TUPE or not TUPE
The government has published a controversial pro-business consultation paper, making broad changes to employees’ rights when control of a business changes. The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) were last updated in 2006 and it’s clear the government is looking to increase flexibility and certainty for UK enterprise.
The most controversial proposed change is the decision to remove service provision changes from the scope of TUPE. When this was introduced six years ago the idea was to bring certainty to an area which had been muddied by the EU Acquired Rights Directive and a series of contradictory decisions by the European Court of Justice and national courts.
Before 2006 whether or not service provision changes fell within the scope of TUPE was (to cut a long story short) dependent on 'all the circumstances' of the case. This invited a great deal of legal uncertainty, which the 2006 regulations were designed to change.
However, while they have made the position clearer in many circumstances, employers have complained to the government that service provision changes have 'gold-plated' the EU Directive. The idea in 2006 was to allow smaller firms to bid for work against larger incumbents in the knowledge that if they won the work they would inherit the staff to carry it out. But in reality, smaller bidders have balked at taking on the additional employment liabilities.
For clients, the provision has caused problems because it means it's often very difficult to get rid of outsourced workers who aren't performing. If the reason for retendering a contract is that you aren't happy with the people providing a service to you, you won't be terribly happy when you find out that, thanks to TUPE, the same people will continue working for you after moving to another supplier.
Another big problem is that the provisions haven't removed the need for firms to take legal advice when sacking suppliers of services. Before 2006, companies asked lawyers to state whether or not TUPE applied. Now they are taking legal advice on ways to avoid TUPE altogether when casting off undesired outsourcers, and case law has developed that add unevenness to a supposedly level playing field.
Far from increasing legal simplicity, the provisions have created new challenges for lawyers and have rewarded the larger companies that have the resources to bring in legal advice. It's therefore good news for business that these changes are in the pipeline, but it's also critical that they are replaced by a clear and consistent rule which helps smaller companies feel confident about the liabilities they are taking on when responding to large tenders.
Unfortunately, this seems unlikely. The consultation paper states alternatives to simply relying on the old European case law are unworkable and accepting uncertainty will remain inevitable for companies looking to remove suppliers. For smaller companies with limited in-house HR and legal resources, the most cost-effective answer may be to use external legal support not just to give advice, but to conduct HR services too.
Adrian Hoggarth is head of employment at Prolegal solicitors