UK Government to legislate on changes to TUPE consultation duties

The Department for Business and Trade has announced amendments to several retained EU laws designed to simplify UK rules and regulations and cut down on red tape. The changes are reflected in new draft regulations which were published on 8 November and include: (1) A reduction of time-consuming reporting requirements; (2) The simplifying of annual leave and holiday pay calculations under the Working Time Regulations; and (3) The streamlining of the TUPE regulations that apply when a business transfers to a new owner. As it turns out, that streamlining of TUPE amounts to a relatively minor change affecting only small businesses – we’ll hear from a TUPE specialist who thinks it's a missed opportunity.

The draft regulations have been published alongside the government’s response to a pair of consultations on EU retained law which it ran for 8 weeks between 12 May and 7 July. In its press release the government summarises the position, saying:

‘The reforms will see the reduction of time-consuming reporting requirements and the simplifying of annual leave and holiday pay calculations under the Working Time Regulations as well as the streamlining of regulations that apply when a business transfers to a new owner. These proposals don’t change existing workers’ rights in the UK, which remain some of the best in the world, and instead remove unnecessary bureaucracy in the way those rights operate, allowing business to benefit from the additional freedoms we have through Brexit.’

There is a lot in those reforms – too much to cover in this programme - but we will be giving you further comment and analysis shortly on Out-Law and, of course, we’ll be hearing from lawyers on this programme to understand how this is affecting clients’ approach to calculation of holiday leave and pay and their holiday pay strategy.

For now, however, we’ll limit ourselves to TUPE. In its consultation the government said it wanted to hear from how TUPE is currently working in practice, both from the employee and employer perspective. Employers had a lot to say and there were high hopes that at least a few of the changes the government was floating might actually come to fruition but that hasn’t happened. The only change that makes it into the draft regulations is a change to the consultation requirement for small businesses of fewer than 50 employees, or transfers involving fewer than 10 employees, so that if there are no worker representatives the employees can be directly consulted. That change is welcome but, from an employer’s perspective, it’s a drop in the ocean.

So let’s get reaction to it, and the government’s decision not to make any further changes. On the line from Glasgow, Gill Ross. First that change to the consultation rules for small businesses: 

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: “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. In its response the government says: ‘The government believes that the existing ETO reasons strike a careful balance between allowing employers to make changes to terms and conditions where necessary and protecting the rights of transferring employees. The government therefore has no plans to allow employers to make changes to employees’ terms and conditions following a transfer other than for ETO reasons.’ That’s a missed opportunity isn’t it, Gill?” 

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. On this point, the government says: ‘The government is aware of the Govaerts case and its implications for the TUPE regulations. We are continuing to monitor the issues raised by Govaerts and will consider whether any action is required on this in the future. So again, no change.”

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 and we’ll cover next time. Meanwhile if you are interesting more about the government’s current thinking on TUPE, as well as its plans for simplifying holiday pay, you’ll find that in the government’s response to its earlier consultation which was published on 8 November. We’ve put a link to it in the transcript of this programme. 

LINKS
- Link to draft statutory instrument: The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023
- Link to the government’s response to the consultation on reforms to retained EU employment law and the consultation on calculating holiday entitlement for part-year and irregular hours workers