Government Publishes New Guidance On Guideline Amendments

The Government has published legislation amending the Transfer of Undertakings Protect of Employment (TUPE) regulations and the law on collective redundancies. 

The key changes which are expected to come into effect in January 2014 are as follows:

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’ is likely to apply.  This means that currently there are two separate duties to inform and consult: under TUPE and TULRCA (the 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. 

Under the new rules, the transferee must give the transferor 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.  

2. Service provision changes
An amendment will be made to the existing provisions on SPCs 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.

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 who 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.

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 entitled to receive pay increases subsequently agreed by collective consultation.

Expert Opinion

Even with the changes to redundancy consultation, there are still practical issues that transferees will have to consider. For example, some transferors may not want a transferee to begin consultation, for example where they have lost a contract to the transferee. <br/> <br/>"In addition, 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. <br/> <br/>"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 unless the criteria they use are wholly objective and relevant documents are available to evidence their decisions. <br/> <br/>"In terms of other aspects, the exemption of micro businesses 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. <br/> <br/>"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 - Partner