Government announces very limited TUPE reforms

The government has published a policy which shows its plans for reforming UK employment law post-Brexit, including changes to TUPE. The paper, ‘Smarter Regulation to Grow the Economy’, includes a number of employment law measures, including a 3-month cap on non-compete clauses which is the most significant proposal - and we have a separate programme on that - but it’s TUPE we’ll look at in this programme, not because the proposal is a big deal - it isn’t a big deal - rather it’s a missed opportunity by the government to review 
TUPE more thoroughly and makes changes to the way works in practice. We’ll hear from a TUPE expert on that in a moment.
The proposed change in the paper relates to consultation arrangements in small TUPE transfers. As things stand, businesses are not allowed to consult employees directly where they don’t have appropriate representatives which means reps have to be elected. The government says that it will consult on removing that requirement for businesses with fewer than 50 employees and transfers affecting less than 10 employees, allowing businesses to consult directly with the affected employees. 

So, what do we make of that, and what about those missed opportunities? With her thoughts, on the line from Glasgow, Gill Ross. First the change to the consultation rules: 

Gill Ross: “So, what they’ve done is they’ve removed the requirement for employers to elect employee representatives for TUPE information and consultation where the business has less than 50 employees or where the TUPE transfer is going to impact less than 10 employees. It’s a common-sense change that they're making, quite a straightforward one to do and, actually, reflects what a lot of employers do in practice at the moment where there is a small TUPE transfer taking place. A lot of our clients already take a commercial, pragmatic, view that they want to consult directly with employees where there's only a handful employees involved in the TUPE transfer and avoid having to go through the process of trying to find reps and elect them and that can hold up the information and consultation process by a week or two. So, it is a good change but, absolutely, I think that there are more changes that the government could have looked to make at this time.”

Joe Glavina: “Just on that change, Gill, it’s a bit unclear in the policy paper whether it applies only in cases where there are fewer than 10 transferring employees and the business employs fewer than 50 people, or if it applies in both situations. What’s your reading of it?”  

Gill Ross: “My reading is that it will apply in both scenarios because I think what the government is trying to achieve is to remove red tape, ultimately, and remove burdens on employers. So, it wouldn't make sense for it just to apply to the small number of businesses that have got 50 employees. I think it absolutely makes sense where there's less than 10 employees involved in a transfer that consultation takes place directly with those employees. So, hopefully, that is what the government is planning but if not, then, you know, again, that's another missed opportunity.”

Joe Glavina: “I know many businesses, transferees, would have welcomed a lifting of the restrictions on changing terms and conditions after a TUPE transfer to make it easier to harmonise the terms of staff across the workforce. There’s no sign of that, unfortunately.” 

Gill Ross: “Yes, I think so. That’s one that causes real difficulties for employers post-transfer because they're inheriting a workforce, they've got an existing workforce, you're then working with two sets of terms and conditions. It can be really difficult to harmonise anything, even if it's a positive change, because they're restricted to making changes where there's an ETO reason, or where they have a contractual flexibility clause, or they have employee consent. So, it can be really difficult for employers to make any sort of changes and they tend to just put a hold on any sort of changes until they're maybe making a wholesale change of terms conditions across their whole workforce and that can be years after the transfer takes place. One of the questions we are often asked is if there’s a time limit after a TUPE transfer that we can then make term changes to terms and conditions, and that isn't at present, but that's something again, that if the government didn't want to say right we're going to kind of get rid of the protection for terms and conditions post TUPE transfer, and harmonisation could happen, if they wanted to still have a protection level in place they could have introduced a time limit of, say, 12 months, or three years. I recently worked on an outsourcing for a client where they were outsourcing services and they obliged the new provider to put a hold on to any changes to terms and conditions for three years. So, even something like that would have been helpful for employers to give them certainty about when they could make changes to terms and conditions and disconnect the changes to the TUPE transfer itself.”

Joe Glavina: “Finally Gill, another missed opportunity is the failure to deal with the problems caused by the ECJ’s ruling in Govaerts, and the EAT decision last year of McTear which applied Govaerts to a service provision change. So, this idea that the employment contract of transferring employees can be split between two or more employers which is tricky. Thoughts on that.”

Gill Ross: “It causes a lot of uncertainty for employers, again, because quite often you will have a situation where services have been outsourced and there are one or more providers. In practice at the moment a lot of employers are just coming to commercial resolution of these issues where they arise. So, it’s not really in anybody's interest that you have an employee who is split three ways amongst different providers. It impacts on things like terms conditions if somebody has three part time contracts. How do you sort out the working hours? How do you sort out things like benefits if they've got company car? Do they get three company cars? If you've got an employee who's working for three different competitors in the market, things like confidentiality, restrictive covenants, intellectual property, it causes havoc, frankly, for the employee themselves, because who would want to be employed by three different employers, or four or more, and also the employers themselves trying to work with what quite often will be their competitors to come to solution for employees on how they can they can split that employment 2, 3, 4 different ways. So, I don't know why the government haven't addressed that because it has created a massive issue, and uncertainty, and could quite easily have been solved by saying that an employee will not be subject to split employment on a TUPE transfer and legislating for what the solution should be in that scenario, whether it is that there employment will terminate at the point of transfer and the various transferees will pick up the notice and redundancy costs, or whether it's the outgoing employer that has to pick up the costs for the termination of the employee in that scenario. So I think that’s the biggest missed opportunity because that case law has created so much uncertainty, and certainly clients at the moment aren't really putting it into their service agreements, their terms and conditions, to cover this situation because it's so complicated and until it actually gets to the point where you know that an employee is potentially going to be split between different employers, it’s difficult to contractually provide for that.”

So, a case of a missed opportunity in our view, and so we continue to live with a lot of uncertainty as far as TUPE is concerned. Gill went on to talk about a number of other problems with TUPE which haven’t been addressed by this paper and we’ll cover those next week. Meanwhile that policy paper is called ‘Smarter regulation to grow the economy’ which was published on 10 May, and we have put a link to it in the transcript of this programme. 

LINKS
Link to the government’s policy paper is called ‘Smarter regulation to grow the economy’