The new TUPE Regulations

The main changes in the 2006 Regulations are as follows

• A widening of the scope of the Regulations to cover cases of outsourcing and assignment.

In the past, there has been uncertainty over the Regulations’ application in cases where a service is ‘contracted-out’ or ‘outsourced’; a service contract is re-let to a new contractor; or a previously contracted-for service is taken in-house or "contracted-in".

Under the new Regulations, these issues are dealt with as Service Provision Changes. The Regulations will apply only to those changes in service provision which involve “an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client”. Cases where there was no identifiable grouping of employees would be excluded.

• A duty on the old employer to supply information about the transferring employees to the new employer.

The old employer will be obliged to provide what is termed ‘employee liability information’. This helps the new employer to understand the rights, duties and obligations in relation to such employees.

The information that must be provided about the employees to be transferred includes:

1. Identity
2. Age
3. Information contained in the statements of employment particulars
4. Information relating to any collective agreements
5. Details of any disciplinary action within the last two years
6. Details of any grievances raised within the last two years
7. Details of any legal action taken by the employees against the employer over the last two years and including any potential legal action that might occur

This information should be given at least two weeks before the completion of the transfer unless it is not reasonably practicable to do so.

• Special provisions making it easier for insolvent businesses to be transferred to new employers

The regulations provide two new options in cases where its requirements apply in relation to "insolvency proceedings ... under the supervision of a competent public authority (which may be an insolvency practitioner determined by national law)".  This amendment was designed to help the rescue of failing businesses.

The two new options provide that:

1. some of the old employer’s pre-existing debts to its employees do not pass to the new employer. Such debts include: statutory redundancy pay, arrears of pay, payment in lieu of notice, holiday pay or a basis award of compensation for unfair dismissal. Payment of such debts will be met through the National Insurance Fund. Any debts over and above those that can be met in this way will pass to the new employer.
2. employers and employee representatives may, exceptionally, agree changes to terms and conditions of employment by reason of the transfer itself, provided that this is in accordance with national law and practice and with a view to ensuring the survival of the business and thereby preserving jobs.

• Provisions which clarify the ability of employers and employees to agree to vary contracts of employment

There has previously been uncertainty as to the circumstances in which a change in the terms and conditions of employees affected by a transfer can be validly made. The revised Regulations will not preclude transfer-related changes to terms and conditions that are made for an ETO reason – that is, an "economic, technical or organisational reason entailing changes in the workforce.

• Provisions which clarify the circumstances under which it is unfair to dismiss employees

Regulation 8(1) of the current TUPE Regulations makes a dismissal automatically unfair under the unfair dismissal provisions of the Employment Rights Act 1996 (subject to the normal qualifying conditions, including one year’s continuous employment) where "the transfer or a reason connected with it is the reason or principal reason" for the dismissal. Regulation 8(2) then provides an exception from this general rule in those cases where "an economic, technical or organisational reason entailing changes in the workforce..." – generally referred to as an ETO reason – is "the reason or principal reason" for the dismissal. In such cases the dismissal may be fair or unfair, depending on whether or not the employer has acted reasonably in treating that reason as sufficient to justify it.

Uncertainty has arisen about the interpretation of this Regulation, leading to cases before the employment tribunals and the higher courts. A particular issue has arisen as to whether dismissals for a reason connected with the transfer – Regulation 8(1) – and dismissals for an ETO reason – Regulation 8(2) – are two mutually exclusive categories or whether the latter is a subset of the former.

The onus will lie on the dismissing employer to show that the dismissal falls within the ETO exemption and courts and tribunals will be minded not to distinguish between each of the ETO categories but to instead treat them as a single concept.

First published in Construction News, Spring 2006.