The forthcoming review of the TUPE Regulations may make it more palatable for charities to tender for public sector contracts, says John McMullen.
As is known, it is the policy of the Coalition government to open up government contract procurement. It aspires to award 25 per cent of government contracts to charities, co-operatives, and SMEs. Diversity of public services provision is also the central theme of the government’s Open Public Services White Paper. But in addition to the TUPE Regulations 2006, which protect employees’ terms and conditions on service provision changes, charities tendering for public sector contracts have been faced with the additional public sector codes of practice which build on TUPE and supplement its provisions. The government now appears to regard these codes, and, possibly, TUPE, as a barrier to these organisations entering the public sector market (see Open Public Services, para 6.19).
The main code of practice is the Cabinet Office Guidance on Staff transfers in the public sector. The most difficult aspect of this guidance is its annexe, A fair deal for staff pensions. However the latter, as Nick Burrows explained on this site recently, is under review And two other codes, one on Workforce Matters in Local Authority Service Contracts and the other on Workforce Matters in Public Sector Service Contracts, have already been revoked. These were the so-called ‘two-tier’ codes, requiring contractors for services not only to apply TUPE terms to transferring staff but also to any new staff hired during the course of the contract. The eradication or softening of the codes will help charities in tendering for services.
There are also signs that the TUPE regulations themselves may be under review. The government is keen to avoid ‘gold plating’ of the European Acquired Rights Directive upon which the regulations are based. Under European law and under the domestic law of all other EU member states (including Ireland) the answer to the question whether TUPE applies on a service provision change is: “It depends” (usually on whether assets are transferred or employees taken over). But the TUPE Regulations 2006 created a special TUPE definition for a service provision change, that in effect alters (and gold plates) the position under the Directive, allowing TUPE to apply without speculation in most cases, notwithstanding European law. It is here where the government’s focus may be concentrated.
The other area of attention may be in relation to a new provider’s responsibility under collective agreements. If an employee’s terms and conditions (including pay) are settled by a third-party body in the sector (such as a national joint council) a contractor/service provider such as a charity will be bound by the pay deal currently in force at the time of transfer. But European law states that a contractor will not be bound by future collective agreements setting pay and conditions in a case where the provider is not a party to the negotiating machinery concerned. Some British cases conflict with this, providing that a new provider may be liable for subsequent collectively bargained terms. The issue is so complex that the Supreme Court (in Parkwood Leisure Ltd v Alemo-Herron and others [2011] UKSC 26) has referred the matter to the European Court. But it is always possible that the government may anticipate events by legislating to confirm the European legal position that a provider is not liable for future pay awards made under collective bargaining processes applicable, say, to the public sector that do not operate in the third sector.
John McMullen is director of employment law at Wrigleys Solicitors