Massive response to consultation delays new TUPE until April 2006

In March, the Department of Trade and Industry (DTI) published a consultation document and draft Transfer of Undertakings (Protection of Employment) Regulations 2005 (TUPE) to replace the ageing 1981 regulations. But the implementation has now been delayed.

The original timetable was for consultation to close on 7 June and final regulations to be laid before Parliament in July, to come into effect on 1 October.

However, it has been confirmed that, as a result of the large volume of responses to the consultation document and the many issues raised by consultees, the DTI now plans to lay the regulations before Parliament in the Autumn of 2005, and they will come into force on 6 April 2006.

Practical implications

The central themes of the new regulations will not change. These are:

– to extend coverage of TUPE to include service contracting situations, such as cleaning, security and maintenance services, so as to make it clearer that TUPE applies in such situations

– to increase the transparency of the transfer process by introducing a requirement on the old employer to notify the new employer of employment liabilities

– to clarify the circumstances in which employers can lawfully make transfer-related dismissals and agree transfer-related changes to employment conditions

– to take up the option in EU Directive 98/50 for more flexibility in the application of TUPE to insolvency disposals, to improve the chances of rescue.

There were also some surprises in the draft regulations, including the introduction of joint and several liability on the company transferring staff out and on the receiving company for the original employer’s failure to inform and consult employee representatives.

And employers will need to watch out for a new right for the employee to resign and make a claim for constructive dismissal on grounds of substantial changes in working conditions to their detriment, even where there is no breach of contract involved.

These, too, are likely to remain unchanged after the consultation is taken on board.

What may disappear is the suggestion that ‘professional business services’ be excluded from the new more generous definition of a transfer in new TUPE. Not many are keen on this.

There is a wealth of more technical problems, raised particularly by lawyers, which may lead to revisions to the original draft.

New timescales

‘Autumn’, of course, is not a firm deadline, but we might see new regulations in October. However, there will be no second chance to send in your views. When published, this will be the final version.

The new regulations will only catch transfers taking place on or after 6 April 2006. This means two things. First we will have up to five months to familiarise ourselves with the new law. Second, if you are concerned that the new regulations will affect a forthcoming transfer, it will be possible to conclude a transfer on the basis of the present law before next April.

As a result, it will be virtually impossible to organise a change of contractors after April next year without TUPE applying. At the moment, it can still be done if insufficient assets transfer to, or less than a major part of the workforce is taken on by, a transferee (provided there is no intention, in structuring a deal, simply to avoid TUPE).

Finally, though, bear in mind that public sector transfers are governed by Cabinet Office Statements of Practice and local government transfers by an Office of the Deputy Prime Minister circular, which already apply comprehensive transfer rights to transferring public sector workers.

And new pension transfer rules impose contribution obligations on private sector employers for the first time under the Transfer of Employment (Pension Protection) Regulations, made under the Pensions Act 2004, which came into force on 6 April 2005.

Plan for new TUPE

– New TUPE regulations were published on 15 March and consultation ended on 7 June. New TUPE was originally intended to apply from 1 October 2005

– On 27 June the DTI announced that final regulations were to be available in the Autumn and in force from 6 April 2006 with no further public consultation

– Old TUPE applies to all transfers completed before 6 April 2006. Check acquisitions in the pipeline and any contracts that will be put out to tender and completed before then. Take legal advice to see if it is worth beating the April deadline

– Public sector rules already catch most transactions within and from the public sector. Make sure you are aware of these

– The Transfer of Employment (Pension Protection) Regulations came into force on 6 April 2005.

By John McMullen, professor of law, University of Leeds

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