TUPE Changes – are they needed?

I read the government’s proposals to change the TUPE Regulations over the weekend.  The increasing emphasis on tackling so called ‘gold plating’ of EU Regulations has lead to proposals for more employment law change, and in my view, not necessarily helpful change.  As you can tell, this is going to be quite a legally blog, so non HR and TUPE types should probably look away now.

Before I start picking fault, I should say that there are some aspects of the proposals that I do agree with.  TUPE can be a complex beast, and some areas are ripe for improvement and increased clarity.  Changing the approach to ‘entailing changes in the workforce’ to include location changes is one of them.  It doesn’t make sense that something that would be a potentially fair reason for redundancy amounts to an automatically unfair dismissal under TUPE.  It also makes sense to allow small businesses to consult directly with employees rather than through representatives.  I can also see the potential logic of allowing the transferor to rely on the transferee’s ETO reason in respect of pre transfer dismissals (albeit there would need to be very clear guidance on how this should be undertaken).   Finally, some more guidance around the complex area of pensions and TUPE would be beneficial to many. 

Unfortunately, the remainder of the proposals start to cause me some concern. 

So what are they proposing to change?  In a nutshell the main proposals (among others) are:

  • Removing the 2006 Service Provision Change definition of a transfer (contracting out, contracting in, and changes of contracted services)
  • Repealing the requirements around providing employee liability information to the other party
  • Changing / clarifying the meaning of ETO reasons (economic, technical or organisational reasons) – making it easier for a dismissal on location grounds
  • More clarity around pensions and when TUPE applies
  • Consultation changes for small businesses

The essential purpose of TUPE is to protect employee rights in a transfer situation.  However the proposals for change focus unsurprisingly less on employee rights than they do the interests of the employer.  The consultation document states ‘it can be hard when outsourcing a service for a transferee to introduce efficiencies and operate more cheaply than the transferor because the regulations act as a barrier to reducing the size of the workforce or (my emphasis) the transferred workers’ pay levels.’  It goes on to say that it is difficult to harmonise the terms and conditions of the workforce with the transferees existing workforce.  They seemed to have missed the point that this is the essence of TUPE; the Regulations exist to ensure that employers cannot make changes in these circumstances.  Is it really morally acceptable that for the sake of competition we should be able to reduce workers’ pay?  (Worryingly I’m starting to agree with the TU’s on this one). 

There is comment in the consultation document about how difficult it is for employers to manage employees with different sets of T&Cs.  I would disagree.  I’ve worked for businesses that transfer employees under TUPE all the time and are perfectly capable of dealing with this.  An example is given that it’s not even possible to change the date of pay, leaving employers to run two different payrolls.  Putting aside whether this is really that onerous, I have never had a transferring employee refuse to change a pay date to fit in with our cycle: just ask them!  Surely there are better reason for change than this. 

The Service Provision Change was introduced to give clarity of when TUPE applied and when it did not.  Yes, potentially it extends the situations to which TUPE applies, but removing it could leave us with even less certainty than we have now.  It will certainly send us back to the pre 2006 case law position.    

I’m not sure why the consultation document proposes limiting the time period for T&C to apply for one year before they can be changed; they admit in their own document that this is likely to be against the Directive and probably therefore cannot be achieved.  Even if it could be, is that really right that after a year employers can enforce any change that they like on transferred employees?

The consultation documents goes on to say that the SPC may have imposed a burden on businesses and asks ‘whether they have delivered the benefits originally anticipated’.  What about the benefits to employees?

My favourite section is 7.14, which states that employers previously had to take legal advice on whether or not TUPE applied.  Post the 2006 SPC they now have to take advice on how TUPE could be avoided or how to mitigate its effects.  So we should change the law because employers are having to spend money on advice on how to avoid it? 

I said earlier that TUPE is a complex beast.  But it’s not all the time.  Some transfers are very straightforward, so it does concern me that we are, to quote my grandmother, throwing the baby out with the bathwater, by potentially discarding some things that don’t actually present HR practitioners and businesses with many problems.  The potential changes to the employee liability information rules is a good example.  This area could do with more clarity, and the information provision could be sooner, providing for much more effective consultation.  But how will removing it entirely help this? 

In summary, there is little here that is really going to help HR practioners or employees, and the changes will potentially further erode employment rights.  I guess it will be good for TUPE lawyers though!    

Rant over.

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