DENTAL ACCESS PROGRAMME GUIDE TO THE USE OF SCHEDULE 18 (STAFF TRANSFER) AND TUPE TRANSFERS UNDER THE PDS PLUS AGREEMENT

Transcription

1 DENTAL ACCESS PROGRAMME GUIDE TO THE USE OF SCHEDULE 18 (STAFF TRANSFER) AND TUPE TRANSFERS UNDER THE PDS PLUS AGREEMENT Beachcroft LLP 7 Park Square East Leeds LS1 2LW UK tel: +44 (0) fax: +44 (0) DX Leeds Park Square 1 25 February _3.DOC

2 DENTAL ACCESS PROGRAMME GUIDANCE ON THE USE OF SCHEDULE 18 (STAFF TRANSFER) AND TUPE TRANSFERS UNDER THE PDS PLUS AGREEMENT This guidance should not be regarded or relied upon as a definitive statement of the law and separate legal advice should be taken where a PCT has any specific issues. 1. INTRODUCTION 1.1 What is the purpose of Schedule 18? In some instances the commencement and/or termination of the Agreement might give rise to a transfer of employees between existing and new service providers. Schedule 18 deals with the legal obligations of the parties in that situation The law governing this is known as TUPE (which stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006). TUPE protects the rights of employees when a business or service changes hands. 2. WHICH VERSION OF SCHEDULE 18 DO I NEED TO USE? 2.1 There are two alternative versions of Schedule 18: The Standard Version should be used when it is not envisaged that any employees will transfer to the Contractor on commencement of the Services. Further guidance on this version is set out at Annex The Transfer Version should be used if the Contractor intends to take over all or part of an existing practice, or in any other situation where TUPE might apply on commencement of the Services. Further guidance on this version is set out at Annex In most cases the Standard Version will be the appropriate version because the Contractor will be providing new NHS dentistry services which are not available locally from another practice. However you should make appropriate enquiries of the proposed contractor at an early stage in precontract discussions to ensure that this is the case, taking legal advice if you are unsure. 2.3 The Transfer Version is more complex, partly because it reflects the need for PCTs to comply with the Cabinet Office Code of Practice on Workforce Matters in Public Sector Service Contracts 2005 ( the Code ) if any NHS staff will transfer to a private sector contractor on commencement of the Services. The Transfer Version requires the Contractor to provide pension protection for any transferring public sector employees, as required by the Code. 2.4 Both versions of Schedule 18 deal with the fact that TUPE is likely to apply on termination of the Agreement. For example, if the PCT puts the services out to tender so that, on termination of this Agreement, a new contractor is awarded the contract, TUPE may apply to transfer some or all of the Contractor s staff to the new contractor. 2

3 2.5 In order to determine which Schedule should be used, you should use the following flow chart as a starting point. The detailed requirements of TUPE are complex and the consequences of getting it wrong can be serious. This guide and the flowchart at Figure 1 below, provide only a brief introduction and should not be used as an alternative to independent legal advice. Figure 1 Which version of Schedule 18 should I use? Is a new contractor taking over the provision of the service from the PCT or another contractor? No Yes Do the employees carrying out the Services spend the majority of their time dedicated to the Services? Yes No Is the Contractor providing a brand new local NHS dentistry service (eg providing new capacity to service an NHS waiting list)? Yes Use Schedule 18 Standard Version No * No Are there any employees of another practice or provider who could transfer to the contractor on commencement (seek legal advice if unsure) Yes Use Schedule 18 Transfer Version * For example, if the Contractor is taking over dentistry service provision in an area in which a current practice or provider will be ceasing to provide services and/or patients are moving from the current practice or provider to the Contractor. 3

4 3. BACKGROUND WHAT IS TUPE? 3.1 TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations TUPE is referred to in Schedule 18 as the "Employment Regulations. 3.2 TUPE protects the rights of employees when the business or service function in which they work transfers to a new owner or contractor. 3.3 In practice, this means that employees will usually go with the business. Their contracts of employment, and the rights and liabilities associated with them, transfer to the new employer. 4. WHEN DOES TUPE APPLY? 4.1 TUPE applies as a matter of law. This means that it applies regardless of whether the parties to an agreement intend it to apply. 4.2 Deciding whether TUPE applies can be difficult. In the context of service provision it applies when service activities are outsourced to a contractor, or when an existing contractor providing services is replaced with a new contractor, for example following a re-tender. It can also apply when previously outsourced service activities are brought back in-house. 4.3 TUPE applies regardless of the size of the undertaking transferring or the number of employees involved. 5. WHO TRANSFERS? If TUPE applies, the employees who are assigned to the services will transfer to the new owner. Assigned is not defined but, for example, an employee who spends the majority of his time working on the activities in question will transfer. Usually the parties to an agreement will agree who is likely to transfer, following consultation with employee representatives. 6. WHAT TRANSFERS? 6.1 When employees transfer to a new employer under TUPE, they maintain their continuity of service and their existing terms and conditions of employment. Almost all associated rights and liabilities transfer with the employees. This means that the new employer becomes responsible for the liabilities associated with the transferring employees employment. 6.2 The liabilities associated with the transferring employees transfer to the new employer by law and this cannot be changed by contract. However, Schedule 18 sets out some indemnities which change which party bears the commercial risk associated with these liabilities. 6.3 Contractual pension rights do not transfer under TUPE as a matter of law but transferring employees pension rights are protected to some extent by regulations providing a basic level of protection. Staff transferring out of the public sector enjoy a very high standard of pension protection by virtue of the Cabinet Office Code of Practice on Workforce Matters in Public Sector Service Contracts ( the Code ). Beachcroft LLP 25 February

5 ANNEX 1 Guidance on the Standard Version of Schedule PARAGRAPH 1 - EMPLOYMENT REGULATIONS The term Employment Regulations refers to TUPE. In the majority of cases it is understood that staff will not transfer either from the PCT or an existing dental service provider to the Contractor on commencement of the agreement. The guidance and flow chart above should help you identify whether transfers are likely, but if you are in any doubt you should seek legal advice. This paragraph simply sets out that the PCT and the Contractor agree that this is the correct version of Schedule 18 to use, as there are no transfers of staff foreseen at the outset. It is, however, important to remember that the parties to an agreement cannot opt in or opt out of TUPE. There may be circumstances in which the parties are not aware of potential transfers, but they become apparent during the course of the agreement. In the event that this occurs, paragraph 1.2 provides that the TUPE legislation and the Code should be adhered to. 2. PARAGRAPH 2 TUPE TRANSFERS Although TUPE may not apply at the beginning of the contract, it is likely to apply at the end. The contract may be terminated and awarded to another contractor, in which case it may be that the Contractor s employees who are assigned to the service will transfer to the new provider of the dental services. Alternatively, the PCT may decide to bring the service back in-house in which case, the employees providing the service may transfer to the PCT. In the event of any TUPE transfers, there are specific obligations under TUPE that the parties must comply with, whilst ensuring continuing service and patient care. 3. PARAGRAPH 3 EMPLOYMENT COSTS The purpose of this paragraph is to ensure that the wages (and other benefits) of the employees carrying out the service are paid by the Contractor for the appropriate periods. 4. PARAGRAPH 4 INDEMNITIES An indemnity is a promise from one party to compensate the other in respect of a particular type of liability, should it arise. The purpose of an indemnity is to provide a guaranteed remedy (on a pound-for-pound basis) for a claim in damages. In outsourcing services agreements the commissioner of the services (i.e. the PCT) will commonly seek an indemnity from a contractor in respect of various employmentrelated liabilities that may arise as a result of the operation of TUPE and general indemnity covering liabilities arising in respect of the past conduct of the employer in relation to their employees. Paragraph 4.1 For example, an employee of the Contractor may transfer to the PCT under TUPE and subsequently make a successful employment tribunal claim against the PCT as their new employer. However, the basis of the claim may be (for example) 5

6 discriminatory treatment which occurred prior to transfer and was the fault of the Contractor. Under TUPE, the liability for the discrimination claim transfers to the PCT, but this paragraph allows the PCT to reclaim the cost of the litigation back from the Contractor. Paragraph Regulation 13 of TUPE sets out the obligation to inform and consult with representatives of employees who will transfer under TUPE. Regulation 14 of TUPE sets out the requirement to elect employee representatives if there is no trade union to consult. This paragraph allows the PCT to reclaim costs of litigation where the Contractor (or Subcontractor) has failed to adhere to their obligations under Regulations 13 and 14 of TUPE. Paragraph 4.2 This paragraph deals with cooperation during legal proceedings. 5. PARAGRAPH 5 EMPLOYEE INFORMATION Paragraphs 5.1 to 5.3 These require the Contractor to provide the PCT with information about its staff in the period leading up to termination of the Agreement. This information can then be used by the PCT in preparation for putting the services out for re-tender. Paragraph 5.4. The purpose of this paragraph is to prevent the Contractor making changes to its workforce in the run-up to termination which might have the effect of making the services difficult or unattractive to re-tender. This can be because of changes in the quality of the staff assigned to the services or their terms and conditions. Paragraph 5.5. Under this paragraph, if the PCT or a new provider incurs losses because of the Contractor s failure to provide the required information, they are indemnified by the Contractor. Paragraph 5.6 This sets out the Contractor s obligation to provide employee liability information under TUPE, as explained above, but increases the time in which it should be provided from 14 to 30 days before termination. The paragraph also gives an additional indemnity linked to the provision of this information. 6. PARAGRAPH 6 EXIT TRANSFERRING EMPLOYEES Even if the Contractor does not retain the services on termination of the Agreement and re-tender, its staff who are engaged in providing the services will not necessarily transfer to a new service provider. Some of them might opt to stay with the Contractor rather than transfer. Paragraph 6 requires the Contractor to provide the PCT with a definitive list of the employees who will transfer under TUPE at the end of the agreement, and to keep the list up to date. 6

7 ANNEX 2 Guidance on the Transfer Version of Schedule PARAGRAPH 1 - EMPLOYMENT REGULATIONS As described above, this version of Schedule 18 is to be used in the event that the TUPE legislation will apply to transfer employees at the time that the Contractor begins to provide the service. This paragraph sets out that the PCT and the Contractor agree that this is the correct version of Schedule 18 to use as transfers of staff are foreseen at the outset. This paragraph highlights how TUPE operates and flags the connected pensions implications. 2. PARAGRAPH 2 INFORMATION PRIOR TO COMMENCEMENT Paragraphs 2.1 and 2.2 This sets out the PCT s obligation to provide employee liability information under TUPE, as explained above. The paragraph also gives an additional indemnity linked to the provision of this information. The PCT will also notify the Contractor if the information changes and therefore becomes out-of-date. Paragraph 2.3 Prior to the transfer of staff, the current employer must inform the staff of measures that will affect them post-transfer and consult with them about the measures. In order to properly comply with this requirement, the new employer (the Contractor) must give details of any changes that they intend to make to the working conditions of the transferring employees to the current employer to allow proper consultation to take place. 3. PARAGRAPH 3 EMPLOYMENT COSTS The purpose of this paragraph is to ensure that the wages (and other benefits) of the employees carrying out the service are paid by the appropriate party for the appropriate periods before and after transfer. 4. PARAGRAPH 4 INDEMNITIES As set out above, the purpose of an indemnity is to provide a guaranteed remedy for a claim in damages. In this version of Schedule 18 there are additional indemnities to deal with the period of employment for transferring staff in the period up to transfer. In outsourcing services agreements the contractor will commonly seek an indemnity from the commissioner of the service (the PCT) in respect of various employmentrelated liabilities that may arise prior to the date on which they obtain responsibility for the transferring employees or that arise as a result of the operation of TUPE. Paragraph For example, an employee of the PCT may transfer to the Contractor under TUPE and subsequently make a successful employment tribunal claim against the Contractor as their new employer. However, the basis of the claim may be (for example) discriminatory treatment which occurred prior to transfer and was the fault of the PCT. Under TUPE, the liability for the discrimination claim transfers to the Contractor, but this paragraph allows the Contractor to reclaim the cost of the litigation back from the PCT. 7

8 The PCT does not give indemnity protection for staff transferring from the employment of existing dental practices to the Contractor. The Contractor may request that the indemnities are extended to offer this protection and the PCT should consider whether that is acceptable in the circumstances of each scheme. The financial risks in offering indemnities on behalf of the existing practices will be dependent on a number of factors, including the number of staff transferring, whether there are outstanding employment issues, and the contracts in place between the PCT and the existing practices. If contractors request these indemnities from the PCT we strongly suggest that independent legal advice is taken to assess the potential liability. Paragraph In this paragraph, the PCT indemnifies the Contractor against specific claims which may arise from employees who transfer to the Contractor (or who claim that they should have transferred to the Contractor), but who were not identified prior to the commencement of the agreement. An example of a possible claim by such an employee would be a claim for unfair dismissal for a reason relating to the transfer. Paragraph Regulation 13 of TUPE sets out the obligation to inform and consult with representatives of employees who will transfer under TUPE. Regulation 14 sets out the requirement to elect employee representatives if there is no trade union to consult. This paragraph allows the Contractor to reclaim costs and liabilities arising from claims made on the basis that the PCT has failed to adhere to their obligations under Regulations 13 and 14 of TUPE. Again, this indemnity does not extend to failures by existing dental practices to consult with staff who transfer, but an indemnity to this effect may be requested by the Contractor and additional advice will be required on the risks of offering this indemnity. Paragraph 4.2 This paragraph deals with cooperation during legal proceedings. Paragraphs and These paragraphs set out that the Contractor will bear responsibility for liabilities arising from employees (or their representatives) during the period from the Transfer Date to the Termination Date. Paragraph If a employer seriously breaches an employee s contract of employment (for example, by significantly changing the nature of the work) the employee has a common law right to claim constructive and unfair dismissal. Regulation 4(11) of TUPE expressly sets out this right, entitling an employee to resign and claim constructive dismissal in the event that either their current or the new employer fundamentally breaches their contract of employment. If a transfer would result in a substantial change in working conditions to an employee s material detriment, Regulation 4(9) also gives the employee (who would otherwise transfer) the right to resign and claim for constructive dismissal. This paragraph allows the PCT to reclaim costs of litigation where an employee brings a claim under 4(11) or 4(9). 8

9 Paragraph This paragraph enforces the obligation on the Contractor to provide information in order to comply with the agreement and the obligations under Regulations 13 and 14 of the Employment Regulations as explained above. Paragraph This paragraph provides that the Contractor will bear responsibility for any liabilities arising out of the employment of or claims made by employees who transfer under TUPE at the same time as the Exit Transferring Employees, but who have not been included in the list provided by the Contractor to the PCT. Paragraph 4.4 This paragraph deals with cooperation during legal proceedings. 5. PARAGRAPH 5 TRANSFERS AFTER COMMENCEMENT Paragraphs 5.1 to 5.3 The contract may be terminated and awarded to another contractor, in which case it may be that the Contractor s employees who are assigned to the service will transfer to the new provider of the dental services. Alternatively, the PCT may decide to bring the service back in-house, in which case the employees providing the service may transfer to the PCT. The specific obligations under TUPE that the parties must comply with at the outset of the agreement must also be complied with in the event that Contractor staff transfer to another employer on termination of the agreement. 6. PARAGRAPH 6 EMPLOYEE INFORMATION Paragraphs 6.1 to 6.3 These paragraphs require the Contractor to provide the PCT with information about its staff in the period leading up to termination of the Agreement. This information can then be used by the PCT in preparation for putting the services out for re-tender. Paragraph 6.4 The purpose of this paragraph is to prevent the Contractor making changes to its workforce in the run-up to termination which might have the effect of making the services difficult or unattractive to re-tender. This can be because of changes in the quality of the staff assigned to the services or their terms and conditions. Paragraph 6.5 Under this paragraph, if the PCT or a new provider incurs losses because of the Contractor s failure to provide the required information, they are indemnified by the Contractor. Paragraph 6.6 This sets out the Contractor s obligation to provide employee liability information under TUPE, as explained above, but increases the time in which it should be provided from 14 to 30 days before termination. The paragraph also gives an additional indemnity linked to the provision of this information. 9

10 7. PARAGRAPH 7 EXIT TRANSFERRING EMPLOYEES Even if the Contractor does not retain the services on termination of the Agreement and re-tender, its staff who are engaged in providing the services will not necessarily transfer to a new service provider. Some of them might opt to stay with the Contractor rather than transfer. Paragraph 6 requires the Contractor to provide the PCT with a definitive list of the employees who will transfer under TUPE at the end of the agreement, and to keep the list up to date. TWO TIER WORKFORCE The Code Of Practice on Workforce Matters in Public Sector Service Contracts ( the Code ) sets out an approach to workforce matters in public sector service contracts which involve a transfer of staff from the public sector organisation to a Contractor as a result of TUPE. 8. PARAGRAPH 8 ADR The Code requires that the agreement includes provision for resolving disputes in a fast, efficient and cost-effective way as an alternative to litigation. The dispute resolution provisions are designed to achieve a resolution to which all the parties are committed. The Contractor, the PCT and recognised trade unions or other staff representatives, shall all have access to this alternative dispute resolution (ADR) process. 9. PARAGRAPH 9 TREATMENT OF NEW JOINERS PENSIONS The intention of the Code is to prevent the emergence of a two-tier workforce. In order to do so, the Code requires NHS bodies to ensure that employees taken on by a private sector employer to work alongside transferring NHS employees are offered similar terms and conditions. Therefore, this paragraph provides that where the Contractor recruits new staff to work on the service contract, and staff have transferred from the PCT, the Contractor must offer those new employees employment on fair and reasonable terms and conditions which are, overall, no less favourable than those of the transferred employees. 10. PARAGRAPHS MONITORING AND ENFORCEMENT This paragraph ensures that throughout the duration of the agreement, the Contractor will provide the PCT with information as requested which is necessary to allow the PCT to monitor compliance with the conditions set out in the Code. This information will include the terms and conditions for transferred staff and the terms and conditions for employees recruited to work on the contract after the transfer. The Code sets out, and these paragraphs reflect, that employees (and recognised trade unions) should, in the first instance, seek to resolve any complaints they have about how the obligations are being met directly with the Contractor. However, where it appears to the PCT that the Contractor is not meeting its obligations, or where an employee of the service provider (or a recognised trade union) writes to the PCT to say that it has been unable to resolve a complaint directly with the Contractor, the PCT will first seek an explanation from the Contractor. If the Contractor s response satisfies the PCT that the Code is being followed, the PCT will inform any complainant of this. If the response does not satisfy the PCT it will ask the Contractor to take immediate action to remedy this. If, following such a request, the Contractor still appears to the PCT not to be complying with the Code, then the PCT can seek to enforce the terms of the 10

11 Agreement. In addition, where the Contractor has not complied with the Code, the PCT will not be bound to consider the specific Contractor for future work. These paragraphs also require that any obligation on the Contractor is passed on to their sub-contractors. 11