TUPE Changes - February 2014

The final version of the 2014 Regulations on Collective Redundancies and TUPE (2014 Regulations) were presented to Parliament on 10 January 2014 and came into force on 31 January 2014.

The 2014 Regulations make a number of changes to the existing TUPE Regulations, in particular on service provision changes, changes to terms and conditions of employment and information and consultation rights.

These changes have been somewhat watered down from the original proposals. For example, rather than the initial proposal to repeal the service provision change provisions within TUPE, there will still be an obligation on employers to apply TUPE provisions to service provision changes such as outsourcing contracts.

Information and consultation rights afforded by TUPE will now require the transferor employer to provide liability information 28 days before any transfer as opposed to 14 days.

The 2014 Regulations also impact employees.  For example there is a relaxing of rules where a new employer needs to change the location of its workplace under a transfer.  Under the 2014 Regulations, dismissals due to a change of location will not be automatically unfair.

Service Provision Changes

Despite having suggested it in its initial consultation, the Government has decided not to repeal the Regulations applying TUPE to service provision changes. Instead it has sought to align the 2014 Regulations to mirror existing case law.

Service provision changes can arise in three different circumstances: where services are contracted out from the client to a new contractor, when those services are carried out by a subsequent contractor and when those services are contracted back ‘in-house’ to the client. They are commonplace in catering, cleaning and security businesses.

To decide whether TUPE applies you need to consider what activities were provided to the client before the change and whether those activities are performed for the client after the change. For TUPE to apply the client must remain the same and the activities too. If there are differences to the way in which the services are performed it gives rise to the question as to whether there is a change in service or whether it is a new service provision and so not covered by the TUPE test for a transfer.

The 2014 Regulations amend the existing TUPE provisions so that activities carried out after the change must be fundamentally the same as the activities carried out before. This reflects case law, such as a case where the move from the provision of hot food to dry goods kiosks at a workplace was not covered by the service provision change provisions as the activities were held to be different and similarly in a case where it was held that where healthcare provision moved from being provided in a residential home to being carried out in the recipients’ own domestic premises it was not a service provision change.

Whether or not the activities are fundamentally the same will depend on all the circumstances of a particular transfer.

Changes to Terms and Conditions

Under TUPE, the new employer takes over contracts of employment of all transferring employees). The new employer is not able to pick and choose which employees to take on and cannot terminate contracts or dismiss employees just because the transfer has occurred. The new employer takes over the rights, liabilities and obligations arising from the contracts of employment and takes responsibility for any collective agreements in force immediately before the transfer.

The general rule is that contracts cannot be varied if the sole or principal reason for the variation is the transfer. This is so even if the employer and employee agreed the variation and it would have been a valid variation had there not been a transfer.

The 2014 Regulations introduce a number of changes in respect of changing terms and conditions. The Government intended to make it easier for employers to make contractual changes on a TUPE transfer however the new Regulations may have the opposite effect as the new test appears to be tougher than the old test. However, we are expecting the Government to produce guidance on this point.

The new Regulations permit variations if there is an existing contractual right to vary.

The 2014 Regulations provide that the restriction on varying contracts does not apply to changes to terms and conditions provided for in collective agreements in circumstances where the variation takes effect more than a year after the transfer, and following the variation the terms and conditions are no less favourable overall than those which applied before the variation.

This means that the employer could seek to agree effective variations to terms and conditions incorporated from a collective agreement, which may result in those particular terms being less favourable to the employee provided that the employee gets some other more favourable terms, so that overall, the employee is in a no less favourable position after the variation compared to before it.

Under the 2014 Regulations rights in relation to future collective agreements which have not been agreed at the time of transfer do not transfer so long as the new employer in not a party to the later collective agreement, nor a party to the collective bargaining for it. If the new employer does participate in the collective bargaining the employee will have rights arising from it.

Employee Liability Information

The 2014 Regulations amend the deadline for the old employer to supply certain information about the transferring employees known as employee liability information to the new employer. The information must now be provided not less than 28 days before the transfer takes place, where previously it was not less than 14 days, therefore making it more onerous on the old employer. This applies to cases where the transfer takes place on or after 1 May 2014.

Changes to Workplace Location

There is no exhaustive statutory definition of the term ‘entailing changes in the workforce’. The courts have restricted it to changes in the numbers employed or the changes in the function performed by employees (e.g. an employee moving from a managerial position to a non-managerial position.) The 2014 Regulations have added a further situation. It can now include a change to the location where employees are employed to carry on the business of the employer.

The 2014 Regulations have made a further change to the situation where an employer wants to change the location where transferred employees work after the transfer. Prior to the 2014 Regulations where a transfer involved the employer changing the location of its business or part of it, dismissals due to that change would usually be automatically unfair. However, the 2014 Regulations have amended this position and now the employer is able to fairly dismiss transferring employees in these circumstances. This is the case even if the employer still needs the same number of staff in the new location providing that sole or principal reason for the dismissal is an economic, technical or organisational reason.

Pre-Transfer Consultation on Redundancies

In a situation where there is to be a transfer under TUPE the new employer may before the transfer propose 20 or more redundancies at one establishment within a period of 90 days or less. The 2014 Regulations allow a new employer in these circumstances to elect to consult (or start to consult) transferring employees about collective redundancies prior to the transfer, even though the transferring employees are not yet their employees. This is called a ‘pre-transfer consultation’.

Exception for Micro Businesses on Obligations to Inform and Consult with Trade Unions or Employee Representatives

Under the 2014 Regulations, micro businesses (which means businesses with 10 employees or less) will be able to inform and consult employees directly in respect of transfers which take place on or after 31 July 2014.

 

Under the existing TUPE Regulations, if there are no recognised trade unions or existing appropriate representatives, an employer would have to make arrangements enabling the affected employees to elect representatives. Under the existing Regulations if employers consulted with their staff directly rather than to trade unions or elected representatives they would not be complying with their obligations under TUPE and may be held liable for failure to inform and consult, which could result in an award of up to 13 weeks’ pay per employee. However, the 2014 Regulations introduce an exception for micro-businesses. Where there is no independent recognised trade union in respect of the affected employees nor other appropriate employee representatives, a micro business can do the following:

• comply with the duties to inform and consult by dealing with each of the affected employees as if they were an appropriate representative or;
• invite the affected employees to elect representatives in which case the employer must allow them to elect representatives and must inform and consult with such elected representatives.
• If the employer invites the employees to elect representatives but they fail to do so within a reasonable time, the employer can inform the employees directly.