In previous posts (Proposed Changes to UK's TUPE will impact outsourcing deals, The UK Government consults on proposed changes to the TUPE regulations) we highlighted the UK Government's proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE 2006"). The UK Government has now finalised these changes, resulting in the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 ("Amended TUPE Regulations"). The Department for Business, Innovation and Skills (BIS) also published useful guidance which helps to explain the changes made to TUPE 2006. Generally speaking, the Amended TUPE Regulations brought into effect the changes discussed in our previous post, which will apply to business transfers or service provision changes taking place on or after 31 January 2014. There are two exceptions to this implementation date, the first relates to the provision of Employee Liability Information; the second to information and consultation obligations for micro businesses. These are discussed in the Key Amendments below.
The Key Amendments
- Definition of Service Provision Change The Amended TUPE Regulations has clarified that a "service provision change" occurs where the services provided post-transfer are "fundamentally the same" as the services provided previously.
- Change in workplace location A dismissal on the grounds of a change in workplace location will be an "economically, technical or organisational" (ETO) reason making such dismissal potentially fair, subject to complying with the usual rules of fairness when dismissing an employee.
- Changes to Terms and Condition of Employment The provision in TUPE 2006 that changes to terms and conditions of employment that are made in connection with a TUPE transfer are unlawful has been removed. Changes made to terms and condition of employment where the "sole or principal reason" is the transfer itself will still be void unless there is an ETO reason. Agreed changes to terms and condition of employment where the employment contract permits the variation (for example mobility clauses) or the change is unrelated to the transfer are permissible.
- Pre-Transfer Collective Redundancy Consultation If the transferee will be making any redundancies post-transfer, the transferee can make one election to undertake pre-transfer collective redundancy consultation obligations pre-transfer with the transferor's written agreement.
- Collective Bargaining Agreements There will be a "static" approach to collective bargaining agreements so that any changes that are made post transfer where the transferee has not been involved in the negotiations will not be binding on the transferee. From one year following the transfer, the transferee can make agreed changes to the collective bargaining agreement provided the new terms are "no less favourable" to the employees when considered together.
- Employee Liability Information From 31 May 2014, the transferor must provide the Employee Liability Information at least 28 days before the transfer.
- Micro businesses On or after 31 July 2014, micro businesses with fewer than 10 employees can conduct consultation with the employees directly rather than with employee or trade union representatives.
Practical steps to consider
The Amended TUPE Regulations may allow more scope to argue whether TUPE applies, particularly in an outsourcing situation. This may or may not be helpful depending on the circumstances. Disputing whether TUPE applies can be time consuming during negotiations and could escalate costs and increase the risks of claims being made by an employee who claims TUPE did apply. Where there is a dispute as to whether TUPE applies the parties will need to consider recent case law.
Existing outsourcing agreements should also be reviewed to ensure that they comply with the Amended TUPE Regulations, particularly in relation to the provision of Employee Liability Information.
The Amended TUPE Regulations provide some flexibility for the new employer to make some changes to terms and condition of employment and collective bargaining agreements provided it has the employee's agreement and the reason for change is not the transfer. This remains a difficult area and legal advice should be sought on the risks of making any such change.
If redundancies are being contemplated post-transfer, consider whether pre-transfer collective redundancy consultation will be helpful. If so it may make sense to include the election and the terms of the arrangements in the applicable agreement.