Government Proposes Reforms to TUPE Obligations

The Government has published a consultation which is seeking views on proposals to refine and reform the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”), in an attempt to make the process less complex, and cheaper, for businesses. The consultation, running until 11 July 2024, forms part of the Government’s efforts to reduce the regulatory burden that many UK businesses are under.

The law as it stands

A European Court of Justice (“ECJ) ruling in 2020 has imposed an obligation on employers to split employees’ contracts between multiple employers where a business is transferred to more than one new business. The case in question involved a cleaning contract that had been divided between two different companies following a transfer of undertakings. The ECJ judged that the contract should be split in proportion to the tasks performed for each company. The Government holds the view that the splitting of contracts can be impractical for employers and employees alike because employees might need to work between multiple sites, and it poses a significant challenge for employers’ to attempt to divide employees’ terms and conditions. Further, there are no provisions in the TUPE regulations to determine how a contract should be split between multiple employers,

The proposals

The consultation sets out various proposals for reforms to employment law and is seeking views on the following proposals:

  • Reaffirming that only employees are protected by TUPE (and, therefore, workers will continue to not be covered by TUPE regulations); and
  • Removing the complex obligation to split employees’ contracts between multiple employers where a business is transferred to more than one new business.

The Government has pointed out in its published White Paper that the generally accepted principle that TUPE regulations do not apply to workers, was called into question by a 2019 Employment Tribunal (“ET”) decision, where the ET found that both employees and workers qualified for TUPE protection. The ET’s judgment isn’t binding on other tribunals, but the Government has proposed to amend the definition of employee in the TUPE regulations, to help bring certainty on this point.

In its consultation paper, the Government has stated that some of the respondents to its May 2023 consultation on reforms to retained EU employment law called for clarity on how similar TUPE cases to the ECJ one of 2020 should be handled, following the ECJ’s judgment. Before that case, it was widely understood that an employment contract could not be split as part of a TUPE transfer. The proposal puts forward that an employment contract should only be transferred to one employer. The employers taking over the business or service would need to agree which employer is responsible for each employee’s contract. They reason that this will simplify the transfer process for both employees and employers.

How these proposals could impact you

With this being an election year, and the consultation not closing until 11 July 2024, it is difficult to predict if anything will result from this. However, the Government estimates that the effect on businesses will lead to more certainty in business planning. This increased clarity could potentially bring small administrative savings to affected employers and bring a more level playing field for businesses.

How we can help

For further information, or to discuss the impact the proposed reforms might have on your business, please contact us to speak to a member of our Employment Team. 

Darren Smith
Partner, Employment
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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