Employment Law Digest October 2024 – Navigating Large-scale TUPE Transfers

This article has equal application to the termination of service provider contracts in the private sector though; the principles and learnings are the same.

Under PFI, rather than borrowing to build essential infrastructure projects, such as hospitals, schools, roads, prisons and street lighting, the government instead contracted with the private sector to finance, design, build and maintain these essential public assets. The contracts typically run for 25–30 years. In 2024 there are an estimated 700+ such contracts still in effect, with the majority set to expire in the next few years.

It’s fair to say PFI contracts have been controversial from day one. Client experiences of them might best be described as “mixed” (in the interests of avoiding stronger language, and ensuring this Digest passes successfully through your organisation’s email filters).

What happens when they expire?

With the expiry of PFI contracts comes TUPE transfers, often including hundreds of employees. A scary prospect to most organisations. In this article we won’t scrutinise the Regulations or labour the nuances of provision of employee liability information, or information and consultation obligations per se. As far as employment legislation goes the TUPE Regulations are relatively reader-friendly, and brief by comparison to most other important legislative instruments. What we want to do with this article is share our experience of clients successfully navigating the process as transferees (receiving employees), with some practical tips on how to position yourself to achieve the smoothest possible transition.

What should you do?

1. Find out when

The first point to be aware of is that service contracts such as PFI contracts in the public sector don’t suddenly expire without warning. Their expiry date is known from the outset of the contract, usually many years in advance. Clients will therefore be able to identify a date in the future when they know they may potentially be faced with the incoming transfer of hundreds of employees. So the first piece of practical advice is to find out when your contract expires. Find out early so you can start planning. Given the duration of these contracts it’s highly likely that the management / senior leadership team who were in situ when the contract was implemented in the ’90s or early ’00s may be long gone by the time it expires in 2025 or later. If so there’s likely to be a lack of institutional knowledge about the contract. If you’re going to be the person in situ when the contract expires then find out in plenty of time when that expiry date is.

2. Prepare

Once you know the expiry date – ideally months or even a year in advance – then begin your preparations. If it’s a PFI contract or similar size then it will likely be impossible for one person to coordinate and manage everything that will need to be done. Assemble a team and assign roles ahead of time:

• Who’ll be responsible for requesting, processing and coordinating all the necessary ELI?
• Who’ll be responsible for deciding what changes (in TUPE language, “measures”) need to be made? Are those changes permissible as “ETO” reasons (economic, technical or organisational)?
• Who’ll be responsible for liaising with the transferor?
• Who’s going to prepare the necessary information and measures letters?
• Who’s going to attend / participate in / conduct the consultation meetings with affected employees (depending on the cooperation of the transferor, which sadly can’t always be guaranteed)?
• Who’ll be responsible for communications with any trade union(s)?
• With all of the above, how many people do you need to complete the task successfully?

This is not an exhaustive list, just an indication of what needs to be planned for in advance. With many of these steps it will also be the case that HR can’t do it alone. It will need input and in some cases leadership responsibility from management, so get people involved and familiar with their brief ahead of time.

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3. Build relationships

If it’s a unionised workforce then you’ll be spending a lot of time meeting and communicating with the union’s representatives. If relations are strained or frosty then invest some time and effort ahead of the process to repair the relationship. When the time comes it’s better to have the union as your friend than your foe. This is especially the case if the outgoing transferor has effectively ‘downed tools’ and becomes passive or even obstructive to the transfer process. Unfortunately we’ve seen it happen all too often. If and when it does happen the union will be worried for their members and frustrated or angry at the situation they find themselves in. If your relationship with them is strong you should be able to work together to achieve a smooth transition, with the outgoing obstructive transferor incurring the wrath of the union and its members, not you. Besides which, as the transferee you need to have a working relationship with the union and its members long after the transfer.

4. Communicate

At its core, setting aside the legal technicalities, a large-scale TUPE transfer is essentially a big employee relations exercise. Transferring employees will naturally be worried and stressed about their personal situations. And don’t overlook your existing employees who may be uncertain about their own positions after a big influx of new employees. As with most employee relations exercises transparency and clear, timely communication will serve you well. Good communication is key to a smooth transition.

From our long experience of advising on large-scale TUPE projects these four pointers stand out as key factors to get right. If one or more of them is lacking then invariably problems follow. Those problems usually mean multiple employment tribunal claims from a significant number of newly transferred employees with the firm and supportive backing of eager trade unions. Finally, if you’re in doubt please take advice. Spending time and resources avoiding a problem before it happens is always better than dealing with it once it has.

if you would like more information about handling PFI contracts get in touch with our dedicated team of PFI Specialists. To make an enquiry about TUPE in more detail speak to our Expert Employment Lawyers.