CWU SUBMISSION TO BIS CONSULTATION TUPE REGULATIONS 2006: CONSULTATION ON PROPOSED CHANGES TO THE REGULATIONS

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1 CWU SUBMISSION TO BIS CONSULTATION TUPE REGULATIONS 2006: CONSULTATION ON PROPOSED CHANGES TO THE REGULATIONS The Communication Workers Union (CWU) is the largest union in the communications sector in the UK, representing over 200,000 employees in the postal, telecommunications and financial and business services industries. In January 2013 the government launched a consultation on proposed changes to the TUPE regulations The consultation follows a call for evidence from the government in the autumn of 2012, which indicated that the changes to TUPE regulations were being considered. The CWU submitted evidence to the government s call for evidence. The CWU is strongly opposed to the proposals outlined in the government s consultation document. If successfully implemented, the proposals would seriously weaken employment protection and would place significant additional cost burdens onto employees. Workers in already low-paying outsourced services sectors will be particularly disadvantaged. Question 1: Do you agree with the government s proposal to repeal the 2006 amendments relating to service provision changes? a. Please explain your reasons. b. Are there any aspects of the pre-2006 domestic case law in the context of the service provision change cases which might need to be considered with a view to helping to ensure that the test in such situations is aligned with that in the Directive (as interpreted by the Court of Justice of the European Union)? No. The CWU strongly opposes the proposal to repeal the 2006 amendments relating to service provision changes (SPCs). SPCs apply when a service is outsourced for the first time, retendered (resulting in a change in outsourced service provider) or when an outsourced service is brought back in-house. SPCs were introduced into TUPE legislation in 2006 with the intention of making the legal position more certain. The government s policy does not stem from any consensus over the desirability of the repeal of SPCs. The government undertook a call for evidence on TUPE reform in The majority who expressed a view on the government s proposal favoured retaining SPCs in TUPE legislation: 66 respondents favoured including SPCs, 47 wanted them repealed, and 61 expressed no view. It is curious that the government has given such little weight to the opinion of respondents on this issue. The repeal of SPCs from the 2006 TUPE regulations will make the position of workers more precarious. While application of pre-2006 TUPE regulations to SPCs remains unclear and 1

2 therefore problematic, the move is intended to reduce the scope of their application, meaning fewer workers will be protected and more will face redundancy or the prospect of being hired to undertake the same work for a different employer on inferior terms and conditions. This is clearly bad for workers. Many workers affected by SPCs are employed in low paying sectors, such as cleaning, security and in the case of many of our members, call centres. The government s proposals will make it easier for employers to depress terms and conditions in outsourced services, exacerbating the problem of low pay. This is not a positive outcome and not an outcome to which the government should aspire. The government s proposals are bad for business. They will lead to greater uncertainty. Many SPCs - the impact assessment estimates 65% based on 2006 analysis - will remain subject to TUPE following any repeal of the 2006 legislation; however, which transfers are subject to TUPE will become very unclear. This ambiguity will necessarily lead to more legal challenges, increasing the burden on business and workers. The government s priority of reducing the burden on business will not be met; instead the burden will fall disproportionately on those embroiled in legal challenges over the application of TUPE. Repealing SPCs will limit competition. Smaller companies will be discouraged from tendering for outsourcing contracts as there will be ambiguity as to whether staff will transfer with the work. The potential for having to recruit all staff from scratch will act as a disincentive for tendering for contracts. Savings for customers will only come at the expense of employees, not through genuine competition over efficiency, as happens when employees terms and conditions are protected. The government acknowledges in its impact assessment that encouraging SMEs to bid against more established firms was one of the drivers of the policy. The fact that it can point to no evidence that an increased number of SMEs have been successful says more about the government s broader lack of evidence on the application of TUPE than it does about the success of the policy. There is no evidence for the government s claim that: Removing the service provision changes should act as a spur to competition within the outsourcing market. The government has not carried out robust analysis into the effects of the repeal of the SPCs. Instead the proposal is based on a crude assumption that regulation is an undesirable constraint on business. It is clear from the impact assessment published alongside the consultation document that the government has little evidence of the effect of its proposals. The assessment that the repeal of service provision changes will save business between 13m and 30m a year is based on analysis of gains to individuals, in terms of better terms and conditions, identified seven years ago, in There has been no assessment of whether and to what extent these costs were realised, rendering them of little relevance to the current proposals. The government s proposals are likely to have the opposite effect to that which it desires. Current protections have facilitated many transfers which have been made possible because unions and employees have been reassured by the protections in the regulations. To water these down will lead to workers and unions opposing more TUPE transfers, with a resultant deterioration in industrial relations. 2

3 Question 2: If the government repeals the service provision changes, in your opinion, how long a lead in period would be required before any changes take effect (i) less than one year; (ii) 1 2 years; (iii) 3 5 years; or (iv) 5 years or more? a. Do you believe that removing the provisions may cause potential problems? b. If yes, please explain your reasons. The CWU is opposed to plans to repeal service provision changes (SPCs). If the government seeks to go ahead with this proposal, it should ensure as long a lead in period as possible, at least five years. Question 3: Do you agree that the employee liability information requirements should be repealed? a. If yes, please explain your reasons. b. Would your answer be different if the service provision changes were not repealed? c. Do you agree, that there should be an amendment to regulation 13 to make clear that the transferor should disclose information to the transferee where it is necessary for the transferee and transferor to perform their duties under the regulation. No. We do not agree that employee liability information requirements should be repealed. Currently, the transferor in any TUPE transfer must provide the transferee with employee liability information (ELI) no later than 14 days before transfer. The timely sharing of information between transferor and transferee is essential to make TUPE transfers work effectively. The government recognises this, stating in the consultation document that: The Government appreciates that the provision of ELI helps make TUPE work. We do not accept that removing the employee liability information requirement will encourage the timely sharing of information. Instead it sends the wrong signals about the importance of information sharing, will discourage the sharing of essential information and will make TUPE transfers work less smoothly. Regarding question 3 (c), we support strengthening legislation to ensure adequate information is shared between transferor and transferee. There should also be a requirement to share this information with trade union representatives. However, the government s proposed amendment should be used to enhance, not replace, current requirements; it should not be associated with the government s proposed weakening of employee liability information regulations. Question 4: Do you agree with the government s proposal to amend restrictions in regulation 4 on changes to terms and conditions so that the restriction more closely reflects the wording of the Directive (article 4, which is in relation to dismissals) and the CJEU case law on the subject? a) If you disagree, please explain your reasons? 3

4 b) Do you agree that the exception for economic, technical or organisational reasons entailing changes in the workforce should be retained? No. We do not support proposals that would remove restrictions on varying employees terms and conditions after transfer. The government reflects on the problems of two-tier workforces and the administrative burden of managing multiple terms and conditions. We do not believe these issues constitute adequate justification for cutting employees terms and conditions. There is scope for harmonisation of terms and conditions post transfer, but by levelling-up rather than undermining the terms and conditions of transferring employees. The government rightly recognises that it is restricted in what it can do in this area by the Directive. It is proposing to amend the wording of the regulations to reflect the Directive and intends that only variations to terms and conditions that are by reason of transfer will be prohibited, rather that variations that are for a reason that is connected with the transfer. It is not clear that the proposals will succeed in implementing this distinction. Our understanding is that this runs counter to established case law which shows that the current regulations are not broader than the requirements of the Directive. Moreover, we do not support proposals intended to have this effect. Instead we believe the government is adding further confusion to already complex legislation. Again, we believe the government s proposals are likely to have the opposite effect to that which it desires. TUPE regulations have made transfers possible by offering reassurance to employees and their representatives; watering down protections will mean workers and unions will be more likely to oppose TUPE transfers. Question 5: The government is considering using article 3.3 of the Acquired Rights Directive to limit the future applicability of terms and conditions derived from collective agreements to one year from the transfer. After that point, variations to those terms and conditions where the reason was the transfer would be possible provided that overall the change was no less favourable to the employee? a. Please explain your answer. b. Do you agree that there should be a condition that any change after the one year period which is by reason of the transfer, should be no less favourable overall than the terms applicable before transfer. c. If the outcome of the Parkwood Leisure v Alemo-Herron litigation is that a static approach applies under TUPE, do you think that such an approach would provide useful additional flexibility for changing such terms and conditions? d. Do you think there are any other changes that should be made regarding the continued applicability of terms and conditions from a collective agreement (bearing in mind the limitations of Article 3(3) of the Directive)? 4

5 No. We do not support proposals to allow the variation of terms and conditions derived from collective agreement one year after transfer. The government is looking for additional routes through which to enable the variation of terms and conditions and levelling-down of workers terms and conditions post transfer; it is explicitly seeking to create a means through which union-negotiated terms and conditions can be undermined. This is strongly against the interest of transferring employees. It is very unclear how the government s proposal will work in practice. Collectively bargained terms and conditions in the UK (subject to incorporation requirements) are part of individuals contracts of employment. Contractual terms are then treated equally, regardless of their source. Any time limit on the applicability of terms derived from collective agreements would be inconsistent with this legal principle. The implication of the proposal, that elements of individual s contractual terms and conditions, where they are derived from collective bargaining, could be varied one year after transfer, would mean different elements of employment contracts are accorded different statuses. It would also mean that there could be differences in the way members of a group of transferring employees were treated. For example, a group of employees may be subject to TUPE transfer and within that group a number will have had their pay set by collective bargaining while a number of the group will not. Under those circumstances, different members of the transferring group will be treated differently. The first group will have their pay subject to variation one year after transfer; the second group s pay will be protected. This is clearly discriminatory and not an acceptable outcome. Again, we believe the government s proposals are likely to have the opposite effect to that which it desires. TUPE regulations have made transfers possible by reassuring employees and their representatives; watering down protections will mean workers and unions will be more likely to oppose TUPE transfers. We strongly oppose proposals to allow the variation of terms and conditions derived from collective agreement one year after transfer and we question whether they are legally enforceable. Question 6: Do you agree with the government s proposal to amend the wording of the regulation 7(1) and (2) (containing the protection against dismissal because of a transfer) so that it more closely reflects the wording of the Directive (article 4) and the CJEU case law on the subject? a. If you disagree, please state your reasons. b. Do you agree with the drafting of the restrictions to terms and conditions in regulation 4 and the drafting of the protection in relation to dismissal (regulation 7) should be aligned? 5

6 No. We do not agree with the government s proposal to amend the wording of regulation 7(1) and 7(2). We understand that, as with question 4, the government s intention is to try and allow dismissal protection to be limited to those by reason of transfer and exclude those by reason connected to the transfer. We not believe that such a distinction does or should apply. Question 7: Do you agree that TUPE should be amended so that regulations 4(9) and (10) are replaced by a provision which essentially copies out article 4(2) of the Directive? a. Please explain your reasoning. No. We do not support the proposal. The implications of the government s amendments are very unclear. They intend to weaken unfair dismissal protection and again further confuse already complex legislation. Question 8: Do you agree with the Government s proposal that entailing changes in the workforce should extend to changes in the location of the workforce, so that economic, technical or organisational reason entailing changes in the workforce covers all the different types of redundancies for the purposes of the Employment Rights Act 1996? a. If you disagree, please explain your reasons. No. We do not support the government s proposals. The government wishes to extend the definition of economic, technical or organisational (ETO) reasons for changes to the workforce to allow changes in the location of the workforce that result in dismissals to no longer count as unfair dismissal. Firstly, we oppose the proposal on the grounds that, if achieved, it would seriously weaken employment protection for workers facing TUPE transfers. Secondly, we do not accept that the government can legally redefine the term workforce, to include the location at which the work is undertaken, as it suggests. Again, we fear the proposal will only further confuse already complex legislation. Again, we believe the government s proposals are likely to have the opposite effect to that which it desires. TUPE regulations have made transfers possible by reassuring employees and their representatives; watering down protections will mean workers and unions will be more likely to oppose TUPE transfers. Question 9: Do you consider that the transferor should be able to rely upon the transferee s economic, technical or organisational reason entailing changes in the workforce in respect of pre-transfer dismissals of employees? a. Please explain your reasons. 6

7 No. We do not think the transferor should be able to rely on the transferee s ETO reasons for pre-transfer dismissal of employees. The proposals weaken employment protection for employees in the case of TUPE transfer. There is a significant risk that the proposals would exacerbate the risk of dismissals. Transferors may use the opportunity to rely on the transferee s ETO reasons to, for example, make the company more attractive to sell. Given, as the government notes, transferees often do not receive sufficient information on transferring staff from the transferor until the moment of transfer, there is a real risk of unnecessary dismissals taking place. The decision as to whether to dismiss for ETO reason should be based on the transferee s thorough analysis of all necessary information, including details on transferring employees. It should not be based on the transferor s anticipation of the transferee s needs nor should the transferor have the opportunity to use ETO reasons for its own gain. Moreover, we do not believe the government can amend TUPE in this way while complying with Article 4(1) of the Directive. Question 10: Should there be an amendment to ensure that any actions of the transferee before the transfer takes place count for the purposes of the requirements to consult on collective redundancies (under the Trade Union and Labour Relations (Consolidation) Act 1992), therefore allowing consultations by the transferee with staff who are due to transfer to count for the purposes of the obligation to consult on collective redundancies? a. If you disagree, please explain your reasons. No. We do not support the proposals to allow consultation with transferring employees prior to transfer to count towards the subsequent duty on the transferee to undertake collective redundancy consultations following transfer. Firstly, decisions over redundancies need to be taken by an employer in possession of all the facts about its operation. Prior to transfer, as acknowledged by the government, it is unlikely that this will be the case. Transferees often do not receive all appropriate information about the workforce in a timely manner. In the absence of this information, fair and informed decisions about redundancy are unlikely. Secondly, rather than clarifying the purpose of consultation, consulting on transfer and redundancy simultaneously is likely to lead to considerable confusion, notably for employees, but also for the transferor. Thirdly, the purpose of collective redundancy consultations is to look at how the number of redundancies can be reduced. These proposals will make this much harder. Employees and their representatives need to be able to look in detail at the reasons for redundancy and need to engage directly with the employer seeking to make redundancies. This would be very difficult in a situation where the employees faced with redundancies are not yet employed by the company proposing the redundancies. 7

8 Fourthly, there is a duty to consult all employees affected by the proposed redundancies. This includes not just the employees who may be made redundant, but also the wider workforce. This wider workforce includes employees working for the transferee. Therefore, pre-transfer consultation is unlikely to cover the whole group of workers. A pre-transfer consultation also artificially limits the pool for the selection of redundancies to those employed by the transferor, rather than also including those already employed by the transferee. Finally, we do not see how the proposals could be implemented while remaining compliant with the European Collective Redundancies Directive, which places a collective redundancy obligation on the employer. In the scenario envisaged by the government the transferee undertaking consultation is not yet the employer. Question 11: Rather than amending Regulation 13(11) to give clarity on what a reasonable time is for the election of employee representatives do you think our proposal to provide guidance instead would be more useful? a. Please explain your reasons. b. If you disagree, what would you propose is a reasonable time period? No. We do not support the government s proposal. We do not think it is necessary to amend the legislation to attempt to define what constitutes a reasonable time for the election of employee representatives. Question 12: Do you agree that regulation 13 should be amended so that micro businesses are able to inform and consult with affected employees directly in cases where there is not a recognised independent union, nor appropriate existing employee representatives (under regulation 13(3)(b)(i)), rather than have to invite employees to elect representatives? a. If your answer to the question above is yes, would it be reasonable to limit this option so that it were only applicable to micro businesses (10 employees)? No. We do not support the government s proposal to amend regulation 13. We believe all businesses, regardless of size, should be required to consult with employees through elected employee representatives. Question 13: Do you agree that micro businesses should be included under all the proposed amendments to TUPE regulations? a. If not, are there particular areas where micro businesses should be exempt? Please explain your answer. b. Do you think that any of these proposed changes are likely to impose additional costs on micro businesses? c. If so, please give details and suggestions where these costs could be decreased or avoided entirely. 8

9 No. We do not support the government s proposed amendments and therefore would not support their imposition on micro businesses. Moreover, we do not support the variation of TUPE legislation by business size. Question 14: Do you agree that apart from the proposals in relation to service provision changes, there are no proposals which give rise to a specific lead-in period? No. We do not support the government s proposals. However, given the problems identified above, were they to be introduced, they would likely benefit from as long a lead-in period as possible and the opportunity for reflection this brings. Question 15: Have you any further comments on the issues in this consultation. No. Question 16: Do you believe the government s proposals will have a positive or negative impact on equality and diversity within the workforce? Please explain your reasons. a. Do you have any evidence indicating how the proposed changes might impact upon groups sharing protected characteristics? If so please provide them. We believe the proposed changes will have a negative impact on equality and diversity within the workforce. Notably, the government s proposals to restrict the scope of consultations will make it harder to take account of equality and diversity issues in TUPE and collective redundancy situations. The repeal of service provision changes will disproportionately affect vulnerable workers in outsourced services, many of whom are women. Moreover, as much of collective bargaining seeks to achieve agreements which support equality and diversity among the workforce, if the government s proposals are successful in undermining collectively bargained terms and conditions, they will have a negative impact on equality and diversity. Question 17: Do you agree with the analysis and evidence provided in the impact assessment? Please give detail for any area of disagreement or if you can provide any further knowledge in an area. We do not agree with the analysis provided in the impact assessment. We believe it is fundamentally flawed and provides a very weak evidence base from which to proceed. For further information on the view of the CWU contact: Billy Hayes 9

10 General Secretary Communication Workers Union 150 The Broadway London SW19 1RX Tel: Fax: April

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