Limits on unfair dismissal compensation and amendments to TUPE proposed

The Government has released a consultation on suggested amendments to the Transfer of Undertakings (Protection of Employment) Regulations 2006. This consultation has been formulated following a “call for evidence” undertaken in 2012.

Under the proposals the Government has suggested repealing the service provision change coverage so that contracting out, contracting in and tendering do not fall within the scope of TUPE.

In reaching its conclusions the Government has considered that many businesses consider the service provision changes to be anti competitive, in that it allows transferors to pick and choose which employees they retain and which they do not

In addition the Government is proposing that regulation 4 TUPE be amended so that contract changes, by reason of the transfer itself, would be prohibited but (i) parties would be able to agree any changes that they could have agreed had there not been a transfer; and (ii) the parties could still agree a variation for economic, technical and organisational reason. The TUPE consultation closes on 11 April 2013 and the Government will publish its response within 12 weeks of this date. Should the proposals be supported the Government will look to introduce these changes in October 2013.

The Government has also published a response to the “ending the employment relationship” consultation. The key proposal to come out of this consultation process is to cap the compensatory award for unfair dismissal at one year’s pay, whilst at the same time keeping the current statutory cap (currently £72,300) in place. This will effectively limit compensation to whichever of these two amounts is the lowest.