Dr Stephen Hardy, senior lecturer in Law at the University of Manchester explains why TUPE anorakism is sadly here to say.
The Acquired Rights Directive (ARD) 1977 has not proved easy to apply in practice and has been particularly controversial in relation to contracting out. It has resulted in a significant number of cases being referred from domestic courts to the European Court of Justice for interpretation.
Consequently, the European Commission tendered proposals to amend the 1977 Directive in 1994. A revised draft was published in 1997 following heavy criticism of the initial proposals by the European Parliament.
A minor success of the UK’s last Presidency of the Council of Ministers during the first six months of 1998 was to secure the agreement to adopt the Directive amending the ARD at the Cardiff Summit, which was further amended (consolidated) in 2001. These amendments now have to be implemented into national law and as a result the 2006 new TUPE Regulations prevail.
New TUPE Regulations?
The UK Government has been engaged since 2001 in preparing the Regulations needed to amend TUPE to bring into effect amendments made to the parent Directive in 1998. The DTI produced its draft new TUPE Regulations 2005 for consultation on 12 March 2005.
Consultation was initially supposed to close on 7 June 2005 and the original implementation date for these new Regulations was 6 October 2005. However, the DTI was overwhelmed by the response so they extended the deadline and the new Regulations now eventually come into force on 6 April 2006.
Revised Regulation 1 follows the 1998 ARD’s lead and provides a clearer definition than the previous version, but it is likely to clearly rule contracting-out transfers within the ambit of the Directive. Nothing too radical is expected here, except a full adherence to the guidance, albeit variant, from the European Court of Justice.
However, the newly proposed TUPE Regulations 2006 will contain a ‘professional services exemption’, this means if the transfer is a ”one-off” or about professional services. Such an interestingly narrowly drafted, but potentially wide-ranging exemption presents a problem – TUPE or not TUPE, still remains a question.
The major change comes to pensions after TUPE. Contrary to existing Regulation 7, the DTI is keen to include pension rights within the newly revised TUPE framework.
The draft regulations have also been issued for consultation notwithstanding the newly enacted provisions under the Pensions Act 2004.
The rationale for such is purely based upon moral rather than legal grounds, even though the Government was not happy with the outcomes in the Warrener v Walden Engineering and Adams v Lancashire CC cases, where pensions were non-transferable. Consequently, a compromise is expected, where employers do not have to transfer existing occupational pensions, but can provide ‘comparable’ pensions.
What is clear from the 1998 Amended Directive is the fact that sanctions are to be imposed for non-compliance. This we have already experienced in the UK in terms of consultation and information (13 weeks’ pay compensation for non-consultation).
Whilst the newly inserted Articles 11 and 13 of the 1998 ARD spell out sanctions for discrimination and avoidance, how the revised TUPE Regulations implement this will be worth looking out for. Further the Amended Directive effects the most significant changes in relation to transfers by insolvent transferors. The original Directive was silent on the question of its applicability in insolvency situations.
To that end, HR practitioners need to think no more about whether it will apply or not. It is clear that in 99% of cases it will. Hurrah, the HR crowd cheers. But let’s not be too complacent, the lawyers will not lose out on TUPE work, especially with a vaguely worded exemption.
And let’s not forget that if you fail to apply TUPE appropriately post-2006 and/or fail to consult, a £75,000 awaits you. So as ever, HR will have to brace themselves for more ‘risk assessments when it comes to TUPE. Yet at least, the pension issue is resolved, yet postponed as a longer-term problem. TUPE anorakism is sadly here to say … hurrah sayeth the lawyers (again!).
Dr Stephen Hardy is Senior Lecturer in Law at the University of Manchester and a Barrister specialising in Employment and EU Labour law.
Other articles in this series
- The new ET Rules – less litigation?
- Corporate manslaughter – the ball and chain
- The ‘equality’ treadmill
- Deregulation better than re-regulation?
