A recent government consultation exercise suggested that the Government planned to remove provisions within the Transfer of Undertakings regulations which confirmed that ‘TUPE’ protection rights did apply in a contracting situation. However following consultation, it has been decided that the provisions will stay.
There is quite a history behind the regulation on service provision changes. Initially there was some doubt as to whether TUPE regulations, which protect employee’s rights on the sale or transfer of a business, could apply where a particular activity was outsourced. There were particular issues around ‘second generation’ contracting i.e when a contract was re-tendered and passed from the original contractor to a new one. Another question was whether TUPE applied when services were taken back in house.
A sequence of cases in sectors such as cleaning, catering and security, suggested that such exercises were covered, so that staff had the right to transfer to a new contractor on the same terms and conditions and with continuity of service.
This principle was then confirmed when the TUPE regulations were revised in 2006. The concept of a ‘service provision change’ was introduced, meaning that in the vast majority of cases TUPE rights would apply upon:
- a first generation contracting-out
- a second generation contract; and
- services reverting in-house.
Even when later cases brought about some qualifications on the application of TUPE, the new provision meant far greater certainty on the application of TUPE for contractors.
The coalition government was concerned that the rules on ‘service provision changes’ might amount to ‘gold plating’ of an EU directive and suggested its abolition. However the recent announcement that the rules will stay has been welcomed by many legal commentators as avoiding a situation where the question of TUPE in a contracting situation could be thrown back into confusion.
There are to be some changes to TUPE however.
First, for TUPE to apply the service will have to remain fundamentally the same before and after transfer.
Second, a change of location will be defined as an ‘economic, technical or organisational reason’ for dismissal of staff following a TUPE transfer. Up to this point, the extent to which a transferee employer can legitimately make changes to terms and conditions, or can make staff redundant, has been limited by this definition. The change will give employers a little more leeway.
Finally there will be changes to the rules around TUPE consultation to make it easier for the new employer to commence consultation with the incoming staff before the transfer actually takes place.
The changes are likely to become law in the new year.