Proposed changes to UK employment laws are good news for the legal sector

By Anna Gregory, Partner, Farrer & Co

In 2011, the British government extended its broader review of employment law to three specific areas of employer complaints. This article looks at the law firm perspective on two of them: collective redundancy consultation (i.e. the requirements where an employer proposes to make 20 or more employees redundant in a period of 90 days or less) and employee protection on the transfer of undertakings, the UK law on which is invariably referred to as TUPE.

In November 2011, the Department for Business, Innovation and Skills (BIS) published two ‘calls for evidence’. With regards collective redundancy, views are sought on the consultation process and on reducing the 90-day period to 60, 45 or even 30 days if over 100 employees are at risk.

With regards TUPE, the focus is on whether, as employers have complained, it goldplates the Acquired Rights Directive it is based upon and is overly bureaucratic. BIS specifically queries two TUPE issues of particular potential interest to law firms:

1. the impact of service provision changes (better known as outsourcing or contracting out) having been expressly included when TUPE was last updated in 2006; and

2. whether changes in professional service providers should still be covered. '¨

If the evidence submitted suggests changes are required, a formal consultation will follow later this year.

Redundancy policies

As economic forecasts continue to be dogged by pessimism, it is by no means impossible that some firms will need to dust off their redundancy policies for a further round of cuts. Few, one hopes, will trigger the 90-day consultation requirement but some may and, frankly, anything that can be done to simplify the law in this area can only be a good thing.

The experience of many is that 90 days means protracted uncertainty for disillusioned employees and prevents employers who need to make cuts from doing so quickly. At present, some take the commercial decision to pay the penalties for non-compliance instead.

Mergers and outsourcing

Two key market trends over recent years have been mergers and the increasingly innovative use of outsourcing, both of which have potential TUPE implications. When firms merge, which can happen in different ways, one of many possible TUPE issues which BIS seeks views upon is the extent to which terms and conditions can be harmonised later down the line. Clarity here would be much appreciated.

Meanwhile, what started as a tentative contracting out of office services has developed into the phenomenon of legal process outsourcing, with companies such as Integreon and CPA Global becoming key market players. If it is possible to deliver a simpler, less burdensome legal framework to support these developments in our sector, then Kenneth Clarke’s vision of London as the legal capital of the world will be boosted.

Practical considerations

But to what extent can the government actually deliver these changes or the associated business benefits? There are problems, the first being the timescale. The closing date for answers was 31 January, following which a formal consultation needs to occur before any legal changes can actually be made, so any benefits will take time to filter through.

Trade unions and other employee groups will of course argue that this is no time to reduce employee protection. Perhaps the key problem, however, is that the nature of our national relationship with the EU seriously impedes the extent to which we can rewrite these rules. The government may dream of deregulation but, barring a significant repatriation of powers from Brussels, it still needs to comply with the EU directives which underpin our legislation.

This is a particular issue for TUPE changes, albeit that our service provision changes regulations to goldplate the Acquired Rights Directive. However, their specific inclusion was a considered step, which was probably a good thing. More employees may now be protected, but at least employers have greater certainty that TUPE will apply and can plan accordingly.

On a brighter note, even if legal constraints mean the impact of any changes to collective redundancy and TUPE law cannot be that great, combine that with other pipeline changes and the picture may just be slightly rosier.

Taking just three examples, it is proposed that the qualifying period to bring an unfair dismissal claim will increase from one to two years, claimants will soon be required to pay deposits for lodging a claim and the law on whistleblowing will be narrowed to crack down on its use in non-public-interest disputes. Good news for employers.

'¨anna.gregory@farrer.co.uk