TUPE reform: restrained yet pragmatic

This week's long-awaited response to the consultation on TUPE puts the spotlight once again on the government's ongoing Employment Law Review - in this instance, the rules protecting employees' terms and conditions when a business changes hands.

Despite promising wholesale changes involving the repeal of significant parts of the existing TUPE regulations and the usual references to removing 'gold plating' of EU regulations, the proposed changes are considerably less radical than proposed. Perhaps surprisingly, they appear, in the main, to be a sensible and pragmatic response to the majority views expressed in the consultation. The proposed changes are as follows:

(1) Amending the Service Provision Change (SPC) provisions to reflect the approach set out in the case law.

The original proposal was to repeal the SPC provisions. SPC is an example of 'gold plating' which the government has vowed to remove. However, it is also an example of good regulation which works in practice in many cases. The proposed change simply reflects current case law and deals expressly with the 'fragmentation' issues that arise, i.e. there will be no SPC if the service is fragmented or changed substantially following transfer. (see by way of example most recently Enterprise Management Services Ltd v Connect-Up Ltd)

(2) Allowing renegotiation of terms derived from collective agreements one year after the transfer, even though the reason for seeking to change them is the transfer, provided that overall the change is no less favourable to the employee.

This proposal brings TUPE in line with aArticle 3 (3) of the directive, permitting changes to collective agreements after one year. However, here there is some more 'gold plating'. The proposal provides greater protection to employees than the directive does for two reasons. Firstly, by imposing the requirement that the overall change must not be less favourable to employees. There is no such requirement in the directive. Secondly, by requiring any change to be the product of negotiation.

(3) Providing expressly for a static approach to the transfer of terms derived from collective agreements.

This change reflects the recent CJEU decision in Parkwood Leisure v Alemo-Herron and has the effect that collective agreement terms are frozen at the date of transfer.

(4) Providing that changes in the location of the workforce following a transfer can be within the scope of economic, technical or organisational reasons entailing changes in the workforce, thereby preventing genuine place of work redundancies from being automatically unfair.

This removes the anomaly that dismissals where the workplace closes and the workforce are moved to a new location can be a fair redundancy (assuming proper consultation etc.) but not an ETO reason. Now a closure of a workplace may be regarded as an ETO reason.

(5) Amending regulations 4 and 7 to bring them closer to the language of the acquired rights directive.

The final wording has not been finalised but is likely to refer to the reason for the dismissal/variation being the 'transfer itself' rather than 'a reason connected to the transfer'. There is also likely to be a provision which expressly makes it clear that unilateral variations will be permissible if they are allowed for in the contract. An example given is the mobility clause; however, it is also likely to apply to Bateman v Asda Stores types of unilateral variations.

(6) Amending the Trade Union and Labour Relations (Consolidation) Act 1992 to make it clear in statute that consultation which begins pre-transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and where the transferee has carried out meaningful consultation.

This is a sensible and practical measure which permits the transferee to open consultations on redundancy before transfer providing this is agreed with the transferor. It is expected that guidance will be provided on this.

(7) Allowing micro businesses (i.e. those with 10 or fewer employees) to inform and consult directly affected employees when there is no recognised independent union, nor any existing appropriate representatives.

This is another entirely sensible proposal which is permitted by article 7(5) of the directive. Holding elections where there are 10 or fewer than 10 employees is probably an unnecessary burden in most cases. It also only applies where there is no union presence.

(8) Extending the time before the transfer when about Employee Liability Information (ELI) must be given to the transferee to 28 days.

Given that original proposal was to repeal the ELI requirements completely (which would have been disastrous, particularly in SPC cases) this proposal is not only a surprise but actually addresses one of the real problems with ELI, which is that is often given far too late. Although in tendering cases it is likely still to be too late and disappointingly there has been no change to the extent of information that must be provided which is still limited in scope.

The new regulations are expected to be laid before parliament in December and come into force in January 2014.