Will the Government’s recently announced consultation mean the end of the TUPE Regulations? Well, not quite, but the proposed reforms certainly go much further than many were expecting.
Probably the most high profile of the Government’s recent proposals is the removal of the specific ‘service provision change’ (SPC) clauses, under which contracting out, contracting in and retendering exercises were expressly brought within the scope of TUPE following the reform of the Regulations in 2006. This will have particular significance for professional services firms who often tender for contracts on a regular basis.
The proposed repeal of the SPC provisions comes in response to business concerns that the provisions have anti-competitive effects as clients often change contractors because they are unhappy with the employees providing the services only to find that the same employees have transferred to the new contractor. There is also the risk that a transferor may use an SPC as a means of keeping only the employees they wish to retain and transferring out those they wish to lose. The Government intends there to be a lead-in period before any repeal, to accommodate SPCs currently in preparation.
Other proposals for reform include changing the restrictions on varying contracts and also amending the rules on dismissals in relation to a TUPE transfer. Contractual changes that are by reason of the transfer itself would still be unenforceable but the parties will be able to agree any change that they could have agreed had there not been a transfer and they could still agree a variation for an ‘economic, technical or organisational’ (ETO) reason. Similarly, only dismissals by reason of a transfer (rather than just ‘connected to the transfer’) will now be automatically unfair.
The Government is also proposing to amend the definition of an ETO reason ‘entailing changes in the workforce’ to include changes in workforce location; and to narrow the scope of the right under Regulation 4(9) to resign in response to a ‘material detriment’ consequent on the transfer. The Government also intends to allow small businesses with fewer than 10 employees to consult with employees directly about a transfer where there are neither recognised trade unions nor other existing employee representatives in place.
Whilst the Government’s intention to ease the burden on businesses by removing the SPC coverage from the TUPE Regulations is welcome, it remains to be seen whether these reforms will have the desired effect, especially since the Government itself acknowledges that some SPC’s will still be caught by TUPE. Unfortunately, professional services firms may find that they have been returned to the uncertain situation that they faced before the current version of the TUPE Regulations came into force.
The Government’s consultation paper can be found here and the closing date for submissions is 11 April 2013. We are currently collating professional services firms’ views on the proposed reforms to TUPE so would be delighted to hear what you think by contacting us directly.