Post-Brexit legal changes: TUPE or not TUPE?
Charles Wynn-Evans, June 02, 2016
Many are discussing the impact of a possible Brexit, but will TUPE really be reformed or repealed?
The possibility of Brexit has prompted considerable discussion of its potential consequences for domestic employment law. One facet that many commentators have forecast might be reformed or even repealed is TUPE, which implements into domestic law the requirements of the EU Acquired Rights Directive.
But a number of pieces would need to fall into place before TUPE was in jeopardy. The UK would need to continue a post-Brexit relationship with the EU that did not require the retention of transfer of undertakings legislation. Membership of the European Economic Area, for example, can require the adoption of transfer of undertakings legislation.
Concerns about its commercial effects have led to several reforms of TUPE over the years, most recently in 2014. But those changes were all made in the context of the Acquired Rights Directive and so were inevitably limited in their scope.
A more drastic view would argue TUPE is an unacceptable drag on competitiveness. But as an alternative to outright abolition it could be watered down to increase flexibility for employers. The obligation to conduct collective information and consultation in advance of transfer could be removed or made less onerous. The prohibition (save in specified circumstances) of changes to employees' contracts of employment, even by consent, where the reason for the change is the transfer, could be removed.
Greater flexibility could be allowed in insolvency situations. TUPE's protection of contractual terms would then be confined to the 'point of entry'. In which case TUPE would simply operate to transfer staff on their current terms of employment at the point of transfer. Thereafter they might only be protected to the same extent as other employees. The normal rules of contract variation and unfair dismissal would then apply rather than the enhanced protections currently provided by TUPE. Harmonisation of terms – one of the major concerns for those involved in TUPE transfers – would be made far easier.
The principal argument for the retention of TUPE is the protection of employees where their positions may be particularly precarious. However, it should not be forgotten that TUPE is needed as the mechanism to transfer staff regardless of the level of protection provided. Under domestic common law an employee's employment does not automatically follow the business in which the individual works if it is sold or transferred.
Indeed the transfer of the business constitutes a dismissal of the employees working in it. If it is accepted that staff should transfer on a business sale TUPE is therefore needed.
Moreover, there is an additional commercial reason why the retention of TUPE might be favoured by employers. Many outsourcing and similar arrangements have proceeded on the assumption that TUPE will apply on the termination of the arrangements in question. For TUPE no longer to apply would potentially cause immense disruption to the conduct of outsourcing processes as well as rendering incumbent service providers liable for potentially very significant and unbudgeted termination costs.
So increasing employers’ ability to harmonise terms and conditions of employment and reducing consultation obligations are more likely post-Brexit, than outright abolition. People will always need TUPE.
Charles Wynn-Evans is a partner at law firm Dechert