Reorganisation, outsourcing and partnering having become a significant part of the agenda for the health care sector.  TUPE has always been a significant piece of employment legalisation bearing directly on these types of restructuring.  The Government recently published a consultation paper for reform of the TUPE legislation with the express aim of improving and simplifying it.  Whilst this is a UK-wide consultation exercise, any proposed change to TUPE would require approval of the Northern Irish Executive and Assembly before implementation in Northern Ireland.

The consultation paper now identifies the options the Government is contemplating by way of reform.  The consultation will close on 11 April 2013, with a view to introducing change in October 2013.

Key proposals tabled for consultation include:

Repeal of the “service provision change” provisions

For some time, criticism has been raised that certain aspects of the TUPE Regulations “gold-plate” European law, exceeding the minimum requirements of the EU Acquired Rights Directive.  Most notable amongst these is the way the Regulations are applied to change of service providers (such as outsourcing, insourcing or change of contractors), which, it is argued, places unnecessary burdens on employers.  Therefore the Government is proposing to repeal these provisions.  A lead-in period seems likely for this particular change, views being sought in the current consultation on a range of periods of transition from less than one year through to more than 5 years.

If the service provision change rules are repealed, that will not mean that an outsourcing can never give rise to a TUPE transfer.  Rather, we will be back to how things worked pre-2006, when there was often quite extensive legal debate regarding whether a transaction satisfied the multi-factorial test used to determine whether the transfer of an economic entity which retained its identity had occurred.  The withdrawal of this most litigated aspect of TUPE is therefore by no means a panacea and is unlikely to bring an early end to disputes.

If the proposal is enacted a rigorous review of current contractual arrangements should be undertaken to assess the scope of any problem created by a change in service provider and where TUPE is modified by the proposed does not apply.

Removing employee liability information requirement

Although recognising that the provision of appropriate information is essential to aid business planning and protect the interests of transferring employees, it is also widely acknowledged that the statutory requirements in the form of the duty on the transferor to provide “employee liability information” have failed to improve this process.  All too often information is not passed on until the last minute, the reasons for this being many and varied.  The minimum period stipulated of 14 days before transfer is in any event proving too short.

As a result the Government is proposing to repeal these provisions in favour of clear guidance and a general duty of disclosure where such disclosure is necessary for both parties to carry out their respective obligations.  Removal, at first glance seems drastic but, bearing in mind this appears to be a particular problem where there is a service provision change where the specific provisions are to be repealed, and is to be replaced by guidance, in practice it may prove less so.  Greater certainty may be obtained by ensuring that contracts dealing with a proposed TUPE situation stipulate what is required by way of the supply of information about an affected workforce.

Relaxation of restrictions on post-transfer harmonisation

Another aspect of current regulation which causes issues for employers repeatedly is the restriction on the ability to harmonise employment contracts post-transfer – even by agreement.  Employers can be left with groups of employees on quite different terms and conditions, leading to friction amongst staff and management difficulties.

Despite these issues the Government recognises its scope for lessening or abandoning this provision is very considerably reduced by the requirement of European law for such legislation.  It has accordingly opted for tighter wording to clarify that changes are allowed, for example if an ETO reason might apply.  Consequently employers will continue to have to wrestle with this issue in much the same way as before including identifying non TUPE related reasons for change.

Permitting relocation of a work force post transfer

One of the most significant case law developments of last year concerning TUPE was that of Abellio London Limited v Musse & Others EAT/0283/12 where a change in location on transfer was found to result in an automatically unfair dismissal, leaving transferee employers in a seemingly indefensible position where they acquire an undertaking but wish to relocate it.  The Government is considering amending the Regulations so that a change of location is treated as an ETO reason, and so is a prospectively fair reason for dismissal if fair processes and reasonable consideration is applied.

Permitting transferors to rely on post-transfer ETO reasons

To avoid automatically unfair dismissals (due to the operation of the ETO reasons defence) it is not uncommon for employees to transfer to a transferee, only to be dismissed immediately in circumstances that were anticipated.  This is because case law does not permit transferors to dismiss fairly in advance of transfer where the reason for dismissal is that the transferee will have no need for the employee post transfer.  If implemented it could simplify and reduce the cost of the administration associated with the transfer of affected employees.  The Government therefore has proposed allowing transferors to dismiss for the transferees ETO reason.

Collective redundancy law and TUPE

Problems arise in practice where the requirement to inform and/or consult workplace representatives in relation to where a transfer is triggered under both TUPE and the collective redundancy requirements in S.188 of TULRCA, for example, where the transferee intends to make transfer-related redundancies, after the transfer, involving 20 or more employees at one establishment within a period of 90 days or less.  Questions arise as to whether redundancy consultation by the transferee can commence prior to the transfer, given that the transferee is not actually the employer at that point, or whether it can be done by the transferor, on behalf of the transferee.  One approach is for both to jointly inform and consult before the transfer, however, this approach is untested legally and is subject to risk.

In response, the Government is proposing an amendment to ensure that consultation by the transferee, before the transfer, with representatives of transferring employees counts for the purposes of collective redundancy consultation – although there would be no requirement as such for this to take place.

Comment

In the last 12 months, the law surrounding business transfers has undergone its most substantial change since 2006.  To a large extent meaning has been clarified and statutory codes prescribing the terms of public sector transfers have been withdrawn, and a series of significant court decisions from both European and our national courts have altered a number of fundamental preconceptions.  Some of that certainty will be undone by these UK Government proposals if enacted.

Even so, for some employers this consultation will be a welcome further opportunity for review of the most problematic aspects of TUPE, including a remedy to the legal position left over from Abellio.

The Government’s consultation document can be accessed here and you can provide your feedback on the proposals directly to the Government.