New regulations on TUPE came into effect on 31 January 2014 updating the 2006 regulations. Giles Betts looks at what impact these changes will have on the housing sector.
TUPE has the reputation of being the bane of an employer’s life. It’s complicated, the rules are strict and if you get it wrong there can be serious financial penalties for both the outgoing and incoming service providers!
The effect of TUPE is to automatically transfer to those employees assigned to the contract to the new provider on their existing terms and conditions, along with any associated liabilities. It is therefore essential for the parties to obtain early advice on whether TUPE applies and its implications when tendering for contracts. There are six key changes to TUPE that you should be aware of:
Service provision change
Under TUPE a service provision change will occur if activities cease to be carried out by a service provider on his own behalf and are carried out instead by a third party contractor or when there is a change of contractor, or, if a contract is terminated with a third party and the services are brought in-house. The 2014 amendments have made it clear that for TUPE to apply, the activities carried out by the incoming provider must be “fundamentally the same” as those being carried out by the outgoing provider.
Where the activities are different, perhaps if they are carried out in a new or innovative way, or otherwise split between a number of incoming providers, TUPE may not apply and the outgoing provider may have a redundancy situation to deal with. The incoming provider on the other hand will be unfettered by TUPE and will be able to choose its own employees on its own terms.
Pre-transfer collective redundancy consultation
Collective redundancy consultation (which will be relevant only if there is a proposal to dismiss 20 or more employees within a period of 90 days) can now start before the service transfer takes place. Previously, the incoming provider had to wait until after the transfer to commence consultation.
In practice, this will allow the incoming service provider to carry out redundancy dismissals more quickly than was previously the case. However, the dismissals themselves will still need to take place after the transfer has occurred.
Micro businesses
Whilst there is a requirement to inform and consult employees about the transfer, employers with less than ten employees can now directly consult affected employees where there are no existing appropriate representatives and the outgoing service provider has not invited any affected employees to elect employee representatives.
Great flexibility to vary terms and conditions of employment post-transfer
The general prohibition on contractual changes that are by reason of a TUPE transfer has now been relaxed a little, although this is still very difficult to achieve in practice because the incoming contractor needs to have “an economic, technical, or organisational reason entailing changes in the workforce” (an “ETO” reason”). Additionally, the concept of ETO has been broadened to include a change in work location post-transfer. This means that, if the incoming service provider requires transferring employees to work at a new location after the transfer, any dismissal of employees who refuse to move into the new location will no longer be automatically unfair (although any such dismissal will still be subject to the normal “fairness” rules that apply to dismissals generally).
Employee Liability Information (ELI)
An outgoing service provider will now be required to provide a list of basic information about transferring staff (known as ELI) 28 days prior to the transfer (an increase from the current 14 day deadline).
Collective agreements
From one year after the transfer, the incoming service provider will be permitted to make changes to any collective agreement it inherits as part of the transfer, provided that any revised terms are no less favourable to the employee “when considered together”. Additionally, following a recent case in the European Court of Justice, the incoming service provider will not be bound by any post-transfer changes to a collective agreement where it was not a participant in the negotiation that resulted in such changes.
On first sight, the 2014 amendments would appear to make the TUPE regulations a little easier for employers to handle. It remains the case, however, that TUPE is the most technically challenging and frustrating area of employment law and taking some early advice to ‘dodge the bullets’ is time well spent.
