Planned changes to TUPE and contractual redundancy rights

In a move described by TUC general secretary Frances O’Grady as a “blatant attack on the ability of unions to represent working people”, the government has announced changes to TUPE that will water down dismissal and redundancy rights for transferring staff, as well as already outsourced workers.

From as early as January 2014, TUPE is to change so that one year after transfer, employers will be free to re-negotiate any contract term derived from or that incorporates a collective agreement — as long as any change by reason of the transfer is “no less favourable overall”. The government’s express purpose is to “limit a transferee’s exposure to unionised terms and conditions, which should better enable non-unionised prospective transferees to bid for a contract and hence potentially increase competition”. Various commentators have pointed out that the move is a breach of Article 11 of the European Convention of Human Rights — the right to freedom of association, which includes the right to bargain collectively (Demir and Baykara v Turkey Case No 34503/97).

In its current form, TUPE protects collectively negotiated contractual redundancy rights, as well as other important benefits such as early retirement rights (Beckmann v Dynamco Whicheloe Macfarlane [2002] EUECJ C-164/00). Once the changes to TUPE take effect, an incoming transferee will be free to re-negotiate these rights, although like any other contract change, agreement will be needed. To protect these terms, unions will have to fight to maintain recognition for transferred workers, because collective bargaining will be the only way to ensure that new terms are genuinely “no less favourable overall” and to prevent unlawful changes being imposed on workers.

Where unions are recognised, the “no less favourable overall” test will be fraught with difficulty for employers, especially in the context of redundancy and retirement rights, not least because individual employees will have very different views as to whether replacement benefits do, or do not, meet the test.

Recognition agreements transfer formally under regulation 6 of TUPE, but only if the group transferring retains a separate “identity” in the hands of the new employer.