UK government proposes further changes to TUPE

British employment law is gradually beginning to diverge from the EU-derived law that continued to apply when the UK left the EU. After a consultation in 2023, the government relaxed the rules on informing and consulting employees on a TUPE transfer.

On 16 May 2024, it proposed further changes to TUPE, apparently in response to issues raised during the earlier consultation exercise. The current consultation suggests amending the definition of employee in TUPE and clarifying what happens to employment contracts if a service is split between multiple employers after a transfer.

Although these are not major changes to the way TUPE operates, they are sensible reforms that streamline the law without undermining fundamental employment rights.

Definition of employee

TUPE applies to “any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services”. This is similar but not identical to the definition of employee in the Employment Rights Act and there was an historic assumption that it meant that TUPE applied to employees but not the wider category of “limb b” workers.

However, in 2019 the employment tribunal decision in Dewhurst v Revisecatch Ltd t/a Ecourier found that the Acquired Rights Directive on which TUPE is based covered workers, not just the narrower group of employees. As TUPE defines an employee as someone working for someone else under a contract of employment “or otherwise”, the tribunal decided that it applies to someone working under a contract personally to perform work. This led to a risk that discrimination, holiday pay or minimum wage liabilities for “limb b” workers could pass from a transferor to a transferee. Workers would also need to be included in information and consultation processes.

Although a decision at tribunal level is not binding and there is no appellate authority on the point, the government is now proposing to amend the definition of employee in TUPE specifically to provide that it does not include “limb b” workers. This would give transferors and transferees greater certainty about who is protected by TUPE and the liabilities that could transfer.

Split services

Another complex issue is what happens to contracts of employment when a service that was originally provided by one organisation is split between different providers after a transfer. For example, a contract to provide maintenance at several buildings could be awarded to a different contractor at each building after a re-tendering exercise. 

Until the CJEU decision in ISS Facility Services v Govaerts, it was generally assumed that as long as the requirements for a service provision change were met, employees would transfer to one of the incoming service providers (typically the one that had taken on the greater part of the pre-transfer services). In some cases, the provision of the services after the transfer might be so fragmented that TUPE did not apply at all. The CJEU then found that, in principle, there was no reason why employees’ contracts of employment could not be split between all the incoming providers in proportion to the work carried out.

That decision obviously raised difficult practical questions about how such a split would operate. To remove those difficulties, the government is consulting on amending TUPE to ensure that employment contracts are not split in that way. Instead, service providers would be required to agree who would be responsible for each employee’s contract after a transfer. The consultation paper does not address what would happen in a situation in which incoming service providers (who are often competitors) are unable to agree how to divide employees.

Next steps

The consultation closes on 11 July 2024. The government is asking in particular for views on:

•  The effects of the decision in Dewhurst for employers or workers;
• How common split transfers are; and
• The practical considerations that arise on a split transfer.

Authored by Jo Broadbent, Eleanor Doubleday and Stefan Martin.