Local authority staff transfers

This article looks at the framework providing protection to staff transferring out of and between local authorities, in addition to that provided by TUPE.

Cabinet Office statement of practice

The Cabinet Office Statement of practice on staff transfers in the public sector was issued in 2000, and revised in 2013, and sets out a number of general principles:

• Contracting exercises with private and voluntary organisations and transfers between different parts of the public sector will be conducted on the basis that staff will transfer and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE) should apply, unless there are genuinely exceptional reasons not to do so. This includes not only second and subsequent round contracts that result in a new contractor but also cases where a function is brought back into a public sector organisation to which staff originally transferred from the public sector.
• In circumstances where TUPE does not apply in strict legal terms to certain types of transfer within the public sector, the principles of TUPE should be followed and the staff involved treated no less favourably than if TUPE had applied.
• There should be appropriate arrangements to protect occupational pensions, redundancy and severance terms of staff in all these types of transfer.

The Statement sets out the steps that local authorities should take in relation to staff and potential contractors in the context of a public-private partnership contracting exercise, including second and subsequent transfers and transfers back into the public sector. The Statement also addresses transfers and reorganisations within the public sector.

"Genuinely exceptional" cases where the policy framework (and thus TUPE) should not apply are broadly:

• where a contract is for the provision of both goods and services, but the provision of services is ancillary in purpose to the provision of the goods;
• where the activity for which the public sector organisation is contracting is essentially new or a one off project; or
• where services or goods are essentially a commodity bought "off the shelf" and no grouping of staff are specifically and permanently assigned to a common task.

None of the above has legal effect and local authorities will still need to consider carefully in each case whether there will, as a matter of law, be a relevant transfer.

The applicability of TUPE to local authorities and what might amount to a relevant transfer was considered by the European Court of Justice (ECJ) in Federacion de Servicios Publicos de la UGT (UGT-FSP) v Ayuntamiento de la Linea de la Concepcion Case C-151/09 ECJ. The ECJ determined that where the powers of those in charge of the entity - to organise the work of the entity, give orders and instructions, allocate tasks to employees and determine the use of the assets of that entity - remained within the organisational structures of the transferee, there was no transfer under art.6(1) of the Acquired Rights Directive (2001/23/EC) (the Directive from which the TUPE Regulations are derived).

Transfers under s.38 of the Employment Relations Act 1999

Section 38 of the Employment Relations Act 1999 empowers the Secretary of State to make provision, by statutory instrument, subject to the negative resolution procedure, for employees to be given the same or similar treatment in specified circumstances falling outside the scope of the Acquired Rights Directive as they are given under the UK's implementing legislation in circumstances falling within the scope of the Directive. For example, the Transfer of Undertakings (Protection of Employment) (Transfer of Staff to the Department for Work and Pensions) Regulations 2014 (SI 2014/1139) apply to employees employed in the detection and investigation of offences relating to housing benefit or council tax benefit when that function is transferred to the Department for Work and Pensions (DWP), to form the Single Fraud Investigation Service. The Regulations have the effect of transferring the employment of relevant employees to the DWP with protection similar to that provided by TUPE.

Best value and Fair deal for staff pensions

The Best Value Authorities Staff Transfers (Pensions) Direction 2007 came into force on 1 October 2007.

Under the Direction, where a local authority enters into a contract for the provision of services and those services are, in the period immediately before the contract is entered into, provided by the local authority and carried out by the local authority's employees, the contract between the authority and the contractor must require the contractor to secure pension protection for each transferring employee.

The Direction requires that pension protection should be secured if the transferring employee is entitled to acquire pension rights that are the same or broadly compared to or better than those they enjoyed as an employee of the authority.

In respect of any re-tendering of a contract for the provision of services, the Direction requires similar pension protection in relation to former employees of an authority who transferred to a contractor under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246).

The Government proposes to give effect to the Fair deal for staff pensions guidance, issued by the Treasury, in local government. The guidance provides that employees who transfer from the public sector should continue to have access to the public service pension scheme that they participated in prior to the transfer. It currently applies to central government bodies, but not to local government.

In May 2016, the Government published a consultation on changes to the Local Government Pension Scheme (LGPS). Due to issues raised by respondents to the consultation, the Government decided not to go ahead with the specific approach it had proposed.

The Government published a second consultation, LGPS: Fair Deal - strengthening pension protection, on 10 January 2019. The proposed amending Regulations would require service providers to offer LGPS membership to individuals who have been compulsorily transferred from an LGPS employer. They would remove the option for the new employer to provide a broadly comparable pension scheme. LGPS assets and liabilities would automatically transfer when an employer in the scheme is involved in a merger or takeover.

Employees would continue to be "protected transferees" for as long as they remain wholly or mainly employed on the delivery of the service or function transferred, including following a further transfer to another service provider.

The fair deal guidance would replace the best value Direction.

Code of Practice on Workforce Matters in Local Authority Contracts (withdrawn)

In 2003, statutory guidance was issued in the form of a Circular: Handling of workforce matters - Code of Practice on Workforce Matters in Local Authority Service Contracts. The kernel of the Circular as far as human resource management was concerned was the introduction of a Code of Practice on Workforce Matters in Local Authority Service Contracts, the terms of which were to be incorporated in service specifications and contract conditions.

Subsequently the "Code of Practice on Workforce Matters in Local Authority Service Contracts" was revoked with effect from 23 March 2011. The code remains relevant to local authority service contracts in existence prior to 23 March 2011.

One effect of the code was that the terms and conditions of new employees hired to work alongside employees who had transferred over from the local authority, when services were outsourced or retendered, had to be "no less favourable overall" than the terms and conditions of the ex-local authority employees. The aim of the code was to avoid a "two-tier" workforce with transferred employees on better contractual terms than new recruits.