Open Public Services and Employment Law

30th September 2011

John McMullen, director of employment law at Wrigleys Solicitors, assesses the Open Public Services White Paper and its likely implications for the public sector workforce

Last year the Coalition government vowed to open up government contract procurement.  It aspires to award 25 per cent of government contracts to charities, mutuals, cooperatives, and SME's.  Diversity of public services provision is also the central theme of the Government's Open Public Services White Paper (Cmnd 8145, 11 July 2011). 

But the government seems to believe that at present the employment law and guidance surrounding public service contracting can act as a barrier to plurality.  In addition to the TUPE Regulations 2006, which protect employees’ terms and conditions on service provision changes, organisations tendering for public sector contracts must also take account of the public sector Codes of Practice which build on TUPE and supplement its provisions. The Government now appears to regard these Codes, and, possibly, TUPE, as a disincentive to these organisations entering the public sector market (see Open Public Services, para 6.19).

So what is likely to change? The main code of practice is the Cabinet Office Guidance on Staff Transfers in the Public Sector (COSOP).  Third sector organisations in particular have been vocal about the annexe to the guidance,  A Fair Deal for Staff Pensions which describes contracting organisations’ pension obligations.  However A Fair Deal is under review: consultation on change ended on June 15 2011 and Open Public Services declares it will pursue this review further.  And two other codes, the Code of Practice on Workforce Matters in Local Authority Service Contracts and the Code of Practice on Workforce Matters in Public Sector Service Contracts have already been revoked.  These were the so called “two tier” codes, requiring contractors for services not only to apply TUPE terms to transferring staff but also to any new staff hired during the course of the contract. 

There are also signs that the TUPE regulations themselves may be under review.  The government is keen to avoid what it sees as the “gold plating” of the European Acquired Rights Directive upon which the regulations are based.  Under European law and under the domestic law of all other EU member states (including Ireland) the answer to the question whether TUPE applies on a service provision change is: “It depends” (usually on whether assets are transferred or employees taken over).    But the TUPE Regulations 2006 created a special TUPE definition for a service provision change that, in effect, alters  the position under the Directive, allowing TUPE to apply without speculation in most cases, notwithstanding European law.  It is here where the government’s focus may be concentrated. 

The other area of attention may be in relation to a new provider’s responsibility under collective agreements.  If an employee’s terms and conditions (including pay) are settled by a third party body in the sector (such as a national joint council) a contractor/service provider such as a charity will be bound by the pay deal currently in force at the time of transfer.  But European law states that a contractor will not be bound by future collective agreements setting pay and conditions in a case where the provider is not a party to the negotiating machinery concerned.  Some British cases conflict with this, providing that a new provider may be liable for subsequent collectively bargained terms.  The issue is so complex that the Supreme Court (in Parkwood Leisure Ltd v Alemo-Herron and others [2011] UKSC 26) has referred the matter to the European Court.  But it is always possible that the government may anticipate events by legislating to confirm the European legal position that a provider is not liable for future pay awards made under collective bargaining processes applicable, say, to the public sector that do not operate in the private or third sector.