Who: UK Government
When: August 2013
Law stated as at: September 2013
In February 2013, we reported on the Government’s proposed reforms to TUPE and in particular the proposal to repeal the application of TUPE to a “service provision change” (“SPC”).
SPCs occur where services are brought in-house, are outsourced or are transferred from one service provider (or agency) to another.
The application of TUPE to an SPC means that in the context of outsourced advertising or marketing services and a change of provider, any employees assigned to the particular account automatically transfer to a new agency on their existing terms and conditions of employment.
In the advertising sector, this has commonly become a cost of winning business as where the conditions of the SPC rules in TUPE are met, the new agency takes on the employment liabilities of the outgoing service supplier.
So it was music to the ad industry’s ears when the Coalition Government proposed to repeal the concept of SPC under UK law, which goes further than is required by the corresponding European legislation and had been criticised as unnecessary ‘gold-plating’.
What has changed?
On 5 September 2013, the Government published its much awaited response to its consultation on proposed reforms to TUPE. An overwhelming 67% of respondents were against the repeal of the SPC provisions, the general feeling being that, whilst not always desirable the present position was at least clear. Removal of the provisions would lead not only to legal uncertainly, but commercial chaos in respect of contracts already negotiated to take into account the cost of SPCs.
In view of this, the Government has reversed its position on repealing the SPC rule and decided it is here to stay. However, the provisions will be amended will to clarify that TUPE will only apply where the service provision is “fundamentally or essentially the same” before and after the transfer. This is in line with recent case law and aims to limit the scope of the legislation somewhat.
Other key points to note include:
• In a very welcome change, dismissals due to a workforce relocation will no longer be automatically unfair. They will be brought within the scope of an economic, technical or organisational reason entailing changes in the workforce. There is also more scope for a business to make changes to a transferring employee’s terms and conditions of employment.
• Pre-transfer consultation by the transferee on proposed collective redundancies post-transfer will be permitted in certain circumstances.
• Businesses with fewer than 10 employees will be entitled to inform and consult with their employees directly regarding the transfer, as opposed to through employee representations, which are cumbersome lengthy nomination processes.
• The time for providing employee liability information has been increased to 28 days.
Why this matters:
The amendment to the SPC rule signals a greater degree of flexibility for businesses – not every change in service provider will trigger the application of TUPE and the scope for fair redundancy dismissals is increased (usually by the incoming agency).
The application of the ‘fundamentally or essentially the same’ test means that any differences in the services after a change in provider could be an exit route from TUPE. It will depend upon the circumstances and the degree of difference and this may lead to “creative” approaches to providing advertising services in novel or innovative ways.
More generally, whilst employers still need to be mindful of the potential application of TUPE and should take early advice to minimise their potential liabilities and manage the TUPE process, the changes made by the Government, which are on the whole business friendly, should be welcomed.
The new TUPE regulations will be put before Parliament in December 2013 with an intention to bring them into force in January 2014. The Government is also expected to review and improve the guidance on TUPE.
Read the full response here.