Repeal of TUPE amendments would increase litigation, warns Law Society

A Government proposal to repeal amendments to TUPE relating to service provision changes would increase the amount of litigation, the Law Society has warned.

In its response to a consultation by the Department for Business, Innovation and Skills, Chancery Lane suggested that such a move would be “regrettable” as it would:

• Increase the number of costly and damaging disputes affecting both transferors, transferees and employees;
• Increase the risk of commercial and legal uncertainty; and
• Reduce employee protections.

The Law Society pointed out that the amendments, which were introduced in 2006, were designed to address the previous uncertainty under domestic and European case law in respect of whether there was a traditional transfer of an undertaking in relation to labour intensive activities.

There had been “chaos” as a result of the pre-2006 case law, it said.

The response added: “The 2006 amendments have provided greater clarity about the application of TUPE. This has led to a reduced number of TUPE claims proceeding to the Employment Tribunal. This is further confirmed by the greatly reduced number of TUPE appeals to the Employment Appeal Tribunal since the 2006 amendment.

“It has also led to a more streamlined and cost-effective process for businesses involved in outsourcing. Repealing the amendment would increase uncertainty, thus creating an increase in disputes.”

The Law Society added that the experience of legal practitioners was that since the 2006 amendment there had been less need for organisations to take legal advice.

The response continued: “The gold plating problem may have arisen because the 2006 Regulations introduced the Category A and Category B concept. In reality, TUPE applies to most forms of outsourcing, insourcing and second round tenders, as encapsulated in the concept of service provision change.

“Perhaps the solution would be to abandon the unnecessary gloss of the Category A and Category B distinctions but retain the concept of service provision change as part of one, general definition of when TUPE applies.”

The Law Society also rejected a proposal for the repeal of the employee liability information requirements.

It said: “Where there is no direct contractual relationship between the transferee and the transferor, the employee liability information requirements provide important protections, not only for the transferee, but also for the employees by ensuring that their entitlements, as against the transferee, are clear.

“The assumption that in most TUPE transfers there is usually co-operation between the parties may be correct, but it does not justify removing protection from those without the commercial or other leverage necessary to ensure contractual protection or secure co-operation.”

If any amendment is to be made, the requirements should be retained and expanded, Chancery Lane argued.

The Law Society meanwhile backed a Government proposal to use Article 3.3 of the Acquired Rights Directive to limit the future applicability of terms and conditions derived from collective agreements to one year from the transfer. After that point variations to those terms where the reason was the transfer would be possible provided that overall the change was no less favourable to the employee.

Chancery Lane said such a cap would be helpful, from an employer's perspective, given the Advocate General's opinion in Parkwood Leisure Ltd v Alemo-Herron & others which indicated that under TUPE a ‘dynamic’ interpretation will apply to collectively agreed terms.

The Law Society response said: “In sectors, particularly the public sector, where a large proportion of employees' terms are set out under collective agreements many of those agreements state that terms can be amended ‘from time to time’ as agreed with national/local negotiating bodies.

“Where the transferee is not a member of those national bodies the employer‟s ability to manage the employment relationship and the terms of employment will be fettered under the 'dynamic' interpretation. Placing a cap on the period of time in which those provisions remain ‘dynamic’ in line with Article 3(3) would limit that effect and would allow employers, employees and trade union representatives to negotiate terms suitable for that workplace going forward.”

Angharad Harris, chair of the Law Society’s employment law committee, said: "In this instance, Government has mistaken provision of clarity for ‘gold plating’. Repealing the 2006 amendments would only increase uncertainty, and thus the number of disputes. Businesses and employees both want certainty."

A copy of the Law Society’s response can be viewed here.