The Transfer of Undertakings (Protection of Employment) (Amendment) (Regulations) 2014 (TUPE Regulations 2014) come into force on 31 January 2014. What practical changes will these new Regulations make to business transfers? We report on this new legislation…
Service provision changes
Whilst service provision changes will remain a possible TUPE transfer, there is to be an amendment of the current definition of a service provision change in the new 2014 legislation. This will mean that for TUPE to apply to a service provision change the activities carried out must be "fundamentally" the same both before and after any transfer - be it contracting out, re-tendering or contracting in of the service. This change means that there should be greater certainty as to when a contracting in or out of a service will be caught by TUPE and also place greater focus on the "activity" performed and whether it is different pre and post transfer.
Employee liability information (ELI)
The rules on employee liability information will be retained but the transferor will be required to provide the information to the transferee 28 days (rather than 14 days) before the transfer. This is a positive change as it will allow the transferor employer more time to prepare its ELI and the transferee more time to ask questions. This proposed change will take effect for transfers on/after 1 May 2014.
Changing terms and conditions of employment
Changes to contractual terms will be void if the reason for the variation is the transfer; however, the wording which also prevents changes which are "connected with the transfer" will be removed from the TUPE Regulations 2014. Although aligning the transfer with the contractual change is a good thing, it still does not mean transferee employers can harmonise terms post transfer as the reason for the contractual change would be the transfer.
However, there have been other amendments in the TUPE Regulations 2014 in the area of post transfer contractual changes. Regulation 4(4) will not prevent a contractual variation:-
- Where the sole or principle reason for the variation is an ETO reason – an economic, technical or organisational reason entailing a change in the workforce – provided that the employer and employee agree to the variation.
- Where the terms of the contract permit the employer to make such a variation – this means where there is a flexibility clause in the contract of employment; for example a mobility clause, the transferee employer could seek to rely on it post transfer. We would advise caution if relying on a flexibility clause – such a change must be reasonable and an employee can still claim the change is to their detriment and/or a breach of contract.
- Arising from a change of location – this means that a change of workplace location will fall within the meaning of "entailing changes in the workforce". In such circumstances the contract could be varied by agreement to provide for the new location to be the place of work.
- To a collective agreement more than 12 months after the transfer date PROVIDED the changes are no less favourable to the employees, although expect some future case law over what is meant by "no less favourable".
Collective agreements – automatic transfer principle
The TUPE Regulations 2014 expressly state that collectively agreed terms that are due to come into force after the transfer date, will not automatically transfer provided the transferee is not a party to the collective agreement or bargaining process. This amendment applies to TUPE transfers which takes place on or after 31 January 2014 and effectively brings the TUPE Regulations 2014 in line with European case law.
Dismissals, “ETO” reasons and changes in the location of the workforce
If an employee is dismissed because of the transfer then this continues to be an automatic unfair dismissal under the TUPE Regulations 2014. However, as we saw with contractual changes above, wording in the TUPE Regulations 2006 which also prevents a dismissal which is 'connected with the transfer' is again removed by the 2014 Regulations. This means for a dismissal to be automatically unfair, the reason for it must be the transfer.
A transfer-related dismissal could; however, be potentially fair if it is for an "economical, technical or organisational reason entailing changes in the workforce". The TUPE Regulations 2014 will also be amended so that changes in the location of the workforce following a transfer will be able to fall within the scope of the ETO defence. As a result, redundancies due to a change in location post transfer will not be automatically unfair; although, employers must continue to follow a fair procedure prior to making any dismissals.
Under the new TUPE Regulations 2014, the transferee employer may begin collective redundancy consultation before the transfer date provided it issues a written notice in advance to the transferor and the transferor agrees. This change does not affect the transferee’s obligations in relation to collective consultation - it must still comply with minimum time limits and also elect representatives. Allowing pre-transfer consultation could increase business efficiency and also reduce the impact on employees who could be subject to separate consultation under both TUPE and redundancy.
Micro businesses (those with 10 or fewer employees) will be allowed to inform and consult directly with affected employees where there is no recognised trade union or existing appropriate representatives. This change will take place from 31 July 2014.
Overall the reform to TUPE will be welcomed as being a generally sensible approach to tidying up TUPE without making wholesale changes which could have increased uncertainty and led to increased costs and redundancy liabilities. The Government has also issued guidance to the new TUPE Regulations. For a copy of this guidance or to receive further information about TUPE or the changes, please contact us on [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.