The new transfer of undertakings legislation is upon us. Any business taking over another business or service contract (business transfer) should know about these changes:
- Dismissals following business transfer are less likely to be automatically unfair. The new rules have reduced the range of automatically unfair dismissals following a business purchase or contract transfer. They will only be automatically unfair where the ‘sole or principal reason’ for the dismissal is the transfer. The ‘ETO’ defence is now clearer, and there will be no automatic unfair dismissal where this was for an ‘economic, technical or organisational reason involving changes in the work force’, including changes in working duties, numbers of employees, and places of work.
- Changing contracts after the transfer will be easier. Changes to contract terms will be valid where this has been done for the same reasons as above i.e. they will be invalid only if ‘the sole or principal reason for the dismissal is the transfer’, with an ETO defence available. Contractual changes will also be allowed where this is permitted by the contract of employment (now would be a good time to review your contracts).
- Employee information must be provided earlier. The business giving up the contract, or selling the business, must provide basic information about transferring staff and any problems or disputes 28 days before the transfer date. This used to be 14 days.
- Service provision contracts are less likely to be caught. The new rules state that TUPE will only apply where a contract that has been taken over by another supplier is carried out by the new contractor in ‘fundamentally the same’ way as before. Significant changes in the way a contract is provided are now less likely to be covered by TUPE, and there is more certainty.
- Large scale redundancies: consultation will be easier. The business taking on the new staff, and planning to make more than 20 people redundant, will now be able to carry out their consultation before the transfer takes place, with the consent of the existing employer. They will only be able to make this request once.
- Union negotiated terms will be easier to deal with. The terms of Union negotiated collective agreements can now be changed after 1 year provided the changes, when considered alongside the whole employment contract, leave the employee no more worse off. Where there is a Union agreement in place, terms subsequently agreed (such as pay rises) will not affect transferred employees.
- Flexibility for micro businesses (in force on 31 July)
Businesses with fewer than 10 employees will be able to consult with them directly, without the need for the election of representatives.