As part of its review of employment law, the Government has launched a consultation on its proposals to amend TUPE. The Government is very limited in what it can do to remove the burden on businesses because of restrictions under EU law. But there are some TUPE provisions which go further than EU law does, by bringing more transactions within the scope of TUPE and by giving greater protection to employees where a transfer has an impact on their employment.
Service provision changes (SPCs)
It hasn't come as a surprise that the Government's proposed changes include removing the provisions which specifically bring outsourcings, insourcings and re-tenderings within the scope of TUPE as this is one of the few options that the Government has to try and reduce the impact of TUPE on business.
The SPC provisions don't exist under EU law - they were introduced under TUPE 2006 to try and give certainty on whether TUPE applies when services are transferred to a new provider. Removing this provision will potentially significantly reduce the number of transactions which TUPE applies to. In considering whether TUPE applies to outsourcings, we will go back to the pre-2006 position of considering whether they fall under the remaining category of a "business transfer".
The Government's proposals also include:
Restrictions on changes to contract terms and dismissals: aligning these provisions with EU laws, so employers have greater flexibility to dismiss employees following a transfer, or to change their employment terms. For example, this would mean that employers can agree changes to employment terms with employees in certain circumstances.
Substantial changes to working conditions: amending the wording, to narrow employees' rights:
- to resign in response to a material detriment to their working conditions, and
- to claim unfair dismissal as a result
Workplace redundancies: changing the definition of ETO reason 'entailing changes in the workforce' to include changes in the location of the workforce. This would mean that place of work redundancies, which can currently be automatically unfair, would potentially be fair dismissals.
Providing employee information: removing the requirement for transferors to provide certain information regarding the transferring employees, including about recent disciplinaries, grievances and claims, at least 14 days before the transfer. Instead, transferors will only have to give the transferee information where this is necessary so they can comply with their information and consultation obligations.
Information and consultation process: amending these provisions so that:
- transferees can consult with the transferring employees on collective redundancies before the transfer
- this consultation period also counts towards the collective redundancies consultation period
The Government is also considering:
Collective agreements: whether to change the provisions so that terms and conditions which come from collective agreements:
- will only apply for one year from the date of the transfer, and
- can then be changed, as long as overall, the changes are just as advantageous for employees
Next steps and what this means for employers
The consultation runs until 11 April 2013, and we can then expect final decisions from the Government regarding what it will do by mid July - with any changes brought in in October 2013 (possibly with the exception of removal of the SPCs).
The potential removal of the SPC provisions is likely to be of most immediate interest. Whilst the provisions haven't quite brought the absolute certainty in outsourcing situations that they were intended to, particularly as a result of the various cases over the last 18 months which have brought in added (and unwelcome) uncertainty, most businesses have become used to SPCs and have costed contracts on the basis that an SPC is likely to take place if the contract is lost (meaning employees will also transfer away, together with their redundancy and termination costs). This may make some businesses nervous about changes - but even if the SPC provisions are removed, the impact should hopefully be not too severe - both because we anticipate there will be a lengthy transitional period, and also because some outsourcings may well come under the remaining provisions of TUPE (the business transfer provisions) in the same way as they did before the SPC provisions came into effect in 2006. That said, for contracts negotiated going forwards, businesses should consider changing the automatic assumption that TUPE will apply on exit.
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