As part of its ongoing review of employment law legislation, the government recently carried out a consultation on the ways in which the Transfer of Undertaking (Protection of Employment) Regulations 2006 ("TUPE") could be amended so as to support the flexibility and effectiveness of the UK labour market. The government has now published its response following on from this consultation exercise.
Perhaps the most significant point to note from the response is what is not going to change. Many businesses had hoped that the reform of TUPE would see the removal of the complicated and cumbersome service provision change rules. The effect of these rules is that a relevant transfer for the purposes of TUPE can occur where:
- a particular function or activity is outsourced by a business ("the Transferor") to an independent contractor ("the Transferee"); or
- where there is a change in the external contractor who provides those services; or
- where those functions are brought back in-house by the business which will once again perform those activities on its own behalf.
Where a relevant service provision change is found to have occurred, the usual employment protections provided to employees under will continue to apply.
Broadly, where a relevant transfer occurs there are 2 key obligations:
- to take on the existing workforce who provide those services for the existing service provider; and
- honour the salary package and other contractual arrangements which those employees benefit from.
There had been strong suggestions that the service provision change rules would be removed as part of the government's review. However, it has now been confirmed that these rules will remain in force and will continue to apply so long as the services which are to transfer "remain essentially or fundamentally the same both before and after the transfer". This means that whenever your business is seeking to tender for work or take on a new contract to provide services to another organisation, careful consideration will still need to be given to the implications TUPE will create.
This can often make such commercial opportunities less attractive. However, a failure to comply with the terms of TUPE can allow employees to bring unfair dismissal claims where their rights are not observed.
Of course, where you are looking to outsource particular activities or are unfortunate enough to lose a contract, TUPE may also apply so as to see your workforce (or parts of it) transfer to the new service provider in the same manner.
- The new Regulations (which have not been published yet) are expected to come into force in January 2014. The changes which are going to be made include:
- an ability for the Transferee to seek to renegotiate the terms of any collective agreement which affects the terms and conditions of the transferring employees from one year after the transfer (provided any agreed changes are no less favourable);
- an exemption which will allow for micro-businesses to consult with affected employees directly, as opposed to discussions via trade unions or elected employee representatives.
- where the location from which services are provided from changes as a result of a transfer, this will now fall within the scope of an economic, technical or organisational reason entailing changes in the workforce, providing a Transferee with a defence to potential unfair dismissal claims; and
- an exemption which will allow for micro-businesses to consult with affected employees directly, as opposed to discussions via trade unions or elected employee representatives.
Once the Regulations are published, we will provide you with an update on the full extent of the changes.
We regularly deal with TUPE issues and advise clients on the impact that the Regulations may have for them in respect of pursuing business opportunities. If you feel that you need some assistance in respect of any potential business transfer, don't hesitate to get in touch.
Finding it hard to keep on top of all the employment law changes? Come to our Ask the Expert seminar on 19th September where we will give you an update on everything that's been happening.