Government’s policy paper ‘a missed opportunity’ for TUPE reform

As you may be aware by now, the government has published a policy that 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, notably a 3-month cap on non-compete clauses and changes to holiday pay, merging the four weeks’ EU-derived annual leave entitlement with the UK’s additional 1.6 weeks statutory annual leave into a single entitlement of 5.6 weeks, and allowing employers to ‘roll up’ holiday pay, a move which has been welcomed across the board. 

As for TUPE, it’s something we covered last week in ‘Government’s policy paper a missed opportunity for TUPE reform’ with Gill Ross explaining the change to consultation arrangements for small TUPE transfers, allowing businesses to consult directly with the affected employees. However, that’s the extent of the TUPE reforms which explains that reference to ‘missed opportunities’. So, they don’t have plans to lift the restrictions on changing terms and conditions after a TUPE transfer to make it easier to harmonise the terms of staff across the workforce. Nor do they deal with the problems caused by the ECJ’s ruling in Govaerts which says the employment contract of transferring employees can be split between two or more employers. It means the many practical challenges that case has thrown up remain very much alive, unfortunately.

So, those are two of the missed opportunities but there a number of other TUPE changes we would have liked to see but which don’t appear in the policy paper, meaning employers will continue to face uncertainty in many areas. So, what are they? Gill Ross again:

Gill Ross: “Yes, there were a couple of other items, and one is particularly simple, I think, that they could have rectified. There is a requirement currently for regulation 13 letters to contain certain prescribed information. So, that’s the letter that goes to employee representatives setting out the TUPE transfer and the implications of it. There is a requirement to provide agency worker information as part of that letter and it’s something that employers quite often overlook and can result in a technical breach of the regulations and a protective award claim and some of our clients have been caught out with that, in the past, particularly, really have a trade union present. So, they could have removed that particular requirement. It’s a requirement in collective redundancy as well and it makes sense because you'd want to understand the whole workforce and the agency worker population that you have there, but for TUPE transfers it's really not relevant. So, I think that's an easy one that they could have just put a red line through and dropped that particular requirement.”

Joe Glavina: “Another one they’ve left out is the mismatch between penalties for a failure to collectively consult in the two regimes. So, for TUPE it’s 13 weeks' pay, whereas it's 90 days' pay for redundancies. They could be aligned.”

Gill Ross: “Yes absolutely, that’s an easy one they could have rectified. I've never quite understood why they have the difference between the two and, frankly, I always forget which one applies to which regulations but, yes, that's a simple one, they could have aligned those quite easily and made it the same time periods. The other one that's a bit more complicated the redundancy situation and the requirement for an ETO reason because, at the moment, an outgoing employer can't rely on the incoming employer’s ETO reason so what can happen is it sort of artificially delays redundancies taking effect. So, just to paint a scenario here, if you've got a client in the UK who is outsourcing services to a new provider for the first time and it's going offshore, if they're they know that there are going to be redundancies, a place of work redundancy, what they don't want to do, usually, is outsource and transfer all their employees over who may have been with them for a long time, transfer them over to a foreign, incoming, employer who would then carry out the redundancy process. They would want to carry that out themselves and deal with their own employees. To ensure that they are protected and there are no claims against them or against the new employer they have to enter tripartite agreement so you end up with this really complicated structure to avoid any claims because it would be an automatically unfair dismissal if they made those employees redundant pre-transfer. So, there could have been a bit more thought around how draft legislation that correct that issue and makes it simpler but I think, again, that's another area where the government could have put some thought into it and taken a more commercial approach to actually what happens in practice and made it simpler for redundancies to be effective in a TUPE transfer because it's often not in an employee’s interest, they know there's going to be redundancies and they might prefer their own employer, who they know, to deal with that rather than transferring over and being made redundant within a week or two.”

Joe Glavina: “Another one is the mismatch when it comes to settling claims about collective information and consultation obligations under TUPE. So, that difference between the COT3 approach and the settlement agreement approach.”

Gill Ross: “I think it would be helpful. At the moment, one of our standard claims that we can waive is the right to enforce a protective award, but you can’t actually waive the right to claim a protective award so that’s difference between what can be included in a settlement agreement, but they can't be settled via a COT3. So, there's that disparity there. I don't know why there's a difference. A COT3 entered into without the employees receiving any legal advice, but with a settlement agreement they would receive legal advice, so, I think that that would be another common sense change that settlement agreements can be used to waive the right to bring a protective award claim.”

Joe Glavina: “Finally Gill, there was an opportunity to restrict TUPE to employees and exclude ‘workers’ who were never meant to be protected but are in the frame by virtue of EU law.”

Gill Ross: “Yes, there's been some case law over the last couple of years on that, the Dewhirst case, confirming that the wider definition of employees extends to what we call ‘type-b’ workers. So, it gives them additional protection under TUPE in terms of they have the right to be informed and consulted but, of course, they don't have the same protections that employees have against unfair dismissal, etcetera. So, I think, given the main aim of TUPE is to protect employees’ employment, and to protect their terms and conditions, that doesn't really apply to workers to the same extent in that they're not employed so they can't be unfairly dismissed, but also the terms and conditions point. So, yes it would have made sense to just go with the commonly understood definition of employees for actual employees and not those who are workers and that wider group that TUPE currently captures.”
Those are some of the missed opportunities to reform TUPE which are not addressed in the government’s policy paper. The other two big ones – making it easier to harmonise terms and conditions post-transfer and tackling the problems caused by Govaerts – are covered in our programme ‘Government’s policy paper ‘a missed opportunity’ for TUPE reform’. If you’d like to watch that programme you can – we’ve put a link to it in the transcript of this programme.

LINKS
- Link to HRNews programme: ‘Government’s policy paper ‘a missed opportunity’ for TUPE reform’
- Link to the government’s policy paper is called ‘Smarter regulation to grow the economy’