Focussing on two areas in particular, changing terms and conditions following a TUPE transfer and undertaking collective redundancy consultation, we can see that confusion reigns and we are left awaiting further guidance from the case law. Changing terms and conditions to take heed of are: Prior to 31 January 2014, changes to terms and conditions were void if they were made, “by reason of the transfer itself”; or for a “reason connected with the transfer” unless the employer had an economic, technical or organisational reason for the change entailing changes in the workforce, an “ETO” reason. The latter meant that if the reason for the change could be traced back to the TUPE transfer, it was likely to be held to be “connected with” the transfer and therefore be void. Under the new regulations changes will only be void if the sole reason for the variation is the transfer and there is no ETO reason.
Changes to terms and conditions are now permitted if: The employer has an ETO reason for the change; or the terms of the contract permit the variation; or terms incorporated from a collective agreement are varied at least one year following the transfer and the rights and obligations are no less favourable compared to those which applied immediately before the transfer. It appears to be easier to make changes. However, Government guidance states that the legislation sets out a new test, so existing case law is unlikely to be of much assistance and the Government guidance sheds no further light on the issue. We will need to await further assistance from the case law. Whilst harmonisation of terms for harmonisation’s sake is still likely to be void as being “by reason of the transfer”, there may be scope to argue, for example, that when introducing new restrictive covenants, the principal reason for the variation is because of the employer’s desire to ensure that their business is protected from departing employees. This remains to be seen from the case law.
From a practical perspective, employers should bear in mind ordinary contractual principals, which apply when relying on changes permitted by the contract; and employers amending terms in collective agreements, will no doubt face a battle over whether terms when “taken as a whole” are no less favourable than the previous terms, particularly when comparing financial and non-financial terms. This will no doubt involve quite an artificial weighing exercise, and we wait to see how the tribunals approach it. The timing of collective redundancies in an outsourcing context has always been a tricky area, particularly in offshoring, where mass redundancies may be required immediately following the transfer date. Previously, the accepted principle was that redundancy consultation should take place following the transfer, thereby involving cost and practical difficulties for the off-shore service provider in running the redundancy consultation in a location where they may not have premises or HR staff. For the transferor to undertake consultation prior to the transfer was considered risky, as the transferor was not consulting about its own redundancy proposal and could not rely on the transferee’s ETO reason, thereby risking failure to consult in automatic unfair dismissal claims. The transferee can now elect to undertake collective redundancy consultation before the transfer, provided that the transferor agrees. The transferor may provide information and assistance to the transferee, but is under no obligation to do so.
The difficulties are that; the transferor must consent, and is not obliged to provide assistance such as easy access to the employees. If they refuse consent, the transferee cannot claim ‘special circumstances’ for the purposes of the defence, for a failure to consult claim. It is the transferee’s obligation to ensure that the representatives are allowed access to the affected employees and given appropriate facilities during the process, this may be impossible if the transferor is not providing assistance; parties considering pre-transfer consultation should bear in mind the impact on liabilities. Indemnity protection, given as part of the deal, should be adjusted accordingly; as the transferor cannot rely on the transferee’s ETO reason, the transferor cannot dismiss the employees. The parties will still need to wait until the employees have transferred under TUPE, before dismissing, in order to avoid an automatic unfair dismissal claim; and – most importantly – the new rules only apply to collective redundancy consultation, i.e. consultation involving 20 or more redundancies. Otherwise, the transferee remains in the same difficult position as before, if it wishes to conclude the redundancies prior to the transfer. In reality, the ability to conduct collective consultation prior to the transfer will work best, where it is in both parties’ interests to do so, such as on a first generation outsourcing, or where the parties are bound to co-operate by virtue of the terms of the outsourcing agreement.