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In brief

On 16 May 2024, the government launched a consultation concerning TUPE and European Works Councils (EWCs). There are three proposals under consultation: (1) Overturn the concept of split assignment in a TUPE transfer (where an employee’s contract of employment could be split between two transferees). (2) Confirm that TUPE only covers employees, not workers. (3) Repeal the remaining post-Brexit EWC legislation, which will likely see the end of any statutory obligations to maintain an EWC in the UK. The consultation should continue despite the general election that has since been announced, and is due to close on 11 July 2024. It remains to be seen whether the newly elected government will pursue the proposals.


Contents

  1. Comments
  2. Background
    1. Proposed reforms to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
    2. EWCs – proposed repeal of Transnational Information and Consultation of Employees Regulations 1999 (TICER)

Comments

This is an interesting development, although the subsequent announcement of a general election to take place on 4 July 2024 leaves the proposals’ future in some uncertainty. The consultation is due to close a week after the general election, on 11 July 2024. The newly elected government, which might be of a different political composition, would then need to decide on its legislative priorities, which will be framed by election manifestos and campaign promises.

As for the substance of the proposals, removing the concept of split assignment is unlikely to be controversial. The concept is generally unattractive to both the employers and the individual. Currently, if the issue arises, the parties tend to deal with it by way of agreement. Indeed, the consultation document also promotes agreement: it states that the affected transferees would be required to agree between themselves who should be responsible for each employee’s contract. Nevertheless, creating a statutory obligation to agree is both novel and potentially problematic. TUPE operates on the principle of automatic transfer; i.e. where TUPE applies, in-scope employees automatically transfer. Introducing an element of choice for the affected transferees departs from that principle. This is potentially problematic if (as seems likely in many cases) the transferees cannot agree who will take the affected individual(s). If the agreement approach is pursued, it is to be hoped that the regulations will also provide a mechanism for resolving disagreements.

The proposal to remove workers from the scope of TUPE might be less attractive to some but is not an argument that had gained much traction in our experience in any event. It is a matter that has tended to arise, and be addressed at a commercial level, in circumstances where the business being acquired may rely heavily on freelancers or where it might be advantageous for key individuals (such as certain members of limited liability partnerships) to transfer by operation of law.

As for EWCs, the government’s stated aim is to bring to an end what it considered to be a temporary reprieve for EWCs in the UK. Although the ability to create new EWCs in the UK was removed following Brexit, provisions were retained relating to the operation of existing UK based EWCs. In our experience, many businesses had in fact arranged their affairs before the end of Brexit transition to avoid having a UK-based EWC. However, some employers have found themselves having to operate two EWCs – one based in the UK and one based in the EU. The proposal would allow these employers to stop operating a UK EWC.

The general election does not affect the other change to TUPE that was confirmed earlier this year: namely extending the circumstances in which it is possible to inform and consult with employees directly (see here for more detail). Those changes are already confirmed in legislation and apply to TUPE transfers occurring on or after 1 July 2024.

Background

Proposed reforms to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

TUPE applies where there is a business transfer or a service provision change. Broadly speaking, the former occurs where there is the transfer of an economic entity which retains its identity; the latter arises in outsourcing, second generation outsourcing, or in-sourcing situations. Where a business transfer occurs, employees who are assigned to the transferring economic entity automatically transfer to the transferee business. In some cases, a single transferor will have distinct economic entities within it, which transfer to different transferees. The same can occur in a service provision change, e.g. one outsourcing contract is split into two or three when re-tendered. 

This splitting can be problematic in relation to employees who work across the different parts of the business that are splitting: to which transferee do they transfer? In ISS Facility Services v Govaerts, the ECJ decided that such an employee’s contract of employment could in theory be split. In McTear Contracts Ltd v Bennett, the EAT applied the principle to a service provision change scenario in the UK.

The government has proposed amending TUPE to expressly state that a contract of employment cannot be split, i.e. overturning the effect of Govaerts and McTear

In Dewhurst v Revisecatch Ltd (t/a Ecourier), an employment tribunal held that the word employee in TUPE encompasses the broader definition of worker, sometimes referred to as a limb (b) worker, in reference to the definition in s.230(3)(b) of the Employment Rights Act 1996. The tribunal reached this decision on the basis of its interpretation of the scope of the EU Acquired Rights Directive, which TUPE was intended to implement. The ARD remained relevant at the time, as the decision pre-dated the completion of the Brexit process. Although Dewhurst is not a binding decision, the government has proposed forestalling any other cases, by amending TUPE to confirm that limb (b) workers are not covered. 

EWCs – proposed repeal of Transnational Information and Consultation of Employees Regulations 1999 (TICER)

EWCs derive from EU directives, which were implemented in the UK by TICER. EWCs are an employee information and consultation body designed to deal with transnational issues affecting a company or group of companies. As part of the Brexit process, the government heavily amended TICER. The amended regulations have been the focus of litigation, and have variously been described as poorly drafted or not well thought through. In short, the current position is that businesses that had an EWC in the UK at the time the Brexit transition period ended, operating under the subsidiary requirements in TICER, have continued to have to operate them. This is despite the fact that the company / group will have had to operate an EWC in the EU too.

The government is proposing to remove the legislative framework for EWCs in the UK. No more detail is given, but we assume this will in effect remove any statutory obligation to continue an EWC in the UK. This will not affect any right under an EWC agreement for UK employees to continue to participate in an EU-based EWC. The UK employees’ rights in that respect will be governed by the EU member states’ laws.

Author

Carl is a partner in the Employment Group at Baker McKenzie. He focuses on advising organisations on the employment aspects of financial transactions together with more general employment and litigation advice. Carl has been recommended in the Chambers legal directory as being “hailed for his rigour and interpersonal approach to assignments”, an ability to “build a rapport very quickly with clients." Carl is also recommended by Legal 500 and has been quoted as being “excellent across the board” “very thorough,” “strong on transactional matters," “staying on top of the issues” and is further quoted as being “thorough, patient and goes the extra mile.”

Author

Annabel Mackay has extensive experience of advising employers and employees on a range of complex employment issues.
She has been ranked in Legal 500 and Chambers & Partners since 2015.
Chambers & Partners 2019 report that clients describe Annabel as: "supremely impressive and technically brilliant while also being commercially astute and incredibly bright."

Author

James Brown is a Knowledge Lawyer in Baker McKenzie, London office.

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