from 1998 Bulletin
TUPE was introduced under EU law to protect the rights of employees in situations where their employer is purchased by another company. David Miller of Rand Associates looks at how this might affect maintenance contracts.
Where a local authority has tendered maintenance contracts that were previously undertaken by its own Direct Labour Organisation (DLO) TUPE reg ulations would apply. The costs of running the DLO or of winding it up would have to be covered by a successful new contractor. Such contractors would either have to take over the DLO (including its employees, depots, vehicles, stores, and management staff), or have the reasonable costs of termination of employment (including pension rights together with the cost of disposal of depots, vehicles and stores etc) added to the value of their tender.
The rights of employees under TUPE only arise where they have completed 2 years of unbroken service.
When a contract previously tendered comes up for re-tender involving employees previously transferred, the rules are not so clear. Various cases have arisen before the European Court in respect of the rights of em ployees in such cases. There is an appeal before the House of Lords that may set a precedent, though this judgement will undoubtedly be appealed to the European Court.
Any contract that the DLO has to win in competition may be subject to TUPE, if the commercial viability of the DLO is at risk if it fails to win the tender.
Where a single contractor undertakes most of the maintenance on a sole agency basis within a specific contract, this would give the contractor virtually an exclusive contract. In this situation, the existing contractor at the time of re-tendering must indicate that in his opinion and that of his employees TUPE will apply. Another successful contractor would then have to either take over the previous contractor’s undertakings, or pay for them to be wound up.
The key tests are:
If the possibility of TUPE being implemented by existing contractors and their employees and subcontractors exists, current legal advice says social landlords should incorporate the following requirements into their conditions of contract:
David Miller can be contacted via www.m3h.co.uk