There’s been accelerated action on TUPE. But as always the devil’s in the detail! So what do the proposals really mean for business? Asks Tim Thomas, Head of Employment Policy, for the UK’s manufacturing companies organisation EEF?
Government is now pressing ahead with the reform, proposing a number of changes to Service Provision Change, Employee Liability Information, terms and conditions, collective redundancy rules and collective agreements. But as always the devil is in the detail! So what exactly is Government proposing and will it provide the clarity and certainty employers have continued to call for? Government has recognised that SPC provisions have imposed unnecessary burdens on business and has questioned whether they have delivered the benefits originally anticipated which were to partly increase employer certainty. Theoretically the SPC provisions were meant to work in favour of smaller businesses which do not have large staff resources, as they could then bid for work on the basis that if successful they would have the existing staff transferred to them. In practice, this does not appear to have worked.
The proposed repeal will take us back to the pre-2006 position, when the question of whether a change of service provider attracted TUPE depended upon whether there was a stable economic entity which has preserved after the changes in service provider. In labour-intensive contracts, such as cleaning, identity is not normally preserved unless the new service provider takes on the major part of the workforce (in terms of numbers or skills). Whilst some uncertainty still remains over when TUPE applies to any given transaction, in general we can expect fewer service provision changes to attract TUPE. Government has also proposed to repeal the current requirement upon an outgoing employer to provide Employee Liability Information (ELI) to an incoming employer in advance of the transfer. The reasoning for this is, Government believes that this requirement will be superfluous when the SPC provisions are abolished and that the majority of TUPE transfers will occur in the context of a merger/acquisition, when the purchaser is likely to have conduced some degree of due diligence.
Another key proposal within the consultation is that the current restrictions on changing terms and conditions, following a transfer, will be lifted, but only to some extent. The difficulty is that the rulings of the Court of Justice prevent harmonising terms and conditions post-transfer and so the ability for change is limited. Currently, TUPE restricts changes in terms and conditions where the sole or principal reason for the change is the transfer itself, or a reason connected to the transfer. The proposal is to change this, removing the second limb of the restriction and limiting it to changes by reason of the transfer itself. Government will also make clear that the incoming employer can implement changes to the contract if those changes could have been made by the outgoing employer had there not been a transfer. Changes where the primary driver is harmonisation will continue to be prohibited, but changes driven by the need to tackle inefficient or unsuitable terms and conditions now look to be allowed. The consultation is also seeking views on collective redundancy rules and collective agreements. In cases where the incoming employer intends to make collective redundancies following a transfer, the Government will allow (but not require) collective consultation to start before the transfer has taken place. This would provide some assistance to employers who currently have to wait until after the transfer has been concluded before they can commence a collective redundancy consultation.
On collective agreements, the Government is considering whether the applicability of terms and conditions derived from a collective agreement should be limited to one year from the transfer, after which the new employer would be free to harmonise terms with its existing workforce, as long as the new contract was ‘no less favourable overall’ . Currently, such collective agreement continues to apply, but the European directive allows member states to limit their affect. The UK has, previously, not taken advantage of this flexibility. Generally, industry will and should welcome the proposed changes on TUPE as it is a real example of Government’s intention to rebalance employment regulation, whilst ensuring that workers continue to be treated fairly. The commitments from Government within this consultation mark the start of accelerated action on TUPE, where progress so far has been too slow.
