The government has recently issued its promised consultation on amendments to the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). If implemented as proposed, the changes will make significant differences to the current rules which apply where a business ( or activity) is transferred.

The key proposals are:

  • Repeal of the "service provision change" test ("SPC") ie where activities are outsourced or brought back in-house. 

The government's view is that it is "not clear" that the intended benefits of the SPC test, introduced when TUPE was last amended in April 2006, have been realised.  The government reports that only 24% of respondents to the consultation indicated that the test had reduced the need to take legal advice before bidding for contracts. Others reported "anti-competitive" behaviour by transferors via "staff-switching".  Taking these (and other) factors into account, together with the government's clear view that the SPC test represents "unnecessary gold-plating" of the Acquired Rights Directive, ("the ARD"), the government's proposal is to repeal the SPC test in it's entirety. 

Views are sought both on the proposal and on an appropriate lead-in period before the change takes effect.

  • Repeal of the specific Notification of Employee Liability Information provisions in Regulation 11 - to be replaced with a general requirement that a transferor disclose information to a transferee where necessary for a transferee/transferor to comply with their obligations to inform/consult with employee representatives.

Amendments to Regulation 4(4) on changing terms and conditions of employment - "to replicate more closely the language of the Directive and the main language used in ECJ case law".  The precise drafting is to be considered in view of the consultation responses, but the proposal is that TUPE will simply say that changes to terms and conditions will continue to be prohibited where the reason for the variation "is the transfer itself", but the current prohibition on variations which are only "connected with" the transfer, (and are not for an "ETO reason" - see further below), will be deleted. The government's view is that the latter provision is broader than the requirements of the ARD.

An employer/employee will be able to (1) agree to any variations that they would have been able to agree to had there not been a transfer, and/or (2) agree changes where there is an "ETO reason" ie an economic, technical or organisational reason entailing changes in the workforce.

The government acknowledges that the results of the Call to Evidence indicated that the restriction on harmonisation of terms and conditions of employment in the absence of an ETO reason, (which will remain the position), is a "significant problem", but states that its hands are tied by the wording of the ARD as interpreted by the European Court of Justice. The government says, however, that it will keep the harmonisation issue under review and tackle it "if the opportunity arises";

  • Similar changes to more closely reflect the wording in the ARD and the case law of the ECJ will also be made to:
  1. the provisions on dismissals in Reg 7 ie so that dismissals which are for a reason "connected with" a transfer (which isn't an ETO) will not be included in the automatically unfair dismissal provisions; and
  2. Reg 4(9) changes, so that variations to working conditions which do not amount to a breach of contract, and/or which are minor, would not give rise to a constructive dismissal, and therefore no automatically unfair dismissal claim could flow from it. Instead, if an employee chose to end his/her employment on the basis of the change in working conditions, this would amount to a "termination" by the employer, for which liability would be limited to payment of salary (and possibly benefits) during the employee's notice period.

As with the proposed amendments to changing terms and conditions of employment, both of these changes are intended to ensure that TUPE cannot be interpreted more widely than the ARD;

  • The definition of what amounts to an ETO will be amended  - to make it clear that changes to workforce location are covered; and
  • Views are sought on:
    • whether a transferor should be able to rely on a transferee's ETO in respect of pre-transfer dismissals;
    • whether terms and conditions derived from collective agreements should be limited to 1 year post-transfer - after which point changes to such terms and conditions could be made provided that they were "no less favourable overall" to the employee;
    • whether consultation on redundancies by a transferee pre-transfer should count for collective redundancy consultation purposes; and
    • whether the government should provide clarity on what amounts to a "reasonable time" to elect employee representatives.

The consultation closes on 11 April 2013, with changes to TUPE being expected to take effect in October 2013.  We will report again when final details of the government's reforms are announced.

Please click HERE for a link to the BIS consultation document: "Transfer of Undertakings (Protection of Employment) Regulations 2006: Consultation on proposed changes to the Regulations", January 2013.