Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
We think that some of the proposed changes are positive but careful attention will need to be paid to the detail of the wording as the current proposals seem to create greater uncertainty. The biggest concern is the proposal to remove the definition of service provision change from the scope of a TUPE transfer.
Removing the scope of service provision changes
The Government’s main reason behind this plan are that the introduction of the service provision change definition has not produced the greater level of legal certainty hoped for. Only 24% of respondents to the Call for Evidence said the 2006 amendments had reduced the need to take legal advice before bidding for contracts.
Our view is that whilst there is still some level of uncertainty as to when TUPE will apply on a service provision change the position is much clearer than it was prior to 2006. We consider that the removal of the service provision change test will leave clients with greater uncertainty as to whether TUPE will apply on any given service provision change. One of the policy drivers behind the proposed change is said to be to make it more attractive to bid for public sector contracts. Again, we don’t believe that will be the case as the public sector employees involved will still wish to assert that TUPE does apply and there will then be an argument that they fall within the previous test as to whether a TUPE transfer applies.
This proposed change also presents a big risk for existing service providers who are currently expecting staff to TUPE out to a new provider at the end of a contract. There is a potential that they could find themselves left with redundancy costs that would have otherwise transferred under TUPE. Service providers who are about to enter into service contracts should consider negotiating indemnities in relation to redundancy costs if TUPE does not apply at the end of the contract.
Employee liability information
In reality organisations need to have the information much earlier that the 14 days currently required under TUPE. We do not believe this is a good reason to get rid of this minimum level of information. We consider a requirement to disclose information where it is necessary to enable the parties to inform and consult could potentially be very wide. Until service providers have the information they don’t know whether they need to inform and consult because they don’t know what might need to change. Our view is that the intention to provide guidance and possibly model contract terms in relation to the provision of information would be the preferable approach as it would be difficult to have a "one size fits all" requirement in relation to the timing of the provision of information.
Lifting restrictions on changes to terms and conditions
We consider that change to remove the reference to a reason connected with the transfer would be useful although we do not think it will have a significant impact on when organisations will be able to make post transfer changes. We still think a much better argument for organisations looking to change terms post transfer is to show why the change is not related to the transfer at all. For example, because of a change in funding requirements or business model.
Terms contained in collective agreements
Subject to the wording that the Government use here, this could be a useful provision. The Government had said they would wait for the ECJ decision in Parkwood Leisure and Alemo-Herron before concluding their view on this. The Advocate General’s conclusion that a dynamic interpretation to collective agreements is compatible with the Acquired Rights Directive may push them to conclude that this provision should definitely be introduced.
Dismissals relating to the transfer
Having clarity that changing location falls within the definition of an ETO would be a very useful point of clarification. It would give organisations greater confidence in dismissing staff as redundant where there is a change in location that falls outside any mobility clause in their contracts. It will also be useful for the transferor to be able to rely on a transferee’s reason for dismissal. However, for service provision changes, we don’t think this is likely to be particularly useful.
Duty to inform and consult over collective redundancies
The ability to consult pre transfer confirms what a number of employers have done in practice in any event. We consider it is a sensible suggestion to enable parties to be clear as to their obligations and responsibilities in respect of staff consultation.
We will be preparing a detailed response to the consultation which we will circulate to those who are interested. We would like to your comments and would therefore ask you to let us know what you think about each of the proposed changes by telephone or email by 1 April 2013.
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