The great Tupe dilemma

Tupe remains a grey area for employers, says Paul Gilroy. Paul Gilroy is a barrister at 9 St John Street chambers, Manchester. TUPE or not Tupe? That is the question. Providing the answer has been made more difficult for employment lawyers as a result of the European Court of Justice's decision in the case of Ayse Suzen (1997).

This and other issues were considered at a recent seminar for local authority solicitors arranged by the employment law group at 9 St John Street chambers in Manchester.

Ever since the landmark decision in Spijkers (1986), European practitioners have approached the question of the applicability of the Acquired Rights Directive – and in the UK the Transfer of Undertakings (Protection of Employment) Regulations – on the basis that: "The decisive criterion for establishing whether there is a transfer… is whether the business in question retains its identity."

Now, says the ECJ in Suzen, the directive does not apply to a change of contractor if (a) there is no transfer of significant tangible or intangible assets and/or (b) there is no acquisition by the new employer of a significant part, in terms of numbers and/or skills, of the workforce assigned by the transferor to the performance of the contract.

This development is of concern mainly to those involved in contracting out services, typically local authorities. Predicting the circumstances under which the directive and/or the regulations apply has become an important part of the analysis which potential transferors and transferees must carry out before contemplating any alteration to the contractual arrangements for the provision of services.

Hot on the heels of Suzen, the Court of Appeal, in the related cases of Wilson and Meade, has created further uncertainty for contractors. It has failed to take the opportunity to provide clear guidance on the crucial question of the extent to which it is possible, if at all, for parties to agree to the variation of terms and conditions of contracts of employment after a "relevant transfer".

One of the matters raised at the seminar was the dilemma local authorities face when council employees opt not to join the transferor after a Tupe transfer. Paying them severance monies will probably incur the wrath of the district auditor. Declining to make such payments can create a major employee relations problem.

The only certainty in relation to Tupe is that there will be much more case law on this subject in the near future, with 10 transfer cases currently in the ECJ pipeline. We await with interest the decision in Seidel, in particular. Whether this will produce more questions than answers remains to be seen.

See feature, page 24.