The government has recently introduced new statutory amendments to further promote the economic revival by making regulations that affect businesses and employees more flexible and easier to navigate. One such change relates to The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), which determines what happens to existing employees on the sale of a business or change in services. TUPE has been amended by the Collective Redundancy and Transfer of Undertakings (Amendment) Regulations 2014 which came into force on 31 January 2014. I have laid out below those amendments that businesses should be most aware of.
‘Service provision change’ simplified
If a business decides to out-source, take in-house or re-tender a service that had previously been conducted by an ‘organised grouping of employees’ (which can constitute one person) whose ‘principal purpose’ was the provision of those services, then this would constitute a ‘service provision change’ under TUPE.
The amendments have narrowed the definition of ‘service provision change’. Now there will only be a TUPE transfer of employees in relation to a service provision change if the relevant activities remain ‘fundamentally’ the same as those carried out previously. Thus, any fundamental changes to the method or nature of the new services in question may not trigger a transfer of employees. This means that the planning of any such service provision change must be carefully considered so as not to trigger a transfer of unwanted employees. Altering the method or nature of the new service is one possible solution to safeguard against any such transfer, and businesses should bear this in mind at the planning stage.
Automatically unfair dismissals curtailed
Previously under TUPE, a dismissal could be deemed automatically unfair if it was ‘connected’ to a transfer. This was a wide interpretation which has now been narrowed so that a dismissal can only be considered automatically unfair if it can be proved that it was ‘by reason of’ the transfer. The government have introduced this change in order to bring it in line with EU law, although the facts of each case shall ultimately be the determining factor. Thus, businesses should be clear as to the facts relating to any dismissals that could be potentially linked to a transfer and should take legal advice in this regard before such dismissals are approved.
Relocation no longer caught by TUPE
Under TUPE, a dismissal by reason of a transfer is not unfair if it can be found to be an ‘economic, technical or organisational (ETO) reason entailing changes in the workforce’. However, under the old regulations, an ETO reason did not include relocation of employees. The amendments have now allowed relocation to be an ETO reason which allows businesses further scope to relocate employees on a business transfer without being caught by TUPE. This is a pragmatic change that all businesses will welcome.
Changing contractual terms
Previously under TUPE, harmonisation of employees’ contractual terms between the transferring businesses was not permitted if it related to or was connected with a transfer, unless it was an ETO reason and the employee consented.
This has now been narrowed to not include harmonisation of terms ‘connected to’ the transfer but rather only to harmonisation of terms ‘related to’ the transfer (as is the case with the service provision change mentioned above). Another important change is that a variation to the terms of an employee’s contract will be permitted if the contract already had a mechanism which allowed for such a future variation. This is significant and businesses should make sure that all new employment contracts have a clause that allows for such a future variation of terms in order to avoid triggering TUPE.
Collective agreements and pre-transfer consultation
Another new amendment means that if a post-transfer employer was not involved in pre-transfer collective bargaining with a trade union that led to changes in employees’ contractual terms (via a collective agreement), then this new employer will not be bound by these terms. Moreover, if an employee’s contract is drawn up from a prior collective agreement then a post-transfer employer will not be bound by those terms unless such terms do not take affect for 12 months after the transfer itself and those terms are no less favourable.
The new amendments also allow an employer who wishes to make collective redundancies to start the consultation process pre-transfer. However, the transferring company needs to agree to this consultation and can withhold its consent. Business should be aware of the consultation periods depending on the amount of employees they wish to make redundant and how such periods may overlap with a transfer. Adhering to these periods could prove problematic if the transferring company refuses to give its consent to pre-transfer consultations, in which case it may be necessary to delay any such redundancies.
Employee liability information period extended
Only one of the recent changes to TUPE does not come into force on 31 January 2014, and this is the change relating to employee liability information, which comes into force on 1 May 2014. On a business transfer the company transferring the employees needs to provide certain information to the new employer relating to those employees. This information will need to be provided no later than 28 days before the transfer rather than the previous rule which was 14 days before the transfer.
In light of this change, transferring companies must make sure that they have all the relevant employee liability information ready to send at least 28 days before the transfer and the new employer should consider delaying the transfer if the transferring company is late in providing this information as such information could affect the purchase price.
Micro-businesses relief from transfer consultation
A final change relates to ‘micro-businesses’, that is, business of less than 10 employees. Such businesses will be excused from needing to consult with a trade union or employee representatives in relation to a TUPE transfer that will affect such employees. It is enough for the micro-business to consult with each employee individually. This is a welcome measure which will help small, growing businesses avoid the red-tape which can often tangle their progress.