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Various changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) came into force on 31 January 2014. These are the culmination of the Government's consultation but the changes have not been as widespread as initially envisaged.
This note considers how these changes may affect you in conducting any TUPE process.
Notably, and despite the Government's initial intention to abolish it, a "service provision change" continues to fall within the ambit of TUPE. The Government was convinced by responses to its consultation that abolition of these rules would cause greater uncertainty about when TUPE would apply.
Helpfully, however, the Government has now confirmed in legislation that the activities carried on after the change in service provider must be "fundamentally the same" as those carried out before the transfer.
The changes to TUPE have gone some way to address the issues faced by a new employer when it will need to make the transferring employees redundant. Although the changes do not go so far as to allow the old employer to dismiss, relying on the new employer's redundancy, they do permit the new employer to commence any collective consultation process before the transfer.
Collective consultation for at least 30 days is required when an employer is proposing to dismiss 20 or more employees as redundant within a 90-day period. From 31 January 2014, in the context of a potential TUPE transfer, the prospective employer may start consultation with employee representatives before the transfer, provided it has the existing employer's agreement.
The existing employer should ensure that it obtains protection against any liabilities that may be caused by commencement of the consultation process while the employees are still employees of the old employer. Prospective new employers should note that this only applies to collective redundancies where 20 or more employees are affected and dismissals should in any event always follow a fair process.
The requirement that an employer must go through a process of holding elections and then informing and consulting with elected representatives about the TUPE transfer will no longer apply in companies where there are fewer than 10 employees (not just transferring employees). Such employers will be able to inform and consult on an individual basis instead.
There has been a minor amendment to the unfair dismissal rules in connection with TUPE transfers. Previously an employee would have been unfairly dismissed if the sole or principal reason for the dismissal was the transfer itself or a reason connected with the transfer that was not an economic, technical or organisational reason entailing changes in the workforce (an ETO reason).
The new wording states that the dismissal will be unfair if the sole or principal reason for the dismissal is the transfer unless the sole or principal reason for the dismissal is an ETO reason. It is unclear at this stage what difference this change will make, if any.
However, it appears that there is an intention to have eliminated the very wide "connected with" the transfer term. In practice, however, employers should be very careful before dismissing employees prior to, on or shortly after a TUPE transfer unless they have an ETO reason.
There has been a similar change to the test for varying employees' terms and conditions in the context of a TUPE transfer. From 31 January 2014, employees' terms and conditions are preserved upon transfer and any variation is void if the sole or principal reason for the variation is the transfer, unless either the sole or principal reason for the variation is an ETO reason and provided that the employer and employee agree that variation or the terms of the contract permit the employer to make such variation.
Again, it is unclear precisely what difference this new test will make. However, it appears intended to ensure that the new employer can still rely upon contractual terms that would allow minor changes to the contract, such as small changes to an employee's duties.
Guidance makes it clear that changes to transferring employees' terms to "harmonise" them with existing employees will still be unlawful.
TUPE expressly includes that from 31 January 2014 a change in the location of the workforce will be an ETO reason. Therefore genuine place of work redundancies, which often occur as part of outsourcing transactions, will no longer be automatically unfair.
This provides greater certainty as to the risks of unfair dismissal claims in such transactions.
The existing employer has a duty to provide certain information about transferring employees to the new employer in advance of the transfer. This information includes names, ages, lengths of service, pay, notice periods and other key employment particulars.
From 1 May 2014, this must be provided at least 28 days before the transfer (currently it must be provided at least 14 days before). The aim is for a prospective employer to have this information at an earlier stage in commercial negotiations.
In practice, this is unlikely to make much difference in commercial transactions, but may be particularly helpful when re-contracting for service providers.
This article was written by Kirsti Laird and Clare Davis.
For more information, please contact Kirsti on +44 (0)20 7427 6411 or firstname.lastname@example.org