TUPE reform – the details

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The Government is currently consulting on its proposals for reform of TUPE. In this briefing, we summarise the proposals and explain how you can join the debate.

The Government first called for evidence on the operation of TUPE in November 2011. EEF submitted a detailed response on behalf of its members. The Government is now pressing ahead with reform, and has issued a consultation document setting out its proposals in detail and inviting comments.

The key proposals are as follows:

Service provision changes

  • The Government proposes to repeal the “Service Provision Change” (SPC) provisions which were introduced into TUPE 2006 and which were intended to bring most outsourcing, in-sourcing and change of contractors into the scope of TUPE.
  • The Government recognises that the SPC provisions have imposed unnecessary burdens on business and that they represent “gold-plating” of the EU Acquired Rights Directive.
  • The proposed repeal will take us back to the pre-2006 position, when the question of whether a change of service provider attracted TUPE depended upon whether there was a stable economic entity whose identity was preserved after the change in service provider. In labour-intensive contracts, identity is not normally preserved unless the new service provider takes on the major part of the workforce (in terms of numbers or skills).
  • There will continue to be uncertainty over when TUPE applies to any given transaction, but in general we can expect fewer service provision changes to attract TUPE.
  • However, much depends on whether the Government will also be prepared to reverse the pre-2006 Court of Appeal decision in ECM v Cox, where the Court ruled that whether or not TUPE applied to a change in service provider could partly depend upon the incoming provider’s reasons for not wanting to take on the existing workforce. According to the Court of Appeal, if the motive is to avoid TUPE, this can be a factor in favour of TUPE applying. We will therefore be calling for the effect of this decision to be reversed as part of the reforms to ensure that most changes in service provision stay outside of TUPE.
  • A lead-in period may be introduced before any changes take effect and the Government are consulting over whether any such lead-in period should be (i) less than one year (ii) 1-2 years (iii) 3-5 years or (iv) 5 years or more.

Employee Liability Information

  • The Government proposes to repeal the requirement upon an outgoing employer to provide Employee Liability Information to an incoming employer in advance of the transfer – apparently because it is felt that this requirement will be superfluous when the SPC provisions are abolished.

Restrictions on changes to terms and conditions and protection against dismissal

  • Restrictions on changing terms and conditions will be lifted to some extent, in that changes for reasons which are “connected” to the transfer will now be allowed. The Government will also make clear that the incoming employer can implement changes to the contract if those changes could have been made by the outgoing employer had there not been a transfer. However, changes which are purely “by reason of” the transfer itself will continue to be prohibited. Changes where the primary driver is harmonisation will therefore continue to be prohibited, but changes driven by the need to tackle inefficient or unsuitable terms and conditions will apparently now be allowed.
  • The definition of an ETO reason (the narrow category of reasons which can justify a dismissal in a TUPE context) will be widened to cover changes in location.

Duty to inform and consult representatives

  • In cases where the incoming employer intends to make collective redundancies following a transfer, the Government will allow (but not require) collective consultation to start before the transfer has taken place.

Collective agreements

  • The Government are seeking views on whether the applicability of terms and conditions derived from a collective agreement should be limited to 1 year from the transfer, after which the new employer would be free to harmonise terms with its existing workforce as long as the new contract was “no less favourable overall.”

Micro-businesses

  • There is also a proposal to allow micro businesses to inform and consult employees directly regarding transfers, rather than through representatives, in cases where there is neither a recognised union nor existing representatives.

Guidance on assignment and other issues

  • The Government recognises the difficulty which businesses face when trying to work out if any particular employee is “assigned” to a group of employees who are transferring under TUPE, but intends to try to resolve this through better guidance rather than legislation.
  • The Government has committed to reviewing and improving its TUPE guidance generally where appropriate.

On the whole, EEF welcomes the proposals, most of which we have been arguing for. However, we are concerned about the proposal to repeal the ELI requirements, since our members tell us that they require better information sooner and we are not convinced that they will become superfluous.

Get involved

We are keen to continue receiving your views on TUPE reform and these proposals, in particular limiting the applicability of collective agreements and the desirable lead-in period before the SPC provisions are abolished. If you have experience of TUPE and would be willing to share your views, please contact Tim Thomas, Head of Employment Policy.

The consultation closes on 11 April 2013.

To inform our submission, we would like to invite you to a focus group on Thursday 28th March 2013 at 10.30am – 13.00pm. The meeting will be held at EEF Woodland Grange, Old Milverton Lane, Leamington Spa, Warwickshire, CV32 6RN. If you are interested, please contact Tim Thomas.

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