01 February 2013 #Employment
BIS (the Government Department for Business, Innovation & Skills) has recently announced that it proposes to make fundamental changes to the TUPE 2006 Regulations.
The key proposals include:
The Government is also asking whether:
The Consultation closes on 11 April 2013 and changes may be introduced as quickly as October this year. However, the Government accepts that as the proposals to repeal the regulations relating to "service provision changes" are significant, this would most certainly require a “lead-in period”. The Government will therefore also consult on the length of this lead-in period, asking whether this should be less than a year, one to two years, three to five years or five years or more.
Clarkslegal Roundtable Discussions
Many of you may recall that in November last year, BIS called for evidence on the effectiveness of TUPE in light of concerns that TUPE went beyond what was required by European law, was overly bureaucratic and impractical. Following this, Clarkslegal held a roundtable discussion with various employers affected by TUPE to gather views and evidence on the questions raised by BIS. Based on this discussion, we submitted a response to the call for evidence and also shared our findings with the CBI with whom we have a long standing relationship.
BIS’ response to the call for evidence included many of the concerns and suggestions expressed at our roundtable discussion and we are very grateful to all those who contributed. It seems clear that the key concerns identified by the participants have helped shape the current proposals for reform, which are the subject of this consultation – although it has to be said that very few could have anticipated a proposal which would envisage a complete repeal of the service provision changes!
Clarkslegal is once again looking to lead from the forefront and is proposing another roundtable discussion on 13 March 2013 to give its clients the opportunity to voice their thoughts and concerns. We will then feed into the Consultation through the CBI. If you are interested in attending, or simply wish to express a view, please do contact the marketing team by emailing email@example.com or calling 0207 539 8000.
Possible implications of the proposed changes
Recent cases on service provision change (SPC) over the last year have highlighted how uncertain it can be to decide whether TUPE applies where there has been a change of service provider for e.g.:
Given the Government’s plans to reform the public sector, the number of transfers are likely to increase and as such so is the potential for further dispute and uncertainty. Accordingly some simplification of this area of TUPE could make it more attractive for companies to bid for public sector contracts.
The intended lead–in period would greatly benefit existing service providers who may be faced with unexpected redundancy costs at the end of their contract, when previously they would have assumed that TUPE would apply. As such, many businesses may prefer as long a lead-in period as possible.
Practically, a business should begin thinking of protecting itself as far as possible now, irrespective of whether the proposed changes are in force at the point of contract termination. The best way to do this would be to have tightly drafted indemnities and warranties in relation to exit provisions in the contract.
Also, the circumstances under which an employee can be dismissed following a transfer may be widened if the proposals to amend Regulation 7 so that it more closely reflects European statutory authority and case law are implemented. This would mean that dismissals would only be automatically unfair if the sole or principal reason was the transfer (and not connected with the transfer as is currently the case).
Issues not subject to Consultation
The uncertainty as to how TUPE applies to occupational pensions and better guidance on the benefits that do transfer under TUPE, were some of the responses to the call for evidence last year. However, the government does not intend to consult on this issue but has stated that BIS will continue working with the DWP to identify ways to improve the information available to employers and scheme members.
Regulation 8(6) of TUPE provides that where the transferor is the subject of "relevant insolvency proceedings", the employees will automatically transfer to the transferee and receive unfair dismissal protection. However some of the transferor`s debts in respect of the employees will not transfer to the transferee, but will instead be taken on by the Secretary of State and paid out of the National Insurance Fund.
Regulation 8(7) provides that where the transferor is the subject of "bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor", the employees will not automatically transfer to the transferee, and dismissals by reason of the transfer will not be automatically unfair.
Responses to the call for evidence sought greater clarity in this area, as TUPE does not specify which insolvency proceedings apply to which category. However, the Government does not propose to make any changes in this area as it considers the current insolvency provisions in TUPE to be adequate and points to the Court of Appeal’s decision in Key2Law (Surrey) LLP v De`Antiquis  EWCA Civ 1567, which provides some guiding principles.
Agency workers: information and consultation
Regulation 13(2A) of TUPE requires that an employer, when informing and consulting their staff about a proposed transfer should include suitable information relating to the use of agency workers (if applicable). Regulation 13(2A)(b) sets out what "suitable information relating to the use of agency workers" means.
Some responses to the call for evidence suggested that this should not be required. However, the Government disagrees and has taken the view that it "is not minded" to change this as the same definition of suitable information is used in relation to almost all other requirements to inform and consult employees.
Joint and several liability for pre-transfer obligations
At present, almost all of the transferor`s liabilities in relation to employees before the transfer will pass to the transferee. Responses to the call for evidence queried whether liability for all pre-transfer obligations should pass to the transferee or whether both parties should be jointly and severally liable to encourage employers to take their commitment to employees seriously.
The Government has decided that the current position is adequate given that the use of indemnities in respect of pre-transfer employment obligations are widely used and where not, there is often a corresponding reduction in the price agreed.
Some may feel that the Government has stopped short of undertaking a full and through consultation on all issues of importance. However, given the sweeping changes already proposed, others may feel they have gone too far already!
We will update you following our roundtable discussion and inform you as soon as the Government announces the changes proposed following completion of the consultation process.