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Smarter Regulation: Employment Law Reform

In May 2024, the Government launched a consultation on proposals to simplify employment regulations, with a view to reducing the administrative cost and burden for employers.  The consultation addresses concerns from employers regarding complexities under The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and the regulation of existing European Works Councils (“EWCs”).

Proposal 1: To reaffirm that only employees are protected by TUPE

A first instance Employment Tribunal decision in 2019 indicated that workers should have the same protections under TUPE as employees, so that they may have the right to transfer to a new employer with their existing terms and conditions of employment (Dewhurst v Revisecatch Ltd t/a Ecocourier).  This applies when there is a relevant business transfer or service provision change.  Whilst not legally binding, this gave rise to a great degree of uncertainty for business and the potential for increased costs in respect of corporate transactions and outsourcing arrangements, where it had previously been understood that workers did not transfer. 

Many employers will have continued business planning on the assumption that workers will not be caught by TUPE.  However, we are sure that greater clarity will be welcomed by business.  Given the significant rise in atypical worker arrangements, particularly since the Covid-19 pandemic, it is possible that this could restrict rights for a key portion of the UK workforce.  

Proposal 2: To prevent the situation where an employee’s contract of employment can be split between different transferees on a relevant TUPE transfer

Where services or parts of a business are fragmented at the point of a relevant transfer (for example, where outsourced services are transferred from one provider to multiple new providers (“transferees”)), an EU court ruled it is possible for an employee’s contract of employment to transfer to one or more transferee (ISS Facility Services NV v Govaerts and Atalian NV).  Whilst perhaps logical for employment to transfer to the transferee along with the particular activities that they are taking over, in practice, this gives rise to significant practical difficulties.  For example, how is the employee to split their time, location of work and so on. 

It is not clear how the Government proposes that parties should decide which transferee the employee should transfer to.  This could potentially lead to multiple transferees denying that an employee should transfer to them; ultimately leaving the employee without any position, and potentially further litigation.

Proposal 3: abolishing the legal framework for EWCs

The Government proposes to remove the obligation for UK companies to continue EWCs for the purpose of collective consultation with staff regarding decisions that could impact terms and conditions of employment.  Whilst new EWCs are now prevented in the UK, the proposal is that the current regulatory framework should cease altogether, to save the complexity and administrative burden of existing EWCs both in the UK and within the EU.  Instead the Government suggests that appropriate protections are already provided through other existing forms of representation, in particular Trade Unions and employee representatives. 

The consultation is due to close on 11 July 2024.  It will remain to be seen whether the proposals see the light of day following the recently announced general election.  Of course, if a new Labour Government comes into power it may well abandon these proposals, in line with its manifesto to focus on employee rights.  Time will tell!

A copy of the consultation and how your business can respond can be found here: Smarter regulation: employment law reform - GOV.UK (www.gov.uk) 

Posted on 05/24/2024 by Ortolan

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