The Code of Practice

2.11  The Code of Practice and the Circular in which it is found were introduced in 2003 following the Government review of Local Authority contracting in England. Its provisions are designed to ensure the terms and conditions of transferring Local Authority employees are protected and there is fairness for employees recruited to work alongside such transferred employees.

2.12  The Code of Practice applies to all principal Local Authorities in England and Wales9 (see paragraph 2.10 for our views on its application to maintained schools) and constitutes guidance on how Local Authorities might meet their best value duty. The Code of Practice is guidance issued under the powers in s19(4) of the Local Government Act 1999. The principles contained in the Code of Practice were extended to cover the NHS and central government by the publication in March 2005 by the Cabinet Office of the Code of Practice on Workforce Matters in Public Sector Service Contracts (a copy of which can be found at www.cabinetoffice.gov.uk).

2.13  The Code of Practice applies to all Local Authority contracts advertised following publication of the Code of Practice in statutory guidance form (i.e. 13 March 2003).

2.14  Local Authorities embarking upon procurement exercises after 13 March 2003 (whether pursuant to PFI, BSF, NHS LIFT or any other procurement exercise) should ensure their OJEU notices make reference to the Code of Practice and its obligations so that bidders are informed as early in the process as possible about its application. The following suggested drafting can be modified as appropriate for inclusion in OJEU notices:-

"The contracting authority has included obligations within the specification and contract conditions relating to workforce matters. See the Code of Practice - Workforce Matters in Local Authority Service Contracts (2003) www.communities.gov.uk.

These obligations require a contractor to protect terms and conditions (including pensions) of transferring staff and to employ new-joiners on "terms and conditions which are, overall no less favourable than those of transferred employees" and to give them reasonable pension arrangements. Service providers will be required to take account of these obligations in preparing their tender and negotiating the contract.

Full details may be provided on request to the authority."

2.15  The Authority is bound by the EU public procurement regime to ask questions about the manner in which bidders have addressed issues covered by the Code of Practice in their bids. If the procurement is using the competitive dialogue procedure, detailed reference to the Code of Practice and the standard drafting should be made in the information supplied to bidders.

2.16  What does the Code of Practice entail?

2.16.1  The Code of Practice (amongst other things) implements the principles contained in the Statement of Practice as specified in paragraph 2.9 above.

2.16.2  It confirms that Local Authority transferring employees' pension provisions will be protected by requiring the Contractor to offer access to the Local Government Pension Scheme ("LGPS") or an alternative good quality occupational pension scheme which is certified as being "broadly comparable" to LGPS.  Where employees are offered a broadly comparable scheme, the Authority should be in a position to offer bulk transfer terms to the new scheme for those who wish to transfer their accrued rights from LGPS.

2.16.3  Where a Contractor recruits new staff to work on a Local Authority Agreement alongside staff transferred from the Local Authority, it must offer them employment on fair and reasonable terms and conditions which are "overall no less favourable" than those of the Local Authority transferred employees.

2.16.4  The Authority must monitor compliance by the Contractor of the obligations in the Code of Practice. Local Authorities are also required to certify in their annual Best Value Performance Plan that individual Agreements comply with best value requirements, including the Code of Practice. If, as a result of investigations, the auditor (appointed by the Audit Commission) has concerns about an Authority's compliance with the Code of Practice, it may exercise its statutory powers which include recommending that the Secretary of State give a direction under Section 15 of the Local Government Act 1999 and/or requiring the Authority to respond publicly to a written recommendation.

2.16.5  The Code of Practice also contains a bespoke dispute resolution procedure for use on all Local Authority service contracts, an explanation of which can be found at Appendix 6.

2.17  Who is covered by the Code of Practice?

2.17.1  This guidance has been developed on the understanding that the Code of Practice applies to the employees specified in paragraph 2.17.2 below. The authors accept however that there are different interpretations concerning the application of the Code of Practice in this regard and the authors will review this guidance as and when the intended interpretation has been clarified. See paragraph 2.10 for our views on its application to maintained schools.

2.17.2  Employees of the Local Authority who transfer for the first time under the Agreement are covered and it is understood that the following categories of employees are not covered by the Code of Practice:-

(a)  existing employees of the Contractor (who could be former Local Authority employees10 or simply other employees of the Contractor but who are employed on similar tasks); and

(b)  other employees employed by a third party at the time of the Agreement who also transfer to the Contractor as a consequence of the service transferring.

2.17.3  It is understood that the Code of Practice is not intended to apply to category (a) or (b) employees since they will be employed under the terms and conditions of their existing employer rather than local government terms and conditions. It is understood that the philosophy behind this approach is that the Code of Practice was not introduced to harmonise the terms and conditions of existing employees who were not transferred under TUPE directly from the Local Authority at the time of the relevant transfer under the Agreement for the first time after 13 March 2003, or who were, already, prior to the TUPE transfer under consideration, employed by the Contractor.

2.17.4  This means that the reference point for who is a New Joiner is limited to Local Authority employees who transfer under the Agreement and does not include the Contractor's or another third party's employees who may on the first transfer after 13 March 2003 (and subsequently), have been Local Authority employees in the past. See Figure 1.

Figure 1

2.18  Enforcement of Rights Under the Code of Practice by Employees

2.18.1  Since there is an obligation on the Authority and the Contractor to act in accordance with the Code of Practice, it would be possible to insert an express clause in Agreements pursuant to the Contracts (Rights of Third Parties) Act 1999 creating (or acknowledging) a third party right for employees to be able to enforce their right that the Contractor comply with its obligations under the Code of Practice. However (subject to paragraph 2.18.3), such a clause has specifically not been included in the standard drafting contained in this Guidance because it is not considered appropriate that potentially numerous individual employees should be able to commence proceedings against a Contractor in the context of an Agreement. If the Contractor wanted to offer such a right to employees, it may decide to do so through the contract of employment between the employee and the Contractor which may provide a more suitable vehicle for providing redress to employees.

2.18.2  The Code of Practice states that, if following a request by the Authority the Contractor fails to take the requisite action to comply with the Code of Practice, the Authority will seek to enforce the terms of the Agreement. In addition, where the Contractor has not complied with the Code of Practice, the Authority will not be bound to consider the Contractor for future work.

2.18.3  The Direction requires that the transferring employee must have the ability to enforce, directly against the Contractor, the right to acquire pension benefits that are the same as, broadly comparable to, or better than the employee had the right to acquire as an employee of the Authority. This means that the Authority must ensure that the Agreement should provide for the Contractor to ensure that the transferring employees' contracts of employment offer this right of enforcement. The Contractor should be aware that, in the future, transferring employees may be able to enforce the pension provisions of the Agreement directly against them.

2.19  The Code of Practice also contains a bespoke dispute resolution procedure for resolving matters concerning application of the Code of Practice in accordance with paragraph 13 of the Code of Practice. Paragraph 14 requires disputes to be dealt with in a fast, efficient and cost effective way and Appendix 6 sets out the mechanism agreed with employers, trade unions, contractors and the Government for this purpose.

2.20  The Code of Practice constitutes guidance and is issued under powers under Section 19(4) of the Local Government Act 1999.

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9 The Welsh Assembly adopted the Code of Practice on the 2nd April 2003. Further details of the position in Wales can be found at www.wales.gov.uk

10 The Code may however apply if such ex local authority employees were transferred out from the local authority for the first time after 13 March 2003, when the Code of Practice came into effect. (Note however that Communities and Local Government produced draft statutory guidance for consultation in October 2008 (Best Value and Procurement Workforce Matters in Best Value Authority Contracting) which suggests that even ex local authority employees transferred out for the first time before 13 March 2003 may also be covered. The consultation closed on 19 January 2009 but nothing has been issued by CLG since this date.)

11 See footnote above regarding ex local authority employees