TUPE Regulations

TUPE – Transfer of Undertakings, Protection of Employment Regulations

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.

When could TUPE apply to 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:

• Is the existing contractor working on a sole agency basis?
• Are the operatives undertaking the maintenance dedicated solely to the contract being re-tendered?
• Is there anything within the existing conditions of the contract tat required the existing contractor to take over the previous contractors or the DLOs workforce, depots etc?
• Will the existing contractor be required to terminate the employment of any employee if he fails to win the re-tender?

What to do

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:

• The successful contractor should have the sole responsibility to re-deploy or dismiss any of their employees and subcontractors who may be in their employ at the expiry or termination through break clause provision or determination through non-performance etc of the contract.
• The successful contractor should indemnify the social landlord and any other contractor who may succeed on a re-tender against any costs, claims or actions raised by an employee or subcontractor or the successful contractor arising out of the expiry, break clause termination or determination of the contract.
• The successful contractor should be required to provide to the social landlord all the relevant details – names, length of service, pension rights, disciplinary record etc. of all employees or subcontractors working solely on the contract within the three months period preceding the expiry, break clause termination or determination of the contract.

David Miller can be contacted via www.m3h.co.uk