TUPE: welcome move to include change of location in ETO reason definition
Author: Darren Newman
Consultant editor Darren Newman explains why he welcomes the Government's intention to include a change of location within the scope of an "economic, technical or organisational reason entailing changes in the workforce" in relation to TUPE transfers, but warns that a change to the domestic legislation may not necessarily achieve the desired result.
The big story about the Government's proposed reform of TUPE is that it has stepped back from the most controversial proposal - the repeal of the wider "service provision change" type of TUPE transfer. Originally, the Government had said that this kind of transfer, introduced in 2006, provided a level of regulation that went beyond the requirements of the Acquired Rights Directive (2001/23/EC) and therefore constituted "gold-plating". However, the responses to the consultation have persuaded the Government that, in this instance, gold-plating is a good thing.
Quite right too. The removal of service provision changes from TUPE would have caused chaos in the contracting industry, which benefits from at least a modicum of certainty about when a change in contractor will or will not constitute a TUPE transfer. I am surprised that the Government ever thought that the proposal was a good idea, but glad that, on this occasion at least, it chose to take note of what was said by those responding to the consultation.
However, TUPE is not being left alone. The Government still intends to introduce a number of amendments, which are designed to "improve" the working of the Regulations. I am generally sceptical about the value of tinkering with legislation to improve it. New wording always creates new uncertainties and, unless there is a very clear problem to be addressed, I prefer the Government to stay its legislative hand and allow the courts to iron out any small difficulties. Most of the amendments to TUPE that the Government is proposing will make very little practical difference for most people. However, careless drafting could create new problems we have yet to foresee.
There is one area where I welcome change, however, and that is the inclusion of a change in location in the definition of an economic, technical or organisational (ETO) reason. To understand the significance of this we have to look in some detail at just what an ETO reason is.
A dismissal for a reason related to a transfer will be automatically unfair unless it is for an "economic, technical or organisational reason entailing changes in the workforce". This is a bit of a mouthful so it is understandable that people tend to refer to an ETO reason for shorthand. The danger in doing so, however, is that one forgets the requirement for an ETO reason to entail "changes in the workforce" when in fact that is the most important requirement. Almost any dismissal that is not based on the personal characteristics of the employee will be for an ETO reason, but by no means all of them will entail changes in the workforce.
Our leading case on what "entailing changes in the workforce" means is the Court of Appeal decision in Delabole Slate Ltd v Berriman [1985] IRLR 305 CA. The Court held that an ETO reason had to entail a change in the "numbers" or "functions" of the employees. Crucially the case said nothing about the location of the employees - and that is a gap that the Government wants to fill.
The fact is that, when TUPE and the original Directive were conceived, the scenario that was being considered was the takeover of a factory or some other place of work by a new employer. The idea that a transfer might necessitate a relocation of the workforce was not really considered. It certainly was not considered by the Court of Appeal in Berriman, which was concerned with the transfer of a slate mine that was obviously not going anywhere.
However, in the modern setting, changes in location are common. A customer contact centre does not need to be based at a company's headquarters, but can be contracted out and run from a different location many miles away. The employees who are transferred may not want to work in the new location - what is to happen to them?
In Abellio London Ltd (formerly Travel London Ltd) v Musse and others; CentreWest London Buses Ltd v Musse and others [2012] IRLR 360 EAT the transfer of a bus route to a new employer meant that employees were asked to change depot from Westbourne Park to Battersea some six miles away (readers from outside London should be aware that six miles in the capital is - especially when crossing the Thames - a journey of epic proportions). A number of employees successfully claimed constructive dismissal because the move was in breach of the mobility clauses in their contract. The constructive dismissals were connected with a transfer and therefore automatically unfair. There was no scope for arguing that an ETO reason applied because the new employer was not seeking to change the size or function of the workforce, but only its location.
If a change in location were to be specifically included within the scope of an ETO reason that would mean that, in a case like Abellio, the new employer could argue that it had behaved reasonably in trying to accommodate the difficulties that a change in location involved. If employees who refuse to move are made redundant, the employer will at least be able to argue that the redundancy was fair. This will not leave the employees without any protection. The issue will simply be - as it is with any normal unfair dismissal - whether or not the employer has acted reasonably.
Extending the meaning of an ETO reason in this way seems a reasonable measure addressing a genuine problem with the current draft of TUPE. There is, however, one problem. TUPE must be interpreted so as to comply with the Directive from which the concept of an ETO reason is derived. Can we be certain that the European Court of Justice (ECJ) would interpret the phrase "entailing changes in the workforce" as being wide enough to encompass a change in location?
There is simply no way of telling as this is not an issue that the ECJ has so far addressed. For this Government, the uncomfortable fact is that what matters is not how TUPE is drafted, but how the ECJ interprets the Directive. When the change in the scope of an ETO reason goes through, it is only a question of time before a question is referred to Europe asking whether or not the new wording complies with the Directive. What happens then is anybody's guess, but it is worth a try.
