Tuesday, 21 January 2014

Buying and Selling Businesses – Changes to the Employment Rules

There is some good news for those buying and selling businesses – the Government is easing some aspects of the ‘TUPE’ employment protection legislation that applies on the transfer of a business although the Government is not going so far as some business campaigners had hoped. 

What is changing? 

The changes relate mainly to redundancies and altering employees’ terms and conditions.  
From 31 January 2014 it will be easier for in-coming employers to have a dialogue with the out-going employer’s staff about possible redundancies. Crucially, time spent by the new employer consulting with the old employer’s staff before the transfer takes effect will count towards the requirement  to consult employee representatives about redundancies – if the old employer agrees and all the safeguards are met. 

The law is also being altered so that it will be less risky in future to make staff redundant where the new employer wants to relocate the acquired operation.

The TUPE legislation is also triggered when there is a change in the contractor providing services as well as on a more conventional sale of a business.  Despite intense lobbying from some business representatives, a switch in service provider  (for example, on an out-sourcing or  re-tendering exercise) will still be covered by TUPE but only where the services provided are fundamentally the same post transfer, bringing the legislation in line with recent case law.                                     
The law is being amended in other ways, which are intended to widen the circumstances where in-coming employers can make changes to employees’ terms and conditions, including those derived from collective agreements. 

What will be the impact?

The headline change, facilitating in-coming employer consultation about redundancies before a transfer takes place, is likely to cut some of the risk associated with many transfers. 

However, the changes intended to make it easier to implement post-transfer changes to terms and conditions tread a sometimes tortuous path between reform and complying with overriding European Community law. As a result, there is likely to be substantial satellite litigation testing the new law. The changes, therefore, do little to reduce the need for in-coming and outgoing employers to rely, where they can, on warranties and indemnities to meet their business needs. 

Further advice

For further advice on the practical implications of the new TUPE law, please contact FWJ