TUPE – What goes around, comes around

richardparrH&SjpgFashion!  Turn to the left.  Fashion!  Turn to the right” sang David Bowie on his 1980 album, “Scary Monsters”.  Many things in life are victims of fashion whether the height of ladies’ hems, the width of lapels or the presence or absence of turn-ups (remember them?).  It’s not often that any aspect of the law is subject to the vagaries of fashion – but with the publication by the government of its proposals for the reform of TUPE, seasoned employment lawyers are experiencing a sense of déjà vu.

There is a certain irony to the history of TUPE.  The Regulations can trace their origin to the 1977 Acquired Rights Directive (77/187) .  Courtesy of a europhobic, handbag wielding, Prime Minister, it wasn’t until 1981 that the Directive first saw the light of day with the snappily titled Transfer of Undertakings (Protection of Employment) Regulations 1981.  Even then, the Regulations were awash with phraseology idiosyncratically transposed from the original Directive.  Perhaps the draftsman thought it would be amusing to introduce terminology unfamiliar within existing UK employment law and therefore ripe for misinterpretation (and litigation).

Some eleven years after the publication of the original Directive, Brussels decided that this area of the law was in need of a makeover and introduced the Acquired Rights Directive 1998 (98/50) which should have been put into law by EU Member States by July 2001.  The Government only narrowly avoided infraction proceedings by the EU Commission when it introduced new Regulations in 2006 (Transfer of Undertakings (Protection of Employment) Regulations 2006).

One of the major criticisms of the earlier 1981 Regulations was that they were ill-suited to what had become, by the start of the new millennium, a commonplace, asset-light, way of delivering services – namely outsourcing.  Though the UK Government was under no obligations to develop domestic TUPE legislation in this fashion, the 2006 Regulations addressed the issue of outsourcing head-on through the introduction of the concept of a “service provision change”.  The Government was accused of “gold plating” the legislation

The Government is currently consulting on the abandonment of the concept of a service provision change .  Consultation closes on 11 April 2013.  If, following consultation, the Government decides to implement the proposals then the law will probably change in October 2013.

It’s not yet clear what the new Regulations will look like.  But one approach would seem to be to delete references to “service provision change” and, in consequence, fall back on the traditional, simple (in theory) concept of the “….transfer of an economic entity which retains its identity…..” (Regulation 3(1)(a) Transfer of Undertakings (Protection of Employment) Regulations 2006

If the Government goes down that route, then fashions will have come full circle in the world of TUPE and we’ll be back to the challenge of deciding whether an essentially service-based activity (with few, if any, tangible resources) is an “economic entity” – namely “….an organised grouping of resources [our emphasis] which has the objective of pursuing an economic activity.”  (Regulation 3(2)).

If that happens, employment lawyers up and down the country will be dusting off the old pre-2006 case law.  What goes around comes around!

Richard Parr
Employment Department

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