2. TUPE
2.1 Authorities generally have two main options for dealing with employees when considering ways in which to improve service delivery:
2.1.1 retain affected employees in-house and change the way in which they deliver the services; or
2.1.2 transfer the services and any associated employees to a third party.
2.2 The market is fast developing in this area with other hybrid employment models such as secondment, agency and sub-contracting arrangements being developed and used by various Authorities. However, ultimately any arrangement will either involve affected employees remaining in the employment of the Authority or their contracts of employment being transferred to a new employer. For the purposes of this Guidance, we will not consider use of secondment, agency and sub-contracting3 but will focus on how to effectively address workforce issues when transferring staff and the provision of a service(s) to a third party.
2.3 If a Council, following a best value review, decided it would be more economical and effective to transfer the provision of one or more services (for example, ICT and/or highways maintenance) to a third party provider, it could award a contract ("Agreement") for the provision of such services following an EU compliant procurement process. If it decided to transfer its employees who mainly or wholly provide such services, any such transfer would be regulated by the terms of the Agreement and UK employment law. TUPE would usually apply to any such transfer to protect the existing terms and conditions of Authority staff who transfer to the new service provider or contractor. This effectively means that the new employer ("Contractor") will be in the same position as the old employer (Authority) in terms of almost all employment rights and obligations (see paragraph 2.5).
2.4 The application of TUPE is a matter of law, determined by the application of TUPE, the Acquired Rights Directive and case law. Within the public sector it is generally expected that TUPE principles will apply even if at law there remains some doubt as to whether TUPE does in fact apply. Under the LGA 2003, section 101 provides for directions to be issued by the Secretary of State, but following a consultation process with the Local Government Association and the Trade Unions, it was decided that a general staff transfer direction was not required (but see comments regarding pension protection at paragraph 2.10).
2.5 Therefore, all rights and liabilities of the Authority as regards affected employees, including their contracts of employment, unlawful dismissal claims, discrimination claims etc. transfer to the Contractor. Continuity of service is maintained4 and employees must be collectively informed of the reasons for the transfer and the legal, economic, social and other implications thereof.
2.6 Employees cannot "opt out" of TUPE protection on a voluntary basis5, but the European Court of Justice has made it clear that an employee cannot be compelled to transfer to a new employer against their will. Employees may "object" to their individual transfer and in such an instance, the employee is treated as having resigned rather than dismissed as a result of the transfer.6 The employee will have no claim for compensation arising from such a resignation against his/her employer (the transferor or transferee), unless the reason for the resignation was due to a substantial change in his working conditions to his material detriment in which case he is treated as dismissed with notice. In addition, Regulation 4(11) provides that an employee may terminate his contract without notice if the employer commits a repudiatory breach.
2.7 There are a number of issues Authorities must address when transferring employees and the provision of a service to a third party:-
2.7.1 Who will transfer? - whilst it is obvious that employees who spend all their time working for the relevant service will transfer, there remains uncertainty as to whether employees who spend some of their time on the relevant service will also transfer. Such a decision is a matter to be determined by the Authority and its legal advisors following an examination of each individual case according to its merits, but in any event part-time workers should be treated in the same manner as full-time workers. Generally Authorities view employees who spend 50% or more of their time on the transferred service as being able to transfer, but this is only a "rule of thumb." In legal terms, any employee assigned to the service that transfers will be caught under TUPE.7 Whether an employee is assigned or not will depend on a variety of factors including the terms of their contract of employment, the budget from which their salary is paid, as well as the proportion of their time dedicated to the relevant service.
2.7.2 What transfers? - all accrued and pending liabilities, rights, powers and duties in connection with the contract of employment, including collective agreements will transfer.8 Note however, liabilities which by their very nature are personal to the Authority will not transfer, for instance criminal liabilities. Also, certain occupational pension rights and discretions do not transfer under TUPE (see paragraphs 3.3 and 3.27).
2.8 The implications of TUPE and sections 101 and 102 of the LGA 2003 on pension arrangements are addressed in Section 3 of this Guidance. The Statement of Practice and Code of Practice enhance the protections available to transferring Local Authority employees under TUPE, each of which are considered in turn below.
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3 Further information on the use of alternative employment models can be found in the "Employment and Partnerships Technical Note" (March 2004) developed by the Office of the Deputy Prime Minister's Strategic Partnering Taskforce which is available at www.communities.gov.uk.
4 Subject to Celtec v Astley & Others
5 Foreningen of Abedsledsledere / Denmark v Daddy's Dance Hall A/S [1988] IRLR 315
6 Regulations 4(7) and 4(8) of TUPE
7 Botzen v Rotterdamske Droogdok Maatschappif BV [1986] 2 CMLR
8 Subject to Parkwood Leisure Limited v Alemo-Herron and others [2010] EWCA Civ 4