How do employment tribunals interpret TUPE?

The purpose of the EU Acquired Rights Directive is to protect the rights of employees on a transfer and to create a basic floor of minimum rights, so that businesses are not forced to compete by lowering worker protection in a “race to the bottom.”

To the extent that TUPE is based on the Acquired Rights Directive, tribunals are expected to take a broad “purposive” (as opposed to literal or restrictive) approach to interpreting the regulations, with the aim of achieving the Directive’s core purpose of safeguarding employees. Where wording is unclear, tribunals should choose the interpretation that best achieves this purpose, even adding or eliminating wording in the regulations where necessary (Litster v Forth Dry Dock and Engineering Co Limited [1989] ICR 341, USDAW v Ethel Austin Limited [2013] UKEAT 0547/12/3005).

Public sector employees who bring a tribunal claim can choose between relying on TUPE or alternatively on the Directive itself. This is known as “direct effect”. The direct effect of TUPE was established in North Wales Training and Enterprise Council Limited (t/a Celtec v Astley) [2006] UKHL29.

Not every part of TUPE is based on the Acquired Rights Directive. In particular, the regulations governing service provision change (first and second generation outsourcing and taking work back in-house (Regulation 3(1)(b) of TUPE)), go beyond the minimum protection required by the Directive (CLECE SA v Maria Socorro Martin Valor and Ayuntamiento Case C-463/09). The EAT has ruled that tribunals are expected to adopt a “straightforward, common sense approach” when interpreting the service provision change regulations (Metropolitan Resources Limited v Churchill Dulwich Limited (in liquidation) [2009] UKEAT/0286/08).

The twelve months leading up to the 2014 Regulations have seen some worrying developments in relation to the attitude of the European Court of Justice (ECJ) to the Acquired Rights Directive. Recent comments by the ECJ in Parkwood Leisure Limited v Alemo-Herron [2013] C-426/11, appear to threaten to undermine the Directive’s core purpose, signaling a shift away from the protection of employees’ rights and towards the protection of employers. In this case, looked at in more detail on page 61, the ECJ suggested that the Acquired Rights Directive is not aimed solely at safeguarding the interests of employees on a transfer and that instead, those interests must be “balanced” against the needs of the new business to make changes “necessary to carry on its operations”.

In an unexpected and explicitly political judgment, the ECJ remarked that it is especially important to consider business interests when public services are being outsourced to the private sector, “given the inevitable differences in working conditions that exist between the two sectors.” The ECJ went on to rule that the Acquired Rights Directive must be interpreted consistently with the fundamental freedom to conduct business under Article 16 of the European Charter of Fundamental Rights of the European Union.