27.02.14
TUPE 2014 and the public sector
Source: Public Sector Executive Feb/Mar 2014
On 31 January 2014 the amended version of the Collective Redundancies & Transfer of Undertakings (Protection of Employment) Regulations 2014 (TUPE 2014) was implemented. The changes followed a lengthy consultation process, amending TUPE 2006, and aimed to reduce the UK’s supposed ‘gold-plating’ of EU legislation. Mark Hammerton, head of employment at national business law firm DWF, explores the changes and their implications for the public sector.
Before TUPE 2014 was introduced, many had hoped for a wholesale liberalisation of this important employment protection legislation, and an end to the UK exceeding the terms of EU directives when implementing them into national law. While these changes to TUPE fall short of the radical free-market overhaul that some would have liked, the government has made a respectable attempt at using what modest scope it has under EU law to clarify the legislation in a number of respects.
Summary of key changes
In short, TUPE 2014 is EU-driven, much like its predecessor, and seeks to protect the jobs and terms and conditions of employees at a time of business or organisational change, such as the sale of a business or process of outsourcing. As a result, the employer’s freedom to act with impunity and without additional cost is restricted. TUPE 2014 seeks to change this by introducing a number of modifications to existing legislation.
Employers are now able to count pre-transfer consultation for collective redundancy timelines, with an additional 14 days given for current employers to provide employee liability information. There will be a static approach applied to collective agreements, whereby the new employer is bound by the terms as ‘frozen’ at the point of transfer, and the dismissal of an employee under Regulation 7 of TUPE 2006 will now only be automatically unfair if the reason for the dismissal is the transfer itself. A change in the place of employment will now be a justifiable reason for dismissal (but due process is still needed), even where TUPE has led to said action.
Service Provision Change and interpretation
However, the most significant change in TUPE 2014 is an amendment to Service Provision Change (SPC), which was introduced in 2006, so that a service must be “fundamentally the same as the activities carried out previously” for TUPE to even apply. With these words now enshrined in the legislation itself, rather than left to judicial interpretation, greater scope is granted for the new contractor to argue that the legislation is not applicable at all.
This may present a number of issues for both the contractor and customer, and we have already seen a greater propensity for new providers to argue that their approach to service delivery will be so radically different that TUPE does not apply.
As a result of this amendment to SPC, future outsourcing agreements or re-tenders of existing services will need to be more carefully planned to assess a number of factors. Organisations will need to consider the scale of risk, including potential severance costs, and the opportunities available to establish whether TUPE applies. They may also need to explore adjustments to the procurement process or service delivery model to assist those opportunities, and considerations for business continuity or service quality reasons that might take precedence.
While the changes to TUPE are wide-reaching, public sector bodies and contractors are still grappling with the pension changes introduced through the new Fair Deal in October 2013, which require that outsourcing contractors offer compulsorily transferred employees access to a public sector pension scheme. It also allows them to participate directly in NHS and civil service schemes for the first time. On the face of it, this provides a simpler, more risk-managed solution, but the finer details are still unclear and it remains to be seen how some of these changes will work in practice. There are some pitfalls that public sector bodies and contractors should be aware of, such as exit debts, and greater clarity is required on where the risk sits.
For public sector organisations, it is most important to understand that where services are being delivered in an innovative way, there is greater scope to argue that TUPE does not apply. For example, in a situation where the public sector body is outsourcing for the first time, staff are less likely to be entitled to transfer. In a second or later generation of outsourcing, the existing contractor is potentially left with excess staff if no TUPE is in place. In this instance, the contractor would need to review the current agreement to explore if there is any basis for passing the redundancy costs on to their public sector client.