Employment Law Update – The new TUPE Regulations – Part 4
In this the final blog in the series outlining the changes to the TUPE Regulations the focus will be on changing terms and conditions and carrying out dismissals in the context of a TUPE transfer, including the significance of a change in location now being an ETO reason for dismissal.
1. Changing terms and conditions
Changing terms and conditions will now be expressly prohibited only where the sole or principal reason for the changes is the transfer. Changes which are “connected with the transfer” are in theory now permissible.
However, in practice it is not easy to say whether a change is by reason of the transfer or is “connected with” the transfer. As the Government’s own guidance puts it:
“This new test could cover cases where the sole or principal reason for the dismissal was, under the old test, considered to be connected with the transfer.”
So, where does that leave us? On one hand, existing case law is not helpful as most of it relates to reasons “connected with the transfer”. However, it is arguable that old TUPE was just an accurate reflection of how the ARD had been interpreted anyway, where case law had held that “transfer reason” needs to be read as including “connected with the transfer”.
What is clear is that harmonisation for the sake of it will still be not be allowed.
When will changes be permitted?
- If the reason for the change is an economic, technical or organisational (ETO) reason (including place of work redundancy): the new Regulations say that the employer and employee must agree to the changes if they want to rely on the ETO reason – it is arguable that this is intended to remind employers that a proper process (e.g. getting employee consent) must be followed, so does not in my view represent a significant change.
- If there is an existing contractual clause (e.g. a mobility clause): this is helpful, but employers still need to consider the underlying reason for making the change, e.g. if an employer tries to introduce a term giving it power to make changes in future, if the reason for agreeing that power is the transfer, this will be caught by the general restriction on changes to terms and conditions and will be void.
- If the terms have been incorporated from a collective agreement:
(i) changes cannot take effect less than one year after the TUPE transfer – so, an employer seeking to rely on this will be able to negotiate/ agree changes in run up to one year anniversary, it’s just that the changes can’t take effect until the year is up.
(ii) the changes must be “no less favourable” overall for the employee.
(iii) employee consent will still be needed where the terms have been incorporated into the employee’s contract.
2. Carrying out dismissals
Similarly, dismissals carried out for “a reason connected with the transfer” will no longer be automatically unfair. Only dismissals where the sole or principal reason is the transfer will be automatically unfair. I expect this will have limited practical effect as it has often been possible to rely on the ETO reason in the past by having a genuine redundancy situation. The bigger impact in my view is the inclusion of change of location as an ETO reason.
3. A change of location can be an ETO reason
Prior to the recent changes, it had been the case that a change of location, on its own, could not amount to an ETO reason. Many IT and BPO outsourcings/ change in service provider involve a change in location, so service providers have had to accept the risk that they would face claims of automatic unfair dismissal if they needed to change location, and their only recourse has been to try and negotiate indemnity protection in their contracts with customers.
What this has meant is that service providers have been unfairly disadvantaged because, in the normal course, absent a TUPE transfer, a dismissal could be fair on the basis of redundancy (provided a fair process is followed) where there is a change in location.
Now, with the new amendments in force, dismissals as a result of a change of location will not be automatically unfair. Given that it appears that a reduction in headcount is no longer also needed, this is likely to be seen as a helpful change. It applies to dismissals and to changes to terms and conditions. There will however still be a need to follow a fair process before making the change or carrying out the dismissal.
Reflecting on the changes I have covered in this series of blogs as a whole, what is clear is that they have not gone as far as originally hoped or feared depending on your point of view. My own view is that the single most significant change in terms of simplifying TUPE is likely to be the extension of an ETO reason to include a change in location.
As I have mentioned, employers, service providers and customers alike have become used to the service provision change provisions and have put processes in place to deal with them. As far as those processes are concerned, I do not see any game changers being brought about by the amendments, which is probably all for the good, as for businesses there can be nothing worse than constantly having to change approach and processes to take account of government’s latest notion as to how to make doing business easier.
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