Briefing note TUPE changes from 31 January 2014

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1 Briefing note TUPE changes from 31 January 2014 The amendments to the TUPE Regulations will come into force on 31 January 2014 and apply to TUPE transfers that take place on or after that date. This Briefing Note looks at the effect the changes will have. This note summarises an employer s basic obligations in this area of law but does not constitute legal advice on any particular situation and should not be relied on as such. Service provision change (SPC) Only one change will be made to the definition of a SPC, by adding the words: References to activities being carried out instead by another person are to activities which are fundamentally the same as the activities carried out by the person who has ceased to carry them out. The new test for whether a SPC will occur will be as follows: will activities be done by a different person on behalf of a client? is there an organised grouping of employees in Great Britain whose principal purpose is to carry out the activities? will the activities after the transfer be fundamentally the same as carried out previously? the activities are not in connection with a single specific event or task of short-term duration The change could have significant consequences. It will place considerable focus on what the word fundamentally means. It could be interpreted in a narrow sense ( the same in every detail ). Or, it could be interpreted in a wider sense ( the same at a general or conceptual level ). In recent years, Tribunals have been taking more of a narrow approach to the analysis of whether a SPC has occurred. We will be watching closely to see if they continue in the same direction after 31 January, or whether they take the new wording as an opportunity to return to a wider approach. By way of illustration, the narrow approach has held that providing hot food from a central canteen is not the same activity as providing cold food from small outlets. The wider approach might determine that both activities involve catering and are therefore fundamentally the same. In the meantime, how activities are organised and presented in a contracting out situation is vitally important. Any party going into a new contract (as client or service provider) should have a detailed understanding of what activities are to be provided before and after the contract is entered into.

2 Changing terms of employment Some good news for employers here: the test for whether a change is void will be simplified the definition of an ETO reason will be expanded it will become easier to change collectively agreed terms Current test Currently, a change to terms and conditions is valid if: the sole or principal reason is NOT the transfer itself it is connected with the transfer BUT there is an ETO reason This test is difficult to apply and probably stricter than is required by EU law. New test Under the new test, a change is valid if: the sole or principal reason for it is the transfer AND o either there is an ETO reason (and is agreed by employer and employee) o or the change is permitted by the employee s contract Contracts of employment may permit a change to location, hours, duties or other terms. However, even in a TUPE context, a contractual right to make a change must be used in a way that complies with general principles of employment law (including reasonableness and prior notice). A clause in an employment contract that seeks to permit any change to be made following a TUPE transfer is unlikely to be upheld as it would amount to the employee contracting out of their rights. The test for what is a valid change will be simpler. An ETO reason or a contractual right to amend terms will make any changes to terms and conditions valid, even if made because of a TUPE transfer. Allowing an employer to change terms and conditions by relying on a contractual right is, in the opinion of many, contrary to some of the established European case law on TUPE and the approach of UK tribunals to this issue will need to be very closely watched. Harmonisation of terms for reasons of efficiency may well give rise to an ETO reason. However, harmonisation for its own sake will remain void because, as now, it rarely gives rise to an ETO reason. ETO swapping will still not be possible, however. So it will not be possible for the transferor to dismiss an employee and rely on the transferee s ETO reason, or vice versa.

3 Wider definition of ETO reason From 31 January, a change of work location will constitute an ETO reason. So, the full definition of an ETO reason will be: an economic, technical or organisational reason that entails a change in the numbers or functions of the workforce or the place at which employees are employed. Collectively agreed terms Static position on transfer applies Changes to collective agreements made after a TUPE transfer do not affect the transferee if it was not part of the bargaining process that led to the changes. 12 month time limit The transferee can change collectively agreed terms any time from 12 months after the transfer provided that the employees contractual rights and obligations, considered together, are no less favourable as a result. Expect litigation about what no less favourable means in this context. Employee liability information The deadline for providing this will be no later than 28 days before the transfer (currently it is no later than 14 days before). This change will apply to transfers that occur on or after 1 May There will be no change to the type of information that a transferor is required to provide. Micro-businesses and TUPE consultation Businesses that employ fewer than 10 people will be permitted to consult with employees direct about a TUPE transfer, rather than invite them to elect representatives. This often happens anyway so the change will have little impact.

4 Dismissals The test for whether a dismissal is automatically unfair will be simplified. Currently, a dismissal is automatically unfair if: the sole or principal reason is the transfer itself or it is connected with the transfer and there is no ETO reason The new test will be that it is automatically unfair if: the sole or principal reason for it is the transfer and there is no ETO reason This makes an ETO reason (see above for new definition) very important in the context of dismissals. It will make post-transfer redundancies less risky, although the rules of ordinary fairness still apply. Because a change of work location is now an ETO reason, it will no longer be automatically unfair to make redundancies that are connected to relocation in a TUPE context. Relocation There will still be some risk associated with relocation in a TUPE context. Employees can use relocation as grounds for a claim that it amounts to a substantial change in their working conditions to their material detriment. In these circumstances, under Regulation 4 they can treat themselves as unfairly dismissed. Timing will be important. An employee could: either assert a material detriment claim before the transfer and treat themselves as (automatically unfairly) dismissed by the transferor in this case an ETO reason would not apply to the dismissal because it is the transferee s ETO reason or assert the claim after the transfer and treat themselves as dismissed by the transferee an ETO reason could apply because it is the transferee that is dismissing and the transferee s ETO reason

5 Pre-transfer collective redundancy consultation New position A transferee will be permitted to carry out collective redundancy consultation with transferring employees before the transfer, if certain conditions are met. Conditions The conditions are that: a TUPE transfer is likely (whether a SPC or transfer of an undertaking) the transferee is proposing to dismiss 20 or more employees for redundancy at one establishment* within 90 days the redundancies affect at least one employee who will or is likely to transfer the transferee gives written notice to the transferor of its intention to consult pre-transfer and, crucially, the transferor agrees (* the establishment test has been retained in these Regulations but it status is highly questionable: in the context of the collective redundancy legislation itself (TULRCA 1992) it has recently been disapproved because it is not compatible with EU law. The issue is due to be considered by Court of appeal and the European Court). The transferee is treated as the employer for the purposes of consultation and must do all the usual things associated with collective consultation e.g.: arranging for election of employee representatives providing written consultation information filing an HR1 form Strictly speaking, only the consultation phase can be completed by the transferee prior to the transfer. As would be normal in any collective redundancy situation, after completing consultation the transferee must dismiss fairly by applying a fair selection process. A transferee may only make one request to consult pre-transfer. The transferee can cancel its pre-transfer collective consultation process at any time and must inform the transferor in writing if it does so. A transferee who decides to consult prior to a transfer is usually heavily reliant on the transferor for cooperation and practical assistance. However, a failure by the transferor to provide assistance with consultation will not give the transferee a special circumstances defence if it fails to consult properly. January 2014