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Changes to the TUPE Regulations 2006

Last month saw the publication of draft Regulations to amend the 2006 TU(PE) Regulations, which are expected to come into force in January 2014. Perhaps the most striking thing about the draft Regulations is how limited they are in scope when compared to the ambitious proposals first put forward in January. They do however, contain some long overdue changes in details, and lay to rest one or two old enemies.

by Dominic Bayne

Last month saw the publication of draft Regulations to amend the 2006 TU(PE) Regulations, which are expected to come into force in January 2014.  Perhaps the most striking thing about the draft Regulations is how limited they are in scope when compared to the ambitious proposals first put forward in January.  They do however, contain some long overdue changes in details, and lay to rest one or two old enemies.

Service Provision Changes

The service provision change rules are perhaps the clearest example in employment law of the gold plating of European regulations; and it was no surprise, therefore, that their removal formed a central blank of the original proposals.  It is also, I would suggest, no surprise that 67% of the respondents to the consultation felt that they could not be removed without creating significant uncertainty and unfairness.  So that proposal has been quietly shelved. 

In Metropolitan Resources v Dulwich [2009] IRLR 700, HHJ Burke QC made it clear that the service provision change rules were to be interpreted in a common sense way, on the basis of the words actually used in the regulations.  He then promptly went on to read in a requirement that is not there, namely that the new activities must be ‘fundamentally the same’ as the old.  That formulation has been consistently adopted in subsequent appellate decisions (see e.g. OCS Group v Jones, EAT/0038/09, Nottingham v Hamshaw UKEAT 0037/11, Enterprise Management Services v Connect up [2012] IRLR 190, and my personal favourite, Johnson v Campbell UKEAT 0041/12); and from January 2014, those words will appear within the regulations. 

Employee Liability Information

The government has also done a volte-face in the other area in which it attempted de-regulation.  Far from repealing the requirement to provide employee liability information, the information must now be provided a much more realistic 28 days (rather than the existing 14 days) in advance of a proposed transfer.

ETO reasons

For nearly 30 years, since the Court of Appeal’s decision in Delabole Slate v Berriman [1985] IRLR 300, for a transfer related dismissal to be fair, it has had to involve a change in either the number or function of employees in the workforce.  Unlike the definition of redundancy, a change in the number of employees required at a particular location is not enough to avoid a dismissal being automatically unfair.  In the days of the traditional transfer of an undertaking, that did not usually cause much of a problem, because when an undertaking ‘retains its identity’, more often that not, it remains physically in the same geographical location.  Not so, a service provision change.  That was graphically illustrated in the recent decision of the EAT in Abellio v Centre West London Buses [2012] IRLR 360.  Even though there was a mobility clause in the claimants’ contracts of employment, so that the new employer could contractually require them to move workplace; because the change in location was to the claimants’ ‘material detriment’, they were entitled under regulation 4(9) to treat the contract as terminated, and any termination amounted to an automatically unfair dismissal.  At the moment, therefore, if, as a result of a transfer, you acquire a workforce in the wrong place, it is extremely hard either to force them to move or to fairly dismiss them.  From January 2014, however, that problem will be resolved, as the definition of an ETO reason will expressly include a change in the place of employment; and employers will be permitted to make changes to contracts of employment where the reason is a change in location.

Collective Consultation

Where a transfer involves a large workforce, any meaningful consultation has to be conducted at a representative level.  As the EAT recognised in Philips x Xtera Communications [2011] 724, however, holding an election to choose representatives in a non-unionised workforce can be cumbersome, expensive and pointless.  That problem is particularly acute when dealing with a small employer.  Sensibly, therefore, from January 2014, ‘micro businesses’, by which the government means a business employing fewer than 10 employees, will be exempt from the election provisions, and unless appropriate representatives are already in place, will be entitled to consult with their employees directly.

It is not uncommon for both transferor and transferee to go through similar collective consultation exercises either side of a transfer: the transferor consults on the transfer first; and then the transferee consults on redundancy dismissals, once it has acquired more additional employees than it requires.  Those consultation exercises often look at similar issues, and involve similar personalities; which obviously adds to the expense for employers and the stress for employees.  Despite popular support, the government has backed away from its initial plan to avoid such duplication by reversing Hynd v Armstrong [2007] IRLR 338, and allowing a transferor to dismiss an employee pre-transfer, for a transferee’s reason.  Instead, however, it will insert a provision into the TULR(C)A 1992, to allow a transferee (with the transferor’s agreement) to carry out any required collective redundancy consultation prior to the transfer.  That will allow both consultations to run concurrently, and any necessary redundancy dismissal to take place more promptly after transfer.

Conclusion

Although there are a handful of other largely cosmetic changes introduced by the regulations, that is about all there is to it (The other changes are a correction to the definition of a ‘permitted variation’ where relevant insolvency proceedings are engaged; giving effect to the recent decision of the CJEU in Parkwood Leisure v Alemo Herron [2013] IRLR 744 that collective agreements should be interpreted ‘statically’ post transfer, unless the transferee is a participant in the subsequent collective bargaining; and permitting changes to terms and conditions at least one year after the transfer, provided they are not to the employee’s detriment).  All in all, therefore, these are decidedly modest reforms, but ones which remove some, at least, of the more unsatisfactory aspects of the current rules.  Last month saw the publication of draft Regulations to amend the 2006 TU(PE) Regulations, which are expected to come into force in January 2014. Perhaps the most striking thing about the draft Regulations is how limited they are in scope when compared to the ambitious proposals first put forward in January. They do however, contain some long overdue changes in details, and lay to rest one or two old enemies.

 

Service Provision Changes

The service provision change rules are perhaps the clearest example in employment law of the gold plating of European regulations; and it was no surprise, therefore, that their removal formed a central blank of the original proposals.  It is also, I would suggest, no surprise that 67% of the respondents to the consultation felt that they could not be removed without creating significant uncertainty and unfairness.  So that proposal has been quietly shelved. 

In Metropolitan Resources v Dulwich [2009] IRLR 700, HHJ Burke QC made it clear that the service provision change rules were to be interpreted in a common sense way, on the basis of the words actually used in the regulations.  He then promptly went on to read in a requirement that is not there, namely that the new activities must be ‘fundamentally the same’ as the old.  That formulation has been consistently adopted in subsequent appellate decisions (see e.g. OCS Group v Jones, EAT/0038/09, Nottingham v Hamshaw UKEAT 0037/11, Enterprise Management Services v Connect up [2012] IRLR 190, and my personal favourite, Johnson v Campbell UKEAT 0041/12); and from January 2014, those words will appear within the regulations. 

Employee Liability Information

The government has also done a volte-face in the other area in which it attempted de-regulation.  Far from repealing the requirement to provide employee liability information, the information must now be provided a much more realistic 28 days (rather than the existing 14 days) in advance of a proposed transfer.

ETO reasons

For nearly 30 years, since the Court of Appeal’s decision in Delabole Slate v Berriman [1985] IRLR 300, for a transfer related dismissal to be fair, it has had to involve a change in either the number or function of employees in the workforce.  Unlike the definition of redundancy, a change in the number of employees required at a particular location is not enough to avoid a dismissal being automatically unfair.  In the days of the traditional transfer of an undertaking, that did usually cause much of a problem, because when an undertaking ‘retains its identity’, more often that not, it remains physically in the same geographical location.  Not so, a service provision change.  That was graphically illustrated in the recent decision of the EAT in Abellio v Centre West London Buses [2012] IRLR 360.  Even though there was a mobility clause in the claimants’ contracts of employment, so that the new employer could contractually require them to move workplace; because the change in location was to the claimants’ ‘material detriment’, they were entitled under regulation 4(9) to treat the contract as terminated, and any termination amounted to an automatically unfair dismissal.  At the moment, therefore, if, as a result of a transfer, you acquire a workforce in the wrong place, it is extremely hard either to force them to move or to fairly dismiss them.  From January 2014, however, that problem will be resolved, as the definition of an ETO reason will expressly include a change in the place of employment; and employers will be permitted to make changes to contracts of employment where the reason is a change in location.

Collective Consultation

Where a transfer involves a large workforce, any meaningful consultation has to be conducted at a representative level.  As the EAT recognised in Philips x Xtera Communications [2011] 724, however, holding an election to choose representatives in a non-unionised workforce can be cumbersome, expensive and pointless.  That problem is particularly acute when dealing with a small employer.  Sensibly, therefore, from January 2014, ‘micro businesses’, by which the government means a business employing fewer than 10 employees, will be exempt from the election provisions, and unless appropriate representatives are already in place, will be entitled to consult with their employees directly.

It is not uncommon for both transferor and transferee to go through similar collective consultation exercises either side of a transfer: the transferor consults on the transfer first; and then the transferee consults on redundancy dismissals, once it has acquired more additional employees than it requires.  Those consultation exercises often look at similar issues, and involve similar personalities; which obviously adds to the expense for employers and the stress for employees.  Despite popular support, the government has backed away from its initial plan to avoid such duplication by reversing Hynd v Armstrong [2007] IRLR 338, and allowing a transferor to dismiss an employee pre-transfer, for a transferee’s reason.  Instead, however, it will insert a provision into the TULR(C)A 1992, to allow a transferee (with the transferor’s agreement) to carry out any required collective redundancy consultation prior to the transfer.  That will allow both consultations to run concurrently, and any necessary redundancy dismissal to take place more promptly after transfer.

Conclusion

Although there are a handful of other largely cosmetic changes introduced by the regulations, that is about all there is to it (The other changes are a correction to the definition of a ‘permitted variation’ where relevant insolvency proceedings are engaged; giving effect to the recent decision of the CJEU in Parkwood Leisure v Alemo Herron [2013] IRLR 744 that collective agreements should be interpreted ‘statically’ post transfer, unless the transferee is a participant in the subsequent collective bargaining; and permitting changes to terms and conditions at least one year after the transfer, provided they are not to the employee’s detriment). All in all, therefore, these are decidedly modest reforms, but ones which remove some, at least, of the more unsatisfactory aspects of the current rules. 

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