TUPE or Not TUPE? That is the Question!
Most HR practitioners have a favourite joke about TUPE, but how many of us remember life before these oft-berated rules came into force? Before 1981, transfers of businesses were – what shall we say? A bit more rough and ready than they are today. Sometimes workers moved over and then claimed compensation when their contracts were found to have altered. Usually they failed and consciences were pricked rather more when some workers were left with neither jobs nor compensation after finding themselves working for companies with negligible assets.
The original Transfer of Undertakings, (Protection of Employment) Regulations were introduced in 1981 to implement the Acquired Rights Directive 1977. The intention was to put a stop to these shenanigans. The Regulations' primary purpose was to give employees security where their employing organisation was being transferred, by halting changes in employment contracts and dismissals purely because of the transfer of business. Nothing is for life of course, and TUPE protection was not intended to be sine die . It applied to all sorts of transfers where an undertaking or part of an undertaking was being moved from one firm to another. (Acquisitions of companies through share deals were not affected.)
Business has benefited in some ways from TUPE. Workers used to be entitled to leave their new employer at the point of transfer and bring claims for redundancy as their employment had technically ended. ‘Businesses could find themselves with bills for redundancies of workers they would have rather have kept in jobs. 'It was far from ideal,' said Maureen Scholefield.
But the law in relation to TUPE is changing. Businesses of all shapes and sizes are potentially affected and the role of HR practitioners is crucial. Practitioners need to understand when the Regulations apply, how they work and their practical consequences. They must be able to assess risks and strategies when changing contracts of employment, avoid or minimise potential liability for unfair dismissal and redundancy payments and identify and implement employee information and consultation obligations. The case law has beaten well-worn tracks to employment tribunals as many will attest.
Changes in the TUPE Regulations have been in the offing for some time, and already courses and seminars are being arranged in anticipation of new Regulations being laid before Parliament this month. Changes are likely to include provisions to:
- Incorporate more comprehensive application of the basic TUPE concept to include situations where service provision is transferring as the ‘undertaking' in question. The aim is to remove the uncertainty around transfers involving labour-intensive services such as office cleaning, catering, security, and refuse collection. In future, TUPE will cover these sorts of activities.
- Ensure that the transferee is aware of the employees' rights and obligations upon transfer. (It is expected that the Regulations will clarify the precise requirements imposed upon the transferor with respect to the information which must be notified to the transferee concerning the transferring liabilities. There is a proposed fine of up to £75,000 for breach of the notification requirements, enforceable through the ordinary courts not through an employment tribunal.)
- Clarification of the circumstances when the ETO defence (see below) can be applied to change the terms and conditions of employment.
- Make the transfer of insolvent businesses more viable by introducing greater flexibility to attract potential buyers.
'The ETO defence' is one of those essential things HR practitioners need to understand if they are going down the TUPE road. Basically, it refers to a ‘get out,' from the duty not to dismiss workers simply because of the fact of a transfer. The ‘get out,' is that such dismissals may take place if there is an ‘economic, technical or organisational' reason for them unrelated to the transfer itself. This is a veritable minefield on which HR practitioners are generally advised to take legal advice before stepping forth. The newly revised Regulations should clarify the circumstances in which the ETO defence may apply to bring about changes in employment conditions of employees transferred, as opposed to their dismissal and will be eagerly awaited.
Further information:
Whilst the revised Regulations may differ from the draft which was the basis of the consultative document, a summary of the proposed changes as they stood at consultation stage is published at http://www.dti.gov.uk/er/tupe/consultsum.htm
A more detailed document can be seen at http://www.dti.gov.uk/er/tupe/longconsult.pdf
A CIPD fact sheet is available at http://www.cipd.co.uk/subjects/emplaw/tupe/tupe.htm?IsSrchRes=1
1 February 2006
