TUPE: armour not gold-plated?

While wholesale reform of the TUPE regime has been avoided, do the changes made as of 31 January 2014 through the Collective Redundancies and Transfer of Undertakings (Protection of Employment) Amendment Regulations 2014 (SI 2014/16) have more depth than may appear at first glance?

In something of a surprise move, the Government did listen to the majority of consultation respondents who said removing the service provision change (“SPC”) rules – rather than stripping out gold-plating – would actually result in much greater uncertainty and therefore potentially larger liabilities for business.

Not only have the rules been retained, but they have also been amended to give statutory effect to the line of case law which says the activities carried on after the change in service provider must be “fundamentally or essentially the same” as those carried on before it.

Note, however, that the wording of revised reg 3(2A) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (“TUPE 2006”) refers only to activities which are “fundamentally the same”. Whether any sort of wriggle room is created by that is questionable.

Also saved from the legislative scrapheap is the requirement to provide employee liability information. Transfer timetables will need amended, however, because – for transfers occurring on or after 1 May 2014 – this will need to be provided 28 days ahead of the transfer, double the current time period (reg 11(6)(a)).

Where the changes bite

Those are the Government’s proposed changes which are not being made, but provisions instead are being retained and beefed up. So, which consultation proposals have been progressed?

A number of changes have been made to the rules on variation of contracts and dismissals to better reflect the wording of the directive within the regulations. As originally drafted, TUPE 2006 prohibited changes to terms and conditions, or dismissals, which were “by reason of the transfer” or otherwise “connected with the transfer”, unless there was an “economic, technical or organisational reason entailing changes in the workforce” (an “ETO reason”). The words “connected with the transfer” have been done away with in the restyled reg 4(4), which now states that a purported variation will be void if the sole or principal reason “is the transfer” (similarly for dismissals in the new reg 7(1)). A variation will still be permitted where there is an ETO reason, but this definition has been expanded to expressly include “a change to the place where employees are employed by the employer” (reg 4(5A)). Again, a similar amendment has been made in respect of dismissals (reg 7(3A)), better aligning the meaning of an ETO with the definition of redundancy for unfair dismissal purposes.

In this connection, another aspect of the Government’s proposals did not make it to the final legislation. It will remain the case that a transferor is unable to rely on a transferee’s ETO reason if carrying out dismissals pre-transfer. However, new ss198A and 198B have been inserted in the Trade Union and Labour Relations (Consolidation) Act 1992 to enable a transferee proposing collective redundancies to commence consultation prior to the transfer date with the transferor’s consent, so that it counts towards satisfying collective consultation requirements. Micro-businesses are also to be permitted to inform and consult directly with employees where “appropriate representatives” do not already exist (reg 13A). This will apply to transfers taking place on or after 31 July 2014.

Finally, greater clarity is to be achieved in respect of collective agreements, with the “static” interpretation advocated by the CJEU in Parkwood Leisure Ltd v Alemo-Herron [2013] IRLR 744 being given statutory effect in new reg 4A. Therefore, where the provisions of a collective agreement are incorporated into an employment contract, any rights, powers, duties or liabilities in relation to it which are agreed and come into force after the transfer date, do not transfer if the transferee was not a party to the collective bargaining process. Transferees are also provided with increased scope to change terms and conditions incorporated from collective agreements (reg 4(5B)) where the variation takes place more than one year from the date of the transfer, provided that, following the variation, the contract terms taken as a whole are no less favourable to the employee than had applied immediately before the variation.

Waiting for pensions

Sneaking along behind this set of changes are the Transfer of Employment (Pension Protection) (Amendment) Regulations. These were scheduled for implementation in October 2013. However, consultation responses raised as many questions as they achieved answers, and implementation has been delayed, possibly until April 2014. At that point, the interplay between obligations on a TUPE transfer and auto-enrolment requirements should become clearer. Until then, plenty to ruminate and cogitate in the amended regulations and accompanying BIS guidance, and surely not long before a new body of case law begins to build, testing reconstituted TUPE defences.