End of the TUPE line?

If ever there was an example of domestic law that the UK introduced reluctantly for the sole purpose of compliance with its obligations as a member of the EU, it is TUPE. When the original Transfer of Undertakings (Protection of Employment) Regulations 1981 were introduced to a sparsely populated chamber of the House of Commons, Hansard reports that the sponsoring minister recommended them “with a remarkable lack of enthusiasm”. 

The principles they embraced were alien to local tradition - for example, the principle that an employee may be moved without his consent from one employer to another had been likened to slavery by the House of Lords in a landmark judgment. Nothing in TUPE’s subsequent 34 year history has generated any greater level of enthusiasm - they have been a minefield of uncertainty, the product of poor drafting and inconsistent decisions in the courts and tribunals. Their obsessive focus on employee interests has created wider commercial unfairness. Contractors have struggled to understand the extent of their risk when pricing tenders.

So surely a post-Brexit UK government freed from the dictats of European directives will sweep TUPE from the statute books with glee?

Well, maybe, but this looks unlikely. Leaving aside the fact that we have yet to trigger Article 50 and actually leave the EU; leaving aside the question of whether the price of participation in the common market will be continued adherence to EU labour laws – and TUPE variants are alive and well in Norway and Switzerland, for example; and leaving aside the huge amount of parliamentary business to be generated by Brexit, thereby slowing down the pace of change, there is a certain political attraction to retaining TUPE.

It might be tempting to remodel TUPE free from the need to adhere to the requirements of the directive

Whether TUPE would automatically fall away on leaving the EU or whether it is with us until a positive step is taken to remove it from the statute books remains unclear, although the latter seems more likely. It promotes dialogue with employees at times of business evolution and preserves jobs, so politicians will wish to think carefully before making a change.

Furthermore, change itself is unattractive because the goalposts are moved mid-term for service providers who are in the middle of delivering contracts and the prospect of change destabilises procurement processes: nothing eats into the profitability of a contract like inheriting a workforce at the start and then finding that you are left with it after an unsuccessful retender.

Moreover, the UK has chosen not only to incorporate TUPE into domestic law but to go beyond the directive’s requirements - the 2006 revisions and the concept of service provision changes created wider scope for TUPE than exists in the rest of Europe. Policy has extended the reach of TUPE further, in that public sector employees transferring into the private sector enjoy “gold plating”. This was a political expedient to facilitate public sector outsourcing and would be difficult to reverse. There is clear advantage to a framework for the transfer of staff where outsourcing occurs.

TUPE was conceived before the modern outsourcing industry had developed. It was never well suited to the circumstances it came to regulate. But things have settled down. The EU has run out of reforming steam in this area and changes in the UK have been limited to clarification and streamlining rather than policy shifts. If TUPE was to be abandoned, it is difficult to imagine that service provision changes and business transfers could be left unregulated – employees would have no right to be consulted and jobs would be lost. Wage levels would be likely to fall as a consequence. On that basis, TUPE benefits from “better the devil you know” thinking.

What might be tempting would be to remodel and refine TUPE free from the need to adhere to the requirements of the directive. Permitting the post-transfer harmonisation of terms and conditions would be permissible, for example, a change which would be very popular with businesses whose workforces are made up of groups of staff transferred in from a variety of sources. Yet the sheer weight of parliamentary business is likely to be such that some of these “nice to haves” may be well down the queue. A more immediate freedom would be gained from being freed from the need to follow European Court judgements.

It is surprising to say it, but TUPE has become part of the landscape and many contractors have learned to live with it. Those who prophesied back in 1980 that TUPE would have a “drastic effect on British business” have been proved right. It has become the framework for public to private transfers and for outsourcing generally, as well as in its core rationale of business transfers.

An unregulated environment is likely to cause disruption and those who predict the demise of TUPE look to be well wide of the mark.

Michael Ryley is a partner in the employment, pensions and immigration team at Weightmans