Title: "TUPE: New Regulations And Recent Developments"

OUTLINE

1 Introduction

1.1 Revisions to the Acquired Rights Directive of July 1998 to be implemented in EU Member States by 17 July 2001.

1.2 September 2001 publication of the government’s consultation document on the proposed revisions to TUPE. The consultation period ran to 15 December 2001.

1.3 Timescale still unclear.

1.4 Concentrate on certain aspects of the legislation: the scope of its coverage; public sector transfers; disclosure of information pre-transfer; dismissals; changes in terms and conditions and anti-avoidance.

2 Revised Acquired Rights Directive: Scope

2.1 From Schmidt [1994] IRLR 304 to Suzen [1997] IRLR 255.

2.2 Suzen interpretation of Rygaard [1996] IRLR 51. "An organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective".

2.3 Revised Directive Article 1.1(b):-

"… there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary".

2.4 Recital 4 of the amending Directive (98/50/EC) repeated in Recital 8 of the consolidating Directive 2001/23/EC.

2.5 Cases of Sanchez Hidalgo [1999] IRLR 136 and Hernandez Vidal [1999] IRLR 136. Adopted the approach in Suzen.

2.6 Oy Liikenne v Liskojarvi [2001] IRLR 171 the ECJ regarded this as an activity requiring substantial plant and equipment and ruled against a transfer because there was no transfer of the key assets.

2.7 Temco Service Industries SA v Imzilyen [2002] IRLR 214 cleaning contract part of the staff were taken on by the new employer and Abler v Sodexho [2004] IRLR 168 a catering contract, contractor did not take over an essential part of the staff.

2.8 Multi-factorial approach.

3 Implementation in the UK: case law

3.1 Court of Appeal: ECM (Vehicle Delivery) Services v Cox [1999] IRLR 559; ADI (UK) Limited v Firm Security Group Limited [2001] IRLR 542; RCO Support Services v UNISON [2002] IRLR 401 (RCO - appeal to the House of Lords).

3.2 Court of Appeal: Fairhurst Ward Abbott Limited v Botes Building Limited [2004] IRLR 304.

3.3 The Court of Appeal decisions attempt to place Suzen in context. EAT Dudley Bower Building Services Limited v Lowe [2003] IRLR 260 and P&O Trans European Ltd v Initial Transport Services Limited [2003] IRLR 128.

3.4 The Court of Appeal has also been astute to limit the capacity of employers to avoid the application of TUPE by the manner in which the transfer is organised.

4 Implementation in the UK: likely regulations

4.1 What does the UK government intend to do in order to implement the revised Directive?

4.2 The government’s thinking as at September 2001 is described in "Government Proposals for Reform – Detailed Background Paper" (URN01/1158).

4.3 Copy the revised definition in the amended Directive. Legislate specifically to apply the provisions of TUPE to "service provision changes".

4.4 Powers in section 38 of the Employment Relations Act 1999.

4.5 Service provision changes would be those situations described above where, before the change, the activity is carried out by an organised grouping of the transferor’s employees the principal purpose of which is to perform the service activities in question and, following the change, the manner in which the activity is carried out will remain essentially the same.

4.6 Exclude single contracts in contemplation of a specific task and contracts primarily for the supply of goods. Government also wishes to exclude the provision of professional business services.

4.7 The aim of the proposals: TUPE apply "more comprehensively" to labour-intensive service contracts. "Level playing field". Need to be careful drafting. Possible employer avoidance.

5 The public sector

5.1 On transfers within public administration, Article 1.1(c) of the revised Directive again incorporates elements of the case law of the ECJ. Dr Sophie Redmond Stichting v Bartol [1992] 366 and Commission v UK [1994] IRLR 392 and Henke [1996] IRLR 701.

5.2 The Henke restriction has been given a narrow interpretation: Sanchez Hidalgo and EAT in Dundee City Council v Arshad (S) EAT 1204/98. Collino v Telecom Italia [2000] IRLR 788; Mayeur v APIM [2000] IRLR 783; Oy Liikenne case; EFTA court: Viggodsdottir v Islandpostur HF [2002] IRLR 425.

5.3 Government similarly restrictive view of the exclusion that "excludes from the legislation only a relatively limited range of situations involving the transfer of entities pursuing non-economic objectives within the public sector".

5.4 The policy on public sector transfers is set out in "Staff Transfers in the Public Sector" (Cabinet Office, January 2000; paragraph 5).

5.5 Specific regulations to provide for the application of TUPE and primary legislation.

5.6 Issue of the "two-tier workforce". All future Private Finance Initiative hospital deals staff will remain employed by the NHS rather than the private contractors. Government circular: "Local Government Act 1999: Part 1 – Best Value and Performance Improvement" of 13 March 2003 (ODPM Circular 03/2003). The Code forms part of the service specification and conditions for all contracts. Enforcement of the Code is through the local authority enforcing the terms of the service provision contract which incorporate the Code.

6 Notification of employee liability information

6.1 Article 3.2 of the revised Directive allows Member States to legislate to require notification of workforce information prior to a transfer. Government has indicated include in the revised TUPE regulations.

6.2 The proposal is that the transferor is required to give the transferee written notification of all the rights and obligations relating to employees that are to be transferred. The information must be provided in good time and would also be required to notify of any changes pre-transfer.

6.3 Method of enforcement. Position of workers’ representatives.

7 Dismissals

7.1 Consultation document: economic, technical or organisational reasons for dismissal ("ETO reasons") are a subset of reasons connected with the transfer.

7.2 Whitehouse v Blatchford & Sons [1999] IRLR 492. Concern Tribunals more willing to find dismissals fair for ETO reasons.

8 Changes in terms and conditions

8.1 Proposal to change the provisions on changes in terms and conditions on the occasion of a transfer "by making clear that they do not preclude transfer-related changes to terms and conditions that are made for an ETO reason – that is an "economic, technical or organisational reason entailing changes in the workforce".

8.2 Rask v ISS Kantineservice [1993] IRLR 133; Daddy’s Dance Hall [1988]; Collino [2000] IRLR 788; Credit Suisse First Boston v Padiachy [1988] IRLR 504.

8.3 The difficulty is establishing whether the transfer is reason for the change in terms and conditions. House of Lords: Wilson & others v St Helens Borough Council and British Fuels Limited v Meade and Baxendale [1988] IRLR 706 - valid dismissal. Not need to reach a concluded view on the question of whether an agreed change (without any dismissal) is effective to change contractual terms. Would have referred it to the ECJ; offered some tentative conclusions.

8.4 It is this approach which has been adopted by the government in its proposals, but the comments by the House of Lords do not form part of its substantive decision and there is no support from the Directive or the ECJ decisions for this approach.

8.5 Concern is that this amendment will make Tribunals more likely to endorse the validity of agreed changes.

8.6 Government’s proposals, the ETO saving only applies where it entails changes in the workforce.

9 Anti-avoidance

9.1 Efforts to avoid the impact of TUPE; ECM and ADI cases; Brookes v Borough Care Services [1988] IRLR 636.

9.2 Betts v Brintel Helicopters Limited [1997] IRLR 361 ruled out an injunction to prevent dismissals.

9.3 Government is not intending to introduce "pre-determination" procedure.

9.4 Option of giving workers threatened with dismissal the right to apply for interim relief.

10 Conclusion

10.1 The continued delay in producing draft regulations to implement the revised Directive is a cause for concern.

Stephen Cavalier
Thompsons

May 2004

Back to the top