The Government has published new TUPE, which is due to come into force in January 2014 and will govern all TUPE transfers taking place after that date.
TUPE reform has been in the pipeline since November 2011, when the Government issued a call for evidence. New TUPE has finally been published, although it is still only a draft. Assuming it is finalised and approved by Parliament as planned, the Government hope to bring it into force in January 2014 (exact date not set).
We explain the key changes below. We will also be running a series of half day seminars in May 2014, to allow time to take stock of the practical impact of New TUPE and to allow for slippage in the Government’s ambitious target of finalising both the regulations and the guidance by January 2014.
Service provision changes (SPCs)
The Government originally proposed removing SPCs from TUPE because they “gold-plate” the EU Acquired Rights Directive but, earlier this year, the Government drew back from this proposal.
Instead, the new rules clarify that TUPE will only apply to SPCs where the activities remain “fundamentally the same” after the transfer. This wording comes from an Employment Appeal Tribunal decision and essentially ensures that new TUPE reflects current case law
The result is that outsourcing, in-sourcing and changes of contractor will still be potentially subject to TUPE. Whether any particular SPC is caught by TUPE will continue to be an uncertain area.
Under old TUPE, contract changes for reasons which are “connected with” the transfer are void unless there is an ETO reason. Under new TUPE, contract changes are void if the reason for the variation is “the transfer”, unless there is an ETO reason. In theory, therefore, new TUPE allows contract change for a larger range of reasons, i.e. reasons which might be connected with the transfer, but are not the transfer itself. However, in practice it remains to be seen where the courts draw the line between changes “connected with” the transfer and changes “by reason of” the transfer.
New TUPE also clarifies that the new employer can vary a contract if the reason for the variation is the transfer, but the terms of the contract allow the employer to make such a variation (for example because there is an explicit flexibility clause).
New TUPE also includes a new provision dealing with terms derived from a collective agreement (e.g. rates of pay where those are the subject of collective bargaining). These terms can be varied after 1 year from the date of the transfer, whatever the reason for the variation, as long as the new contract is overall no less favourable than the old. However, this simply gives employers a right to try to negotiate new terms after one year, whatever the reason for the desired change. It does not give employers the power to impose new terms. Most terms derived from collective agreements are incorporated into the employees’ contracts of employment and have the same status as any other contractual terms, i.e. they cannot be varied against the employees’ wishes without a breach of contract.
ETO situations (economic, technical or organisational reasons entailing changes in the workforce and justifying contract change/dismissals)
New TUPE also expands the definition of an ETO reason to allow “place of work redundancies”, for example where the new employer wants to operate from a different site than the old employer after the transfer.
Collective consultation over redundancies – can start sooner
In cases where the incoming employer intends to make collective redundancies following a transfer, new TUPE allows them to elect to consult, or start to consult, representatives of affected employees before the transfer. Any such election may be made only if the outgoing employer agrees to it and must be made by “written notice” to the outgoing employer.
Employees who transfer under nationally-bargained terms
New TUPE provides that a new employer will not be subject to any provision of a collective agreement which is agreed and comes into force after the date of the transfer if the new employer is not a participant to the collective bargaining for that provision.
This will help employers in the private sector who inherit a workforce subject to public sector national bargaining arrangements. Those employers will inherit the workforce on the terms existing at the point of transfer but will not be bound by subsequent changes agreed at national level if they are not involved in the national bargaining arrangements.
Employee Liability Information (ELI)
Under new TUPE, ELI must be supplied at least 28 days before the transfer (as opposed to 14 days under old TUPE).
Micro-businesses can inform and consult employees directly
Businesses with 10 or fewer employees will be allowed to inform and consult employees directly regarding transfers, rather than through elected representatives, in cases where there is neither a recognised union nor existing representatives.
The Government has committed to provide better guidance on TUPE – which will be crucial in relation to the question of how far incoming employers will be able to change terms. We do not know when this will be published but will keep members informed.
Comment and booking your place on our seminars
Considered together, these reforms are a step in the right direction and implement some of the changes which EEF has been pressing for. However, we had argued for greater reform. Following these changes, TUPE will still remain burdensome and unclear in many key respects.
It is also disappointing that the draft provisions currently apply only to transfers after January 2014. In our view, some of the provisions (e.g. greater flexibility to change terms) should come into force in January in respect of all employees, whether they were transferred under old TUPE or new TUPE.
We will be running a series of half day seminars in May 2014 to take stock of the impact of new TUPE and to look in a practical way at how both outgoing and incoming employers can operate within the new regime. Our seminars are timed to allow for slippage in the Government’s ambitious target of finalising both the regulations and the guidance by January 2014.
For more details and to book your place, click here