TUPE: The ongoing debate There has been plenty of discussion regarding the Government s proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 ( TUPE ) and particularly the radical changes that were initially proposed by the Government which may have resulted in the removal of service provision changes from TUPE. The consultation process commenced in and around November 2011 when the Government called for evidence regarding the effectiveness of TUPE. Since the initial call for evidence consultation has continued and the Government has finally introduced new legislation which will amend the current regulations. The purpose behind the changes is to reduce the complex nature of the regulations and the substantial litigation that resulted from TUPE disputes. The changes to TUPE will be introduced from 31 January 2014 and some of the key changes are as follows: Service provision change Under the 2006 regulations a service provision change would occur where there was A client engages a contractor to do work on its behalf, engages a different contractor to do that work on behalf of the first contractor, or brings the work in-house. 2014 amendments: The government has amended the legislation in an attempt to clarify that a service provision change will only arise where the activities conducted posttransfer are fundamentally the same as the activities carried out by the person who has ceased to carry them out. The amendments to TUPE seek to clarify the position relating to a service provision change as the provisions within the 2006 regulations led to substantial case law. This case law in turn provide conflicting decisions which further increased confusion and litigation in this area of law. It was apparent that changes needed to be made and it is hoped that these changes will allow businesses to easily identify when the regulations apply so as to minimise the time and cost when negotiating outsourcing agreements. It is not yet apparent whether the additional wording will clarify Page 1 of 5
the position sufficiently and it is likely further litigation will result. Extended time limit to provide employee liability information: Under the 2006 Regulations transferors were required to provide information such as the identity and age of the employee who was to transfer and the particulars of employment relating to that employee which are required by section 1 of the Employment Rights Act 1996 to name a few. The transferor was to supply this information to the transferee at least 14 days before the transfer was to take place. The Government have taken into account the problems associated with consultation within the 14 day period and have decided to extend the period in which employee liability information will need to be supplied. Therefore the new regulations will require transferor s to supply employee liability information to the transferee at least 28 days prior to transfer. Whilst the supply of this information places an earlier burden on transferor s the Government hope that the early exchange of information will provide a sufficient and realistic time-frame to allow the parties to consider the implication of a TUPE transfer so that meaningful consultation can take place. The increased time limit for the production of employee liability information will only be relevant to those transfers taking place on or after 1 May 2014. Duty to inform and consult over collective redundancies: pre-transfer consultation It is commonplace for redundancies to take place after a TUPE transfer has taken place which led to a number of issues regarding the possible overlapping of obligations to inform and consult under TUPE and in respect of the collective redundancies. This ultimately created an issue as to whether or not the consultation in relation to redundancies could start prior to the transfer or whether the process must be delayed until the transfer has taken place. The previous regulations provided complications due to the narrow interpretation of the consultation requirements under the 2006 regulations and therefore the Government sought to address these issues when dealing with the proposed changes. The proposed changes will add additional provisions to the Trade Union and Labour Relations (Consolidation) Act 1992 ( TULCRA ) to allow the transferee to meet the requirements for collective redundancy consultation. These changes will be relevant where: There is to be, or is likely to be, a relevant transfer. The transferee is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. Those who are to, or are likely to transfer to the transferee s employment include one or more individuals who may be affected by the proposed dismissal or measures taken in connection with the proposed dismissals. In circumstances where the above requirements are met then the transferee may start Page 2 of 5
consulting with the transferring employees before the transfer provided that the transferor agrees for the consultation to take place. Whilst the proposed changes are likely to have a great impact on pre-transfer consultations the complex nature of the regulations may lead to a number of practical issues. In particular the ability of a transferee to have a more in depth consultation with the affected employees may lead to a greater opportunity for misrepresentations to be made. It is therefore important that transferors that agree to the consultation are aware of what is being said to protect against future liabilities. There is also a risk for the transferee who will be liable for any breach of the information and consultation requirements under TULRCA. Restrictions on changes to terms and conditions Case law has previously dictated that a variation to the contract of employment is void if the reason for the variation is the transfer itself. This holds true even should the employee agree to the change and the resulting overall contract is no less favourable to the employee. However, if there are variations to the contract which would otherwise be allowed under national law they remain valid so long as the reason for the variation is not the transfer. The Government considered changes to this legislation as it was suggested that the restrictions imposed by the 2006 regulations did not allow for post termination harmonisation which led to a two tier workforce. The Government have introduced changes as of 31 January 2014 that mean that any variation to a terms and conditions of employment will be void if the sole or principal reason for the variation is the transfer unless: The sole and principal reason for the variation is an economic, technical or organisational reason, provided that the employer and employee agree the variation (which will include a change of location); or The contract permits the employer to make such a variation. The new legislation proposes that the restriction on varying terms will not apply to terms which are incorporated from a collective agreement provided that the variation takes effect more than one year after the date of transfer and the terms are no less favourable to the employee. The aim of this amendment was to achieve greater flexibility to transferees in amending the terms and conditions of transferring employees. However, given the restriction imposed by European legislation and case law the provision remain relatively strict. In order to provide further flexibility within the changes the government have pledged to deliver new guidance in order to provide clarity for employers as to how these changes will be executed in practice. Despite the changes made to the legislation it is however important to note that once the requisite year has passed the amendment does not confer powers on the employer to unilaterally change the contractual terms. The proposed changes must still result in the overall contract being no less favourable to the employee which should be agreed following a meaningful consultation. Page 3 of 5
Conclusion There are other changes that have been introduced as of 31 January 2014 however those detailed above are likely to have the biggest impact on businesses as a whole. Despite the changes to the legislation it is likely that TUPE will remain one of the most complex areas of law and businesses should be aware of the impact and seek advice as early as possible to avoid possible litigation at a later date. Penalty Increase for Non-Payment of National Minimum Wage The government have declared that employers who do not pay their workers the national minimum wage ( NMW ) will be subject to an increased fine of up to 100% of the unpaid wages up to a maximum penalty limit of 20,000. The current NMW amount depends on the age of the workers and is as follows: 6.31 for those 21 and over; 5.03 for those aged between 18 and 21; 3.72 for those under 18 and 2.68 for an apprentice. The increased limits have yet to receive Parliamentary approval, however, it is predicted that they will come into force in February 2014. The new penalties are being proposed in a bid to ease the name and shame scheme of employers who disregard the NMW amount. The current position: The current penalty for nonpayment of NMW is 50% of the total underpayment for all the relevant workers. There is a minimum fine of 100 and at present the maximum fine is 5,000 to be paid by the employer. However, if the fine is paid within 14 days the penalty amount is reduced by half. At present HMRC only report companies to the Department for Business, Innovation and Skills ( BIS ) if arrears owed to their employees totals a minimum of 2,000 or where the amount owed averages out at 500 per worker. The employer also had to satisfy a further 7 criteria in order to be named by the Department. The proposed changes: Not only will the above increased penalties be enforced against employers who violate the NMW payment but if an employer does not challenge their Notice of Underpayment within 28 days or their challenge fails they qualify to be considered for naming. At this point the employer is given 14 days to submit representations to BIS in an attempt to avoid being named. In order to do so the employer Page 4 of 5
must outline whether it would incur any of the following risks: - Naming by the BIS carries a risk of harm to an individual or their family - There are national security risks associated with naming, or - There are other factors which suggest that it would not be in the public interest to name the employer or company. If the company fails to submit any representations or does not satisfy any of the above criteria the employer will be named and shamed by BIS in the form of a press release. Conclusion: The government have also expressed their intention to immanently legislate in order to extend the proposed 20,000 maximum penalty limit paid by employers who violate the NMW payment amount to 20,000 for each unpaid worker. New rates of statutory maternity pay and sick pay announced The Welfare Benefits Uprating Order 2014 SI 2014/147 has now been published. The Order sets the rates for statutory sick pay and statutory maternity, paternity and adoption pay from April 2014. The changes that come into force on 6 April 2014 are: an increase in statutory sick pay from 86.70 to 87.55, and increases in maternity pay, ordinary and additional paternity pay, and adoption pay from 136.78 to 138.18. For the purpose of calculating maternity allowance, the Order will come into effect on 7 April 2014. DID YOU KNOW BACKHOUSE JONES PROVIDE THE FOLLOWING SERVICES: Mergers & Acquisitions; Company disposals; Management buy-ins / buy-outs; Group and Company restructures; Joint Ventures; Investment and Shareholders Agreements; Banking and Finance; Corporate Recovery; Company Formations; Partnership and LLP advice & formation; Corporate Governance & Companies Act compliance; Commercial Contracts - Terms & conditions, Supply agreements etc; Agency, distribution and franchise agreements; and Commercial Property Page 5 of 5