As part of the Government’s recent consultation, it has announced proposals to make significant changes to TUPE (Transfer of Undertakings Protection of Employment Regulations). Its broad aim is to simplify TUPE and make transfers easier for all involved.
The most dramatic changes include removing the provisions that apply TUPE to service provision changes, i.e. in-sourcing, out-sourcing and re-tendering. The Government proposes to reverse the 2006 amendment relating to service provision changes, effectively abolishing it in its current form.
2006 TUPE Amendment
The intention of the 2006 TUPE amendment was that it would apply TUPE to most service provision changes and therefore provide certainty. It was hoped it would end any exposure to fluctuating case law and create a more level playing field in the tendering process, reducing costs.
In reality, the changes were deemed to go further than the directive; they were seen as ‘gold-plating’ and overly procedural. As a result, parties often sought legal advice before forming contractual relationships and even where they were already formed, in order to see how TUPE could be avoided or its effects mitigated.
Practicalities of TUPE for Service Provision Changes
One positive effect of TUPE on service provision changes was that a transferee inherited a workforce that was able to carry out the work; the related negative was that they also inherited their employment liabilities.
From the client’s perspective the service provision changes rules have stood in the way of one of the primary aims of re-tendering a contract, namely because it was unhappy with those people who were working on it. If a contract changes hands and the same personnel are employed after the transfer, there seems little point in re-tendering that contract.
Another issue that has arisen is where transferors have been accused of switching employees affected by a service provision change so that they can keep the ones they would like to retain but get rid of those they do not mind parting with.
Although the 2006 amendment brought a degree of certainty to service provision changes in some circumstances, they were overshadowed by other issues. If the Government succeeds in removing service provision changes, TUPE will revert to its original 1981 meaning. Affected businesses may rejoice but this could invite yet more uncertainty in the law as TUPE will still operate in some circumstances. The legal position will then require an understanding of old case law predating the adoption of the 2006 amendment in order to decide whether and how TUPE applies.
If you would like more information regarding the TUPE consultation and the potential effects on your business, Rollingsons has experienced lawyers who can advise you. Please contact Aneil Balgobin via e-mail ABalgobin@rollingsons.co.uk or by telephone on 0207 611 4848.