The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) serves to protect existing employment rights by ensuring that an employer honours the terms and conditions of employees it inherits under TUPE, with the exception of certain occupational rights. While it is important to ensure that there is a level of protection for employees, the current regulations pose considerable difficulties for employers. In some instances, it can prevent businesses from acting in their best interests and thus reduce competitiveness.
For example, if a transferee (the new employer) needs to change the working hours of inherited employees, it must have a contractual right to do so, or an economic, technical or organisational (ETO) reason entailing a change in employee numbers, duties or location. Without this, any changes made because of the transfer – even if the employer and the affected employees mutually agree to it – will be prohibited under TUPE.
Even where the transferee has a contractual right to make changes, problems may still occur, as affected employees may treat themselves as dismissed where there is a substantial change in working conditions to their material detriment. This can happen despite the regulations stating that terms and conditions may be varied in accordance with the contract terms. Government guidance that any such dismissals are not necessarily unfair fails to provide businesses with adequate certainty about where they actually stand.
While the purpose of TUPE is to protect existing rights, why should the terms and conditions of employees who happen to have been transferred be afforded greater protection than those of other employees? This appears to be the current position under TUPE.
What should TUPE look like?
We should start by removing the requirement for changes to be based on ETO reasons and enable changes to terms and conditions to be mutually agreed on the proviso that there is a sound business reason instead. This would provide employers with a fair and lawful means to bring about necessary changes.
This would also pave the way for easier harmonisation of terms. Harmonisation is often dependent upon employers demonstrating a pre-existing business need to distinguish it from the transfer, a change in location or some other form of redundancy. This is because, while there might be a very good ETO reason to harmonise, any change will still be void under the current regulations if the reason for it doesn’t entail changes in workforce numbers, duties or location.
Employment protection is but one area of potential reform, but it is a good place to start. A TUPE regime based on sound business reasoning, rather than ETO reasons and the plethora of demands that come with that, is infinitely more practical. It would enable businesses to be more agile and efficient. Revising TUPE in this way would strike a better balance between the protection of employment rights on the one hand (rather than their enhancement) and the rights of employers to make smart, logical business moves that contribute to our economy and international competitiveness.
Tim Cross is director of employment and legal affairs at Vista Employer Services, and an expert in TUPE and business reorganisation