In a bid to drive economic growth and provide clarity after certain case law judgments, last week the Government opened a consultation to clarify who is to be protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) as well as proposing to abolish the legal framework for European Works Councils (“EWCs”) which have been subject to recent litigation.

The consultation will close on 11 July 2024.

TUPE

The purpose of the TUPE regulations is to protect employees’ employment rights when the business or undertaking for which they work is transferred to a new employer or when a service transfers to a new provider. Where TUPE applies, employees’ employment and associated rights legally transfer from their previous employer to their new one.

Following the reforms to TUPE from 1 January 2024 (small businesses are permitted to consult directly with employees and any size business may consult employees directly where a transfer of a small number of employees is proposed), the questions remained whether TUPE applied to workers as well as employees, and whether employees’ contracts should be split between multiple employers where a business is transferred to multiple transferees. The new consultation is looking to resolve any uncertainty to these questions.

Proposal 1: only employees are protected by TUPE

Previously, TUPE applied to employees only however case law from 2019 found that TUPE applied to workers as well. The judgment in the 2019 case is not binding but has still caused uncertainty for businesses on this topic.

Confusingly, the TUPE Regulations and the Employment Rights Act 1996 do not use the same definitions of 'employee' and 'worker'. The government is therefore proposing to amend the definition of ‘employee’ in the TUPE regulations to clarify that workers are not protected by the regulations.

Proposal 2: no obligation to split employees’ contracts where a business is transferred to multiple transferees

It was always widely understood that an employment contract could not be split as part of a TUPE transfer. However, following a Court of Justice of the European Union case in 2020, the ruling provided that a full-time employment contract can be split between multiple employers when a TUPE transfer takes place to more than one new business.

Splitting contracts in this way can be impractical for all parties involved. Employees may be required to work between multiple sites and dividing employees’ terms and conditions is challenging and confusing for employers.

The Government is proposing to amend the TUPE regulations to clarify that an employment contract should only be transferred to one employer and the employers taking over the business or service would be required to agree who should be responsible for each employee’s contract.

EWCs

EWCs are consultative bodies that represent the European workforce of multi-national organisations. Through EWCs, workers are informed and consulted by the management on the progress of the business and any significant decision at a transnational, European level that could affect their employment or working conditions.

Following Brexit, the government legislated to prevent the establishment of new EWCs in the UK. The regulatory framework was maintained to allow existing EWCs to continue to operate however, it was never the Government’s intention that EWCs in the UK should continue to operate indefinitely.

Proposal 3: abolishing the legal framework for European Works Councils

Currently there is an ongoing cost to businesses of having to operate an EWC in the UK in addition to a parallel one in the EU to meet their obligations under EU law.

The Government proposes to repeal the legal framework for EWCs in the UK, which will include a repeal of the current requirement to maintain existing EWCs. The Government believe that existing structures can effectively represent workers at company level in the absence of an EWC, such as unions or other employee representatives.