After a wait of more than four years, new Transfer of Undertakings (Protection of Employment) Regulations (Tupe) have been drafted by the Department of Trade and Industry (DTI). Due to come into force on 1 October, they have been the subject of a consultation period which ended on 7 June. Over the summer, some important decisions will have to be made on the regulations’ final form. Here is one that I urge the DTI to make.
The new Tupe fulfils the Government’s aim to enlarge the protection afforded to workers under Tupe by making it more likely that the regulations will apply to outsourcing. Thus, from October, Tupe will apply to virtually all service provision changeovers (whether first generation contracting, second generation (contractor changeover), or when a client takes a service back in-house from the service provider). This is the case so long as, prior to the changeover, there is an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client. This is a much easier test to apply than the standard test for a Tupe transfer, which requires the transfer of an economic entity that retains its identity.
But the supplementary definition in the new Tupe concerning service provision changeovers is currently marred by some exceptions, which if they apply will throw the parties back onto the more difficult, standard test. The most controversial of these is the proposed exemption for changeover of professional services. Although the kind of professional services to be excluded from the service provision changeover test has not yet been specified, it is clearly aimed, among others, at lawyers and accountants. But why?
The argument is that, if a client decides to change its law firm, it should not be saddled with having to deal with the same assistant solicitors employed by the outgoing law firm because it has ended up with the newly nominated firm by the operation of Tupe. But is this really a problem in practice? Even the new, wider service provision definition only applies if the law firm has organised salaried lawyers specifically to resource as their “principal purpose” the requirements of that one client. How often does that happen? And if it does, why shouldn’t those employees enjoy Tupe rights which workers in other service sectors would enjoy? And if the professional services exemption were to apply, it would catch staff who are not even themselves professionally qualified, such as clerks, secretaries and other ancillary staff, which does not seem exactly fair.
The problem is not confined to the legal and accountancy professional sectors. The exemption proposed is for professional business services. As the Government’s consultation paper itself recognises, it may be conceptually and legally problematic to draw a clear distinction between professional business services and other types of services. It is for this very reason that the attempt to come up with a generic description of such services in the draft regulations has been abandoned as too difficult. The other, inevitable, alternative is to draw up a list of specified excluded services. While this might provide more certainty, the decision of which service to put in or leave out is bound to be arbitrary.
Finally, the codes of practice in the public sector, for central and local government, which in effect apply transfer rights equivalent to Tupe across the board, do not make any distinction between the changeover of professional and blue collar services. It would seem odd to create such a dichotomy purely in the private sector.
It is to be hoped, then, that the proposed exemption will be dropped. Of course, if it is, young lawyers ought to beware: if you become assigned solely to one client you might find yourself with another law firm if your client moves on.
Dr John McMullen, professor of labour law, University of Leeds