Businesses warn against TUPE test change

A large majority of businesses are not in favour of repealing a key test in the TUPE regulations, a survey by DAC Beachcroft has found.

The government proposed in a consultation paper on TUPE published earlier this year that the 'service provision change test' set out in the 2006 TUPE regulations should be scrapped.

A survey of 47 businesses for the City law firm revealed that 75 per cent said they would prefer the test to be amended.

Zoe Wigan, partner in DAC Beacroft's employment and pensions group, said the current test as to whether or not TUPE applied in outsourcing situations was introduced to reduce uncertainty.

"The test, while not perfect, is fairly simple and gives a reasonable degree of certainty to employers and employees," Wigan said.

"Abolition of this test is likely to result in renewed uncertainty in outsourcing situations and, therefore, an increased need for legal advice, protracted negotiations and increased litigation.

"It could also result in an increase in situations where employees are left stranded between organisations that are arguing about whether or not TUPE applies. This is not good for either business or employees.

"Respondents to our survey were overwhelmingly in favour of amendments being made to the test. We believe that the government should consider improving how the test works, rather than ditching it entirely."

Fraser Younson, chairman of the Employment Lawyers Association working party on TUPE, said repeal "opens up the possibility that employers could side-step TUPE altogether."

He went on: "Some service provision changes could fall outside TUPE. If insufficient key assets are transferred, it could be argued that the identity has not been retained, leaving the transferring employees unprotected by TUPE.

"In labour-intensive undertakings, a prospective employer could simply decline to take on the relevant employees to avoid TUPE. These rules currently provide certainty, are simple to operate and employers have now adopted processes to accommodate them. There's no need to change them."

An even larger majority of businesses, 79 per cent, said they thought the provisions on employer liability information in the TUPE regulations should be retained, but with a much longer time period than the existing 14 days.

Younson said removal of the requirements would leave second generation service providers without a remedy to require the outgoing service provider to give the relevant employee liability information and for it to be accurate.

"These requirements should be strengthened, not removed, to provide information at the contract tender bidding stage so that bidders can see what potential employee liability they would inherit and cost their bids accordingly.

"The current provision for information to be provided two weeks prior to the TUPE transfer is far too late in the process. Two months would be much better."