In February 2003, the Government announced plans to take forward reform of the Transfer of Undertakings (Protection of Employment) regulations (TUPE), the legislation that protects employee rights when the business they
work for is transferred to a new owner. The aim is to improve the operation of the legislation for all those involved in business transfers - employees and employers alike.

The draft regulations have been expected for some time. The Department of Trade and Industry (DTI) had said that they would be published in October 2003. When they are published, there will then be a 3-month period for checking that the wording is clear. The DTI's annual statement detailing forthcoming changes to employment law and practice due to commence in 2004 gives October 2004 as the probable date when the new regulations will come into force, with an added note to say that commencement of the regulations may not take place until 2005.

The most significant change will be to introduce new flexibility into the application of the TUPE regulations in relation to the transfer of a business that is insolvent.

The Regulations will also update existing legislation to take account of decisions in the courts and consolidate the provisions of the Acquired Rights Directive.

Government proposals to increase protection for employees when firms are bought out, by extending the protections offered by TUPE to the occupational pension rights of workers, will be considered separately and to a longer timescale, as part of the pensions review being taken forward in the Government's Green Paper, "Pensions in the Workplace".

Meanwhile, the Court of Appeal has confirmed an earlier Employment Appeal Tribunal decision to the effect that a TUPE transfer can be a genuine material factor within the meaning of the Equal Pay Act.

An employer who fails to ensure that male and female employees get equal pay for equal work and is sued under the Equal Pay Act can justify the inequality if they can demonstrate that the difference is due to a material factor which is not the difference in sex. In the case in question ( Nelson v Carillon Services Ltd. 2003) a female member of staff, who joined Carillon Services Ltd. after they took over the business from Initial Healthcare Services, took her employer to the tribunal because she was paid less than a male member of staff. The latter had worked for Initial Healthcare before the transfer.

The explanation given by Carillon Services, that they were required by TUPE to continue to honour the terms and conditions under which those transferred from Initial had been employed whereas Ms Nelson was recruited at a later date, on Carillon's terms and conditions of employment, was considered by the Court of Appeal to be a genuine reason and not a "sham or a pretence".

Therefore, if a TUPE transfer is a material factor behind differences in pay for employees of different sex who are doing the same work (or work rated as equivalent or work of equal value) it can provide a valid defence to an employee's claim for equal pay with another employee of the opposite sex.