IMploy | Proposed Cap On Pension Charges – TUPE changes may be in force as early as 1 January 2014

TUPE changes may be in force as early as 1 January 2014

The Government has published legislation amending the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and the law on collective redundancies and has indicated that it would like to implement the changes from 1 January 2014. 

What are the changes and will they make any difference to businesses?

1. Redundancy consultation permitted before the transfer

The transferee (that is the new employer) may wish to make redundancies following a transfer. Where this is likely to affect 20 or more employees, the duty to consult ‘employee representatives’ will apply. This means that currently there are two separate duties to inform and consult:

under TUPE as a “measure”; and

TULRCA (the collective redundancy legislation). 

Practical difficulties arise about how consultation should be handled, which party should be involved and who is liable. 

To alleviate these difficulties, the Government will allow consultation by the transferee before the transfer, to count towards its obligations under TUPE and TULRCA. Allowing consultation by the transferee before the transfer is technically prohibited but often already happens in practice.  However, underpinning this within a legislative framework is to be welcomed as it will remove the current uncertainties, and allow consultation to take place at an earlier stage.

Under the new rules, the transferee must give the transferor (the current employer) a written notice stating that it wishes to start consultation with the transferring workforce before the transfer. The transferor does not have to agree to this and can withdraw consent at anytime. However, once agreed, the transferor must allow access to representatives and ensure that appropriate facilities are provided to enable constructive conversations to take place. 

Even with the changes to redundancy consultation, there are still practical issues that transferees will have to consider. For example, transferors who have lost a contract to the transferee are unlikely to wish to assist their competitor to streamline the business and are likely to refuse any approach. 

Other issues, such as who can realistically carry out a fair assessment of the pooled staff, will need to be considered as the transferee’s managers may find it difficult to deal with redundancy selection for a group of people they do not know unless the criteria they use are wholly objective and relevant documents are available to evidence their decisions.

2. Service provision changes (SPC’s)

An amendment will be made to the existing provisions on SPC’s which states that a change of service provider will only trigger TUPE where the transferring activities are “fundamentally the same”. This may narrow the scope of TUPE and provide certainty as to what is and what is not a service provision change in this difficult area.

For more information about SPC’s, please see Tom Flanagan’s opinion piece in this edition of IMploy.

3. Employee Liability Information

Currently, Employment Liability Information has to be provided at least 14 days before the relevant transfer. This is information about the employees transferring to the new organisation such as their pay and other details. Often this is supplied at the last minute with the result that key arrangements affecting employees are made in a hurry or organisations do not specifically know what terms and conditions they are inheriting. 

As a result, the Government will change this to 28 days, meaning that buyers of businesses and those involved in service provision changes should know further in advance what staff and liabilities they are inheriting under TUPE.

4. Exemptions for micro businesses

Businesses with fewer than 10 staff will be allowed to inform and consult directly with employees where there are no pre-existing employee representatives who are recognised.

This is a significant improvement and will mean that transfers can be affected more quickly and cost effectively without the need to undertake an employee representative election process.

5. Changes in place of work

The Regulations provide that a change in the employee’s place of work after the transfer should be regarded as included within the term “changes in the workforce” for the purposes of an economic, technical or organisational (ETO) defence and will apply both to variations of contract and dismissals.

6. Contractual variations

A transferee can make limited changes to a transferring employee’s terms and conditions provided these are unconnected to the transfer (which is very difficult to prove) or where it can establish an ETO defence. The new Regulations make clear that transferees will be able to take advantage of any flexible terms in the employee’s existing employment terms. For example, a transferee will be able to rely on an existing mobility clause to require the employee to move location.

7. Collective agreements

Where employees’ contracts of employment incorporate terms agreed in a collective agreement which take effect after the transfer and the transferee is not a party to the agreement, TUPE will be amended to effectively “freeze” the terms at the point of transfer. This means that transferred employees will not be entitled to receive pay increases subsequently agreed by collective consultation.  This change reflects recent case law and provides real comfort to employers, and particularly those inheriting public sector staff.

Ultimately this is of course a complex area and the Government has promised guidance in respect of many of the issues it has raised. We hope that steps will be taken to ensure such information is available before these changes come into effect.

- Glenn Hayes

Key Contact

Glenn Hayes