What future for TUPE 2006?

Andrew James looks at the impact of the government’s policy intentions in relation to TUPE and related codes of practice on central and local government

With an emphasis on more privatisation and deregulation (it wants to outsource up to 25 per cent of government contracts to small and medium sized businesses), the government has already started to strip away some of the protection provided by the TUPE Regulations.

What are the shortcomings in TUPE?

Despite the positive changes made to TUPE in 2006, three significant shortcomings remain.

First, there is still only limited protection for pensions. Second, the Regulations did not prevent the development of a two-tier workforce when employers took over public sector contracts; and third, TUPE still does not apply to the “... administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities” (Regulation 3(5) TUPE 2006).

In Henke -v -GemeindeSchierke and Verwaltungsgemeinschaft “Brocken", the Court of Justice of the European Union (CJEU) held that the transfer of the administrative functions of the municipality of Schierke to the new local government body was excluded from TUPE by article 1(c) of the directive.

So although Mrs Henke worked as a secretary in the mayor’s office, the transfer of the office related to activities involving the exercise of public authority and was therefore outside the scope of the legislation.

Although it is often said that the Henke exception has been interpreted restrictively, article 1(c) still has wide application to re-organisations affecting the civil service, non-departmental public bodies and local government.

In the EAT decision of Adult Learning Inspectorate and ors -v- Beloff, there was no appeal against the Tribunal decision that the transfer of functions from the Adult Learning Inspectorate (responsible for inspection work relating to further education, vocational and work-based training) to New Ofsted was a transfer of administrative functions between public administrative authorities and so was excluded from the protection of TUPE 2006 by Regulation 3(5).

What do the codes of practice say?

Because of this shortcoming, TUPE was supplemented by three codes of practice: the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector (COSOP); the Code of Practice on Workforce Matters in Public Sector Service Contracts (commonly referred to as the Two-Tier Code) and the Code of Practice on Workforce Matters in Local Authority Contracts (the LG Two-Tier Code).

The codes were intended to have three main effects. Firstly, COSOP ensures that, provided its principles are followed, TUPE-like protection is applied to the transfer of administrative functions between public bodies.

Secondly, the codes applied the Fair Deal for Staff Pensions to TUPE transfers to the private sector or to other parts of the public sector.

Thirdly, they ensured that the terms and conditions of staff joining the employer after the transfer were broadly similar to those of staff transferring in.

The Fair Deal clearly recognises the importance of pensions to the overall remuneration of staff and says that the new provider should offer something ‘broadly comparable’.

That is strictly defined. The government’s intention in relation to public sector pensions is well known, however – higher employee contributions, higher retirement ages and reduced benefits.

It is arguable that, until such changes have been agreed and implemented, any change to the Fair Deal would be premature.

But that hasn’t stopped this government carrying out a consultation exercise on it recently, the outcome of which is awaited.

The government’s attitude to out-sourcing and the extra protection provided to employees by the codes is readily apparent from recent actions.

On 13 December 2010 the Cabinet Office announced that the Two-Tier Code was being withdrawn with immediate effect. This was closely followed on 23 March 2011 by the withdrawal of the LG Two-Tier Code. The detrimental effect of these changes on employees is obvious.

Gold-plating of directives?

Business has been complaining again recently about the “gold-plating” of European directives by the Labour Government, despite the fact that it brought into force a number of Regulations (for example, the Working TimeRegulations, the Part Time Worker Regulations and the Fixed Term Employees Regulations) in as minimalist a way as possible.

The service provision change (SPC) provisions of TUPE 2006 were a notable and much welcome exception.

However, recent guidance from the Department of Business, Innovation and Skills called “How to implement European Directives effectively” (April 2011) exhorts government departments not to go beyond the minimum required by a directive.

It also suggests that departments should avoid “retaining pre-existing UK standards where they are higher than those required by the directive”. Such a general policy would potentially fall foul of the principle of non-regression (under which EC countries cannot use the implementation of a directive to reduce existing rights).

In any event, the removal of the SPC provisions of TUPE 2006 would simply take us back to the previous legal uncertainty surrounding such changes, which itself creates extra expense for business due to the legal costs involved in resolving disputes in Tribunals.