Susan Kelly: Don’t discount changes to Tupe just yet

We’re barely a couple of months into our post-EU lives, and already there has been strong speculation about how workers’ future protections might change.

Just a few weeks ago came the news that business secretary Kwasi Kwarteng was reviewing job protections; a move much criticised as signalling the start of the ‘erosion’ of workplace rights. It was followed by a swift rebuttal that rights wouldn’t be watered down, before an announcement a few days later that a review wasn’t now happening at all. Or, to be exact, that ‘there is no plan’ to reduce workers’ rights’; hardly the strongest of assurances that employment law won’t still be looked at some point in the future.

The official line might well be that there are no plans right now, but this still leaves plenty of wiggle room to revisit this. While still in the realm of speculation, the legislation many feel is most likely to come under scrutiny is that around Transfer of Undertakings (Protection of Employment) (Tupe) regulations.

European law requires that any organisation acquiring the staff of another has to honour the terms and conditions, including holiday, pay and other benefits, of the incoming employees in full. While the intention was to protect staff, for years this particular rule has attracted criticism. Particularly disliked by firms is the fact it allows for large discrepancies to exist between old and newer staff; differences that are often significant when private organisations take on public sector employees.

So what is the likelihood of change? A week before the end of the Brexit transition period, the UK and EU reached agreement on the Trade and Co-operation Agreement, avoiding a ‘No Deal’ Brexit. This makes specific mention of workplace rights and provides that these are not to be weakened below the level they were at when the UK left the EU.

What’s not always realised, however, is that agreements preventing the dilution of these rights are only binding in as far as they do not impact trade and investment between the EU and the UK. What’s more, the onus would be on the EU to prove that any changes made by the UK, for example in allowing terms and conditions to be harmonised after a Tupe transfer, had a material impact on trade and investment.

This latter point is crucial. Even though the EU is highly likely to disapprove of anything that could be seen as giving the UK a competitive edge, it is not clear how a material impact on trade and investment will be determined if changes to Tupe were presented. In other words, there may well be changes to UK employment legislation that the government would feel able to make without fearing remedial action on the part of the EU.

There may be other rules that could be looked at in the same vein, such as how to calculate holiday pay (EU rules requires this to be based on ‘normal remuneration’ which can include bonuses and overtime, for example), and rules around accrual of sick pay during long-term absence or maternity leave, which businesses have had to adjust to as a result of European rulings.

Because of the administrative difficulties some of these EU rules create, as much as anything else, some employers might welcome a change – although in most respects, more change is the last thing they want.

However, while any substantive changes no longer seem to be at the top of the government’s agenda, there is some scope for them within the Trade and Co-operation Agreement and it would be unwise to rule them out entirely.

Susan Kelly is a partner at Winckworth Sherwood LLP