TUPE reforms may lead to biased staff transfers

As the TUPE alterations finally get under way, it seems the changes are set
to create a two-tier TUPE system that favours the transfer of ex-public sector

The week ending 14 February 2003 was a (relatively) exciting one for TUPE
anoraks. The TUPE reform is finally moving on. The Government has been
considering the alteration of the Transfer of Undertakings (Protection of
Employment) Regulations 1981 (TUPE) for several years, but its last
consultation on the subject ended in December 2001 and nothing has been heard
on the matter since.

The DTI’s snail-like progression towards reform has been accelerated by
public sector union pressure. On 13 February, the Deputy Prime Minister’s
office announced that in April, certain public sector staff would receive
immediate better treatment on TUPE transfers ahead of any other sector.

Added to the Cabinet Office Statement of Practice 2000 (which obliges
central government and the NHS to apply TUPE unless there are exceptional
circumstances) and section 38 of the Employment Relations Act 1999 (which
allows the Secretary of State to deem transactions that would not be transfers
under community law, to enjoy the protection of TUPE), the Government has now
approved its Code of Practice on workforce matters in local government.

Unexpectedly, it assumes the application of TUPE on local government
contracting. But controversially, it goes further, and deals with the so-called
‘two-tier workforce’ problem. It will oblige contractors for public services
from local government to apply TUPE not only to transferring staff, but also to
recruits hired after the transfer.

Finally, employees must be offered a reasonable pension provision. This may
be membership of the local government pension scheme, membership of a good
quality employer pension scheme, or membership of a stakeholder pension scheme
with a contribution from the employer.

The code will be enforced by a contract clause between the local authority
and the contractor.

On 14 February, the Secretary of State Patricia Hewitt declared that TUPE
would be the subject of further consultation and draft revised regulations
"in the first half of this year". These are to be put before
Parliament in the autumn and come into force in Spring 2004.

The reforms will include the application of TUPE more comprehensively to
service contract operations (although the press releases stress that this
excludes "professional services" such as accountancy, consultancy and
legal advice), and provisions requiring the new employer to be better informed
of the ongoing employment rights of the staff taken on.

TUPE’s role in selling insolvent businesses will be improved to promote a
‘rescue’ culture, saving businesses and jobs that would otherwise be lost.

A review of the coverage of occupational pension rights under TUPE will be
considered separately during a broader timescale as part of the pensions review
being taken forward, and the Government’s Green Paper, Pensions in the

The announcement will only truly satisfy public sector unions and staff
involved in contracting for public services. It is hinted that service
contracts may receive the same kind of treatment in the private sector, but the
extent to which TUPE will apply outside the public sector is unclear.

Removing the two-tier workforce in public sector transfers may be morally
sound. Creating a two-tier TUPE, where ex-public sector staff are favoured over
those in purely private-to-private sector transfers, is undesirable.

But until a decision is finally made, such employers and employees in the
private sector will have to rely upon the parlous state of case law.

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