TUPE – amendment regulations laid before Parliament and Government guidance issued

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The regulations amending the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") have now been laid before Parliament (the "Amendment Regulations"). Subject to the Parliamentary process, they are intended to come into force on 31 January 2014.

The Department for Business, Innovation and Skills (BIS) has also just issued new guidance on employment rights on the transfer of an undertaking (the "Guidance"), which takes the amendments into account.

Although there have been revisions to the wording of the Amendment Regulations since the first draft published at the end of last year, generally the changes to TUPE remain as set out in our earlier update (which can be viewed here).

We now know the dates on which the various changes to TUPE will come into effect. In broad terms, the majority of the changes will apply in relation to TUPE transfers taking place on or after 31 January 2014. The exceptions to this are:

• the transferor will be obliged to provide employee liability information at least 28 days before the transfer in relation to TUPE transfers occurring on or after 1 May 2014; and
• the provisions enabling micro businesses to consult directly with affected employees will apply in relation to TUPE transfers occurring on or after 31 July 2014.

In summary, the notable changes that have been made to the Amendment Regulations since the previous draft include:

• providing that a transferee can elect to undertake pre transfer collective redundancy consultation once only - the earlier draft allowed for the transferee to withdraw such an election but then make as many subsequent elections as it wished;
• revised drafting of the provisions relating to permitted changes to individual contracts of employment in the context of TUPE transfers. In particular, broadly the Amendment Regulations provide that a variation will not be void where the terms of the contract of employment permit the employer to make it, but an express reference in the previous draft to this being permitted "if the reason for the variation is the transfer" has been removed. This is most likely because of concerns that this could fall foul of European case law. The extent of this provision is addressed in the Guidance (see below); and
• providing that various protections apply where the "sole or principal" reason is the TUPE transfer, in order to align the wording of the Amendment Regulations with the existing wording of TUPE.

The Amendment Regulations can be viewed here and the Guidance here.

Practical advice

• The changes to TUPE made by the Amendment Regulations mean there is more scope for argument about the application of TUPE on service provision changes and this will be particularly relevant in sourcing situations. Recent case law on the similarity of activities before and after a change in service provider will remain important and will inevitably be developed.
• Contractually agreed terms will continue to be important in situations where TUPE might apply. In sourcing and business sale scenarios, employers may now need to consider negotiating contractual terms addressing pre transfer collective redundancy consultation.
• The extent to which variations to individual contracts of employment are permitted under TUPE remains a tricky area in the light of European case law and advice should be taken on this area. The Guidance states that if an employer seeks to agree a term giving the employer the power to make variations in the future and the sole or principal reason for agreeing that power is the transfer, this would be caught by general restriction on variations of contracts and would be void.
• Employers for whom TUPE is an issue would be well advised to review the Guidance, which sets out how TUPE is now intended to apply in practice and answers some common questions which arise in the context of TUPE transfers.