The Transfer of Under-takings (Protection of Employment) (Tupe) Regulations 1981 is, in one sense, a neophiliac's dream. But too much can be tiresome

Tupe is the bugbear of most HR practitioners and employment lawyers, but nothing seems to be happening to correct what many see as a cost-wasteful, litigious and counter-enterprise piece of legislation.

Very little in employment law outstrips the addicts' craving for new cases. Each bulletin of business transfers and employee rights exceeds 6,000 words devoted to case law summaries. The Tupe Regulations date from 1981 and are based on the EC Acquired Rights Directive of 1977. In 1998, the directive was overhauled in Brussels via Directive 98/50. So a 17-year-old directive needed an MOT and some reforms were made. But in the UK, confusion has arisen.

First, the UK Court of Appeal is at odds with the European Court of Justice (ECJ) over when Tupe applies to outsourcing. Despite seven ECJ cases, the Court of Appeal still flouts the test of a Tupe transfer.

Second, the European code on transfers allows no derogation from employees' rights. Employers who have been hoping for more regard in this area will be disappointed. Nothing of substance will appear in new regulations.

As to transfer of employment rights, all obligations of the employer pass automatically to the new employer. Not so in practice. How can a new employer replicate an old employer's share scheme or bonus entitlement? The Employment Appeal Tribunal has recently held that the overlying principle is the doctrine of “substantial equivalence”. But how is this to be measured? Again, nothing will be corrected in the new regulations.

How will the Government react to Beckmann

Dynamco Whicheloe Macfarlane, in which the ECJ held that, under Section 46 of the NHS Superannuation Scheme, a retirement lump sum was payable upon attainment of a certain age. The case concerns the exclusion in Regulation 7 of Tupe, in respect of benefits that transfer under Regulation 5. Regulation 7 of Tupe excludes rights under, or in connection with, an occupational pension scheme in so far as they relate to old age, invalidity or survivor's benefits. Katia Beckmann worked for the North-West Regional Health Authority, contributing to the NHS superannuation scheme, then there was a Tupe transfer to Dynamco Whicheloe MacFarlane (DWM). Subsequently, she was made redundant from DWM. Under the Whitley Council conditions of service, she was entitled to an enhanced lump sum redundancy payment. Transferee DWM did not dispute that this had transferred from the NHS. However, under the NHS superannuation scheme there was an early retirement pension and a payment of a lump sum upon attainment of a certain age, which Beckmann had reached upon dismissal by redundancy. DWM argued that this was excluded by Regulation 7. Beckmann argued that it was not a payment by reason of old age, but was outside the exemption and therefore it transferred.

The ECJ held that any exception to transfer of undertakings must be narrowly construed. In that connection, it is only benefits paid from the time when an employee reaches the end of their normal working life, as laid down by the general structure of the pension scheme in question, that are excluded. Benefits payable earlier than the normal retirement age are transferred to a transferee even if they are calculated by reference to the rules for calculating normal pension benefits.

The second argument on behalf of DWM was that the benefits payable under the Whitley Council paragraph were payable pursuant to regulations issued by the Secretary of State and not the employer, and therefore they could not be transferred from a transferor employer to a transferee employer. Here, the court again ruled in favour of the employee. The benefits concerned transferred regardless of the fact that those obligations derived from a statutory instrument.

This case has potentially far-reaching consequences. It refers to all early retirement benefits intended to enhance the conditions of early retirement payable before the end of the normal working life.

So here is some litigation for the future, which can only be for the benefit of lawyers and not their clients. This is a rallying call for the Department of Trade and Industry to tackle hard issues.