Changes to employment terms and conditions after a TUPE transfer
TUPE: A high-level overview
First, as a reminder, the basic rules regarding staff rights under TUPE 2006 are as follows:
- the transfer of the employment contract and all rights, powers, duties and liabilities under or in connection with it transfers from transferor to transferee;
- the transferee becomes liable for acts or omissions of the transferor in relation to the transferring employees;
- those aspects of an occupational pension scheme that relate to 'old age survivors and invalidity benefits' do not transfer under TUPE, but there are modest obligations on a transferee to provide pension provision under the Transfer of Employment (Pension Protection) Regulations 2005 (SI 2005/649) (as amended to take into account an employer's auto-enrolment obligations);
- collective agreements and recognition of trade unions will transfer to the transferee;
- there are rules restricting when employment contracts may be varied where the reason for the variation is the transfer;
- special rules apply about whether dismissals may occur when the reason for them is the transfer;
- an employer is required to inform and in certain circumstances, consult, with employee representatives;
- a transferor employer has to supply employee information about transferring employees to a transferee.
The legal background and the impact of BREXIT on employee rights and employer responsibilities
The operative law in this area is the Transfer of Undertakings (Protection of Employment) Regulations ('TUPE') 2006 (SI 2006/246), as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (SI 2014/16), replacing the TUPE Regulations 1981 (SI 1981/1794).
European law background
The TUPE Regulations were originally enacted to implement the EC Acquired Rights Directive 77/187/EEC on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses. The Directive is now known as the Acquired Rights (or Business Transfers) Directive 2001/23. Since then, they have become a key feature in the management of staff transfers, whether on mergers and acquisitions, outsourcing, or major public sector transfers. Whilst the UK was a member of what became the European Union, any British law enacted to implement a European law, such as the Acquired Rights Directive, had to be interpreted in the light of the European Directive, and any available European Court case law on the Directive, which gives guidance on how the Directive itself is to be interpreted. This method of looking at British legislation in the light of the Directive and European Court case law is called the 'purposive' method of interpretation. This meant that the 'black letter approach' to the legislation (ie strictly interpreting the legislation on the basis of what it appears to say) gives way to a 'purposive' interpretation designed to give effect to the purpose of the European legislation behind it (although this will not be the case where an aspect of the TUPE Regulations does not implement the Directive (ie goes further than required: see 'Service provision change', below ([6.5]))). This interpretative method continues even though the UK formally left the European Union on 31 January 2020, as is explained in what follows.
Brexit and the EU Withdrawal Agreement
On 29 March 2017, following the outcome of the UK Referendum 2016 on whether to remain in or to leave the European Union, and the European Union (Notification of Withdrawal) Act 2017, the UK Government gave notice to leave the EU under Article 50(2) of the Treaty on European Union. This two-year notice would have expired on 29 March 2019. It was extended by agreement three times until 31 January 2020. The Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community highlighting the progress made (coloured version) in the negotiation round with the UK of 16–19 March 2018 (the 'May agreement') was replaced by the 'Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community' (19 October 2019) (the 'Johnson agreement'). During the 2019 hung Parliament, it was not possible to achieve UK Parliamentary approval to this. But the outcome of the December 2019 General Election, and a large Conservative working majority, meant approval was inevitable. The European Union (Withdrawal Agreement) Act 2020 received Royal Assent on 23 January 2020. The Withdrawal Agreement was ratified by the UK on the same day, by the EU on 30 January 2020, and entered into force on 31 January 2020.
A core part of the Withdrawal Agreement is that there shall be a 'transition' or 'Implementation' period under Article 126. This period begins when the UK leaves the EU and ends on 31 December 2020. However, the UK and EU can jointly agree to extend that period by a further period of up to two years, under Article 132. But the Government has stated that it will not request an extension, and this is enshrined in a new s 15A of the European Union (Withdrawal Agreement) Act 2018. During the Implementation Period, the UK will have to follow most of EU law in the same way as it did before as a Member State. However, it will no longer have representation and voting rights in the EU institutions. The European Union (Withdrawal Agreement) Act 2020 gave effect to this Implementation Period and made certain amendments to the European Union (Withdrawal) Act 2018 to facilitate this. The persuasiveness of ECJ case law decided after the end of the Implementation Period is presently unclear, but it is likely to be taken into account, especially if it clarifies or explains historic ECJ decisions. Section 6(2) of the 2018 Act provides for this.
The primary function of the 2018 Act (as modified by the European Union (Withdrawal Agreement) Act 2020) is to convert existing EU law, including the EU Acquired Rights Directive, into UK law. This means transposition of the acquis communautaire, which comprises both EU primary law and ECJ case law. Section 2(1) of the Act says: 'EU-derived domestic legislation, as it has effect in domestic law immediately before exit day, continues to have effect in domestic law on and after exit day'. The meaning of EU-derived law will be determined in the UK courts by reference to ECJ case law as it exists on the date of the 'Implementation Period' completion date (see above). Such historic ECJ case law will be given the same binding, or precedent, status as decisions of the Supreme Court. However, the 2018 Act must be read alongside the amendments made by The European Union (Withdrawal Agreement) Act 2020. The latter provides for the possibility, for a limited time, by way of enabling regulations, of other courts and tribunals departing from retained EU case law. These regulations would have to particularise the extent to which, or circumstances in which, a court or tribunal 'is not to be bound by retained EU case law', and for laying down the test which would apply 'in deciding whether to depart from any retained EU case law', including the considerations 'relevant to' any court applying the 'test' for when to depart from such case law. There are two savings. Firstly, specified senior judges must be consulted before any such regulations are made and no regulation can be made after the end of the Implementation Period Completion date (see generally s 6(5A)–(5D) of the 2018 Act).
Finally, the original European Union (Withdrawal Agreement) Bill had some non-regression provisions about workers' rights. Clause 34 would have inserted a new s 18A and Sch 5A into the European Union (Withdrawal) Act 2018 to implement these. However, these were removed in a later Bill. It is suggested these may re-appear in a future Employment Bill.
Therefore, it is to be stressed that, as at present, the European Court authorities we refer to in this Digest will still be applicable in the interpretation of TUPE even though the UK has formally ceased to be a member of the EU.
Who is protected by TUPE
Regulation 2(1) of the Regulations defines 'employee' as 'any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract of services and references to a person's employer shall be construed accordingly'. This definition is wider than the definition of an employee under the Employment Rights Act 1996, but does not, on the face of it, include self-employed persons.