ANALYSIS: TUPE changes bring 'all change, no change'

Changes to law governing the transfer of businesses and contracts and protection of employment (TUPE) that took effect last Friday (31 Jan 2014) could have “potentially wide-ranging implications for outsource partners where contracts change hands”, a recruitment industry executive has said.
Tue, 4 Feb 2014 | By DeeDee Doke Changes to law governing the transfer of businesses and contracts and protection of employment (TUPE) that took effect last Friday (31 Jan 2014) could have “potentially wide-ranging implications for outsource partners where contracts change hands”, a recruitment industry executive has said.

At the same time, recruitment industry trade body experts, practitioners and legal experts agree that the changes will make the TUPE process “more straightforward”.

However, the TUC is warning that the changes put workers at risk of having their pay and conditions cut, and even of dismissal after a transfer takes place. The TUC said it fears that the changes will have “a big impact” on low-paid staff in commonly contracted-out services such as cleaning, catering and social care.

According to Croner employment law expert Stuart Chamberlain, highlights of the reforms include:

• The new employer will be able to begin consultation before any TUPE transfer in respect of employees who are likely to be made redundant after the transfer, subject to a number of conditions
• Activities before and after the transfer must be “fundamentally the same” to satisfy the new legal definition of a service provision change
• Where there is a change in the place of work after a transfer, any redundancies as a result of the change are no longer automatically unfair
• The new employer is permitted to make changes to collective agreements after 12 months, provided the terms and conditions are no less favourable to employees
• The new employer is bound by the terms (eg. pay rates that come into force after the transfer and where he or she has not been a party to the collective bargaining)

Howard Flint, managing director at independent RPO firm Omni, discussed with recruiter.co.uk the potential impact of the changes on RPOs. “Although not as drastic as first mooted,” Flint said, “the amendments … nonetheless have potentially wide-ranging implications for outsource partners where contracts change hands, including RPOs.”

He pointed out that the changes now codify that activities carried out after the transfer must be “fundamentally the same” as the activities conducted by the person who has ceased to carry them out for it to be considered a service provision change. Feeling the impact most, he said, will be an RPO taking over a contract “at the edges of a service, where inputs and outputs are likely to be the same from provider to provider”.

“However,” Flint went on to say, “the core service an RPO provides, and where its differentiating proposition lies, is what happens in between those points. It is at those stages… where a provider can distinguish itself from another, and so potentially allows a new (or old) RPO to argue that their offering is dissimilar, that staff are carrying out different functions and that TUPE should not apply.”

On the other hand, Flint added, the recent changes could make processes more straightforward. He explained: “In the past, TUPE could have had ramifications on an RPO’s ability to consolidate operations from an on-site recruitment arrangement to a more efficient central-shared service, as existing on-site employees would fall under transfer regulations.”

Recruitment & Employment Confederation (REC) director of policy & professional services Tom Hadley tells Recruiter that the latest changes will create “less uncertainty” for recruiters than might have occurred under earlier proposed changes.

However, Hadley went on to say that recruiters who have their temporary workers on full employment contracts will need to be aware of when TUPE applies to avoid legal action. “This is especially true in the public sector where we are likely to see new service models develop,” he said.

As an example, Hadley gave the scenario of a contract changing from a master vendor to a neutral vendor agreement. “Would that constitute a change from ‘fundamentally the same’? That hasn’t been tested,” Hadley said.

Hadley disagreed with the TUC view of the potential vulnerability of workers, saying that the reforms would not result in workers “being any worse off”.

Asked about the situation facing umbrella companies that directly employ temporary workers on behalf of employers, he said: “It is fair to say that umbrellas have traditionally been overlooked when discussing TUPE issues. However, there is increasing acceptance that umbrellas can often effectively be the employer of the workers and therefore covered by TUPE requirements.”

Victoria Parry, a partner on law firm Osborne Clark’s employment team, described to recruiter.co.uk the latest changes as “easing the wheels of consultation and making it a little slicker”. However, she summed up the reform package as, “All change, no change”.

Leaders at social care recruitment specialist Caritas and public sector recruiter Eden Brown both told recruiter.co.uk that since they did not directly employ their temporary workers, the reforms would not have “any significant impact” on their businesses.

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