Clause
39
Quality
contracts: application of
TUPE
Stephen
Hammond:
I beg to move amendment No. 224, in
clause 39, page 35, line 22, leave
out from first ‘is’ to end.
Let me say at the outset that
this is a probing amendment and I think that the Minister will see
fairly quickly where my argument is going. The clause is important
because one of the great concerns about quality contracts is to ensure
that staff will be treated fairly during and after the crossover period
to the provision of services under a quality contract. The Minister
knows that the clause provides that such a change shall be treated as a
relevant transfer under the Transfer of Undertakings (Protection of
Employment) Regulations
2006.
The clause has
evolved during the Bill’s pre-legislative scrutiny and during
its passage through the other place. The Lords had a very interesting
debate on the matter, and the Minister will remember that the
Government tabled amendments both on Report and on Third Reading in the
other place.
12.15
pm
As I understand
it, one of the main issues arising from the original wording of the
clause was that protection might only be available to employees taken
on by a new employer that had won a quality contract. It would not
provide protection for those in existing schemes and existing services
transferred to a new operator. I think that amendment was moved by Lord
Bassam, and it was right and proper.
On Report, it was also proposed
that the incumbent operator be required to provide information to the
local traffic authority about its current work force, which could be
used as a basis for tendering. The successful tenderer would be obliged
to employ that work force, provided they were willing or it was looking
for new employees. I do not see anything wrong with that
either.
Third Reading
added a further element, which was to make it an offence for an
operator to provide information that is false or misleading in a
material way, if the person providing the information knows that it is
false or is reckless as to whether it is. Again, I have no problem with
the intent of that Government amendment. It makes sure that there is
adequate protection.
What I am trying to find out
through amendment No. 224 was not answered by Lord Bassam in another
place on behalf of the Government, and I hope the Minister will be able
to answer. It relates to the word “reckless”. In addition
to providing false information, an operator will be breaking the law if
it is “reckless” about whether that information is false.
Will the Minister clarify the precise meaning of
“reckless” with reference to this behaviour, how the
definition of “reckless” behaviour will be set out in
guidance, and who will set out that guidance? It was on that point,
when asked directly, that her colleague in another place could not
answer.
Ms
Winterton:
I understand the hon. Gentleman’s
questions and I hope I can be of some help. I will set out a little of
the background and purpose of the requirement in subsection
(5)(c).
In normal
circumstances, when a local authority is providing a public service
that is to be contracted out, it would, as part of the tender process,
provide anonymised details of the members of staff who would
be likely to be available for transfer to the contract on TUPE terms.
Similarly, if a contract is re-tendered, the outgoing contractor can be
obliged, as a contractual duty, to provide this information for the
benefit of any other employer that wins the new contract. Without
information of that sort, it would be very difficult for a new company
to make a realistic bid for the work, as an important cost element
would be missing from the calculation. However, where a commercial bus
service falls to be replaced by a contracted service, the existing
operator would not be under any form of contract with the local
authority that could oblige him to provide the information. Our TUPE
provision therefore includes a regulation-making power under which
operators could be placed under a statutory obligation to do
so.
If all the
operators in an area are keen to bid for contracts, and recognise that
they could be winners as easily as losers, it is likely to be in their
interest to provide the local authority with accurate information about
staffing, but in some cases, that will not be so. An operator that has
little prospect of winning a contract, does not intend to put in a bid,
or is even so opposed to the whole idea of the scheme that he would
like to cause mischief, may have no incentive to provide correct,
complete and accurate information, and might not bother to check the
facts and assumptions. It is also possible that an incumbent might
provide deliberately false information to mislead competitors into
bidding higher than necessary, either with the prospect of undercutting
them, which would obviously be fraudulent, or simply with the hope of
wrecking the scheme by making it unaffordable. The offence could
therefore cover a wide variety of behaviours, from mere carelessness to
deliberate attempts to deceive. It would be for the courts to determine
the severity of the behaviour and the appropriate penalty, if any, on a
case-by-base basis.
If
a court is satisfied that an operator simply made an innocent mistake,
it might decide not to impose any penalty at all. However, there could
be instances where it is clear that an operator has not correctly
represented the facts available to him, but it is difficult or
impossible to prove a deliberate intention to deceive. That is where
the question of recklessness becomes important, for if it were
necessary to prove knowing deception beyond reasonable doubt, many
negligent or irresponsible operators would go unpunished.
As with all criminal offences,
the purpose is to deter rather than to punish. A responsible or prudent
operator, weighing up all the odds, is not likely to behave in such a
manner that could lead to a criminal prosecution, but if there were no
obvious remedy in criminal law, the temptation to cheat might well be
too great. I hope that explains that explains the thinking behind the
term “recklessness” and that the hon. Gentleman will
withdraw his amendment.
Stephen
Hammond:
I want to probe the Minister a little more,
because it seems to me that all the circumstances she described were
covered by the fact that it is an offence for an operator to provide
such information that is
“false or misleading in a material
particular”.
I understand entirely what she is trying
to cover, but it is already covered by that provision. What she is
saying is that in this situation, recklessness—the test of which
we have discussed under previous Bills—is a lower test of
deception. Is that what she is saying to
us?
Ms
Winterton:
It is a failure to take due care to provide
accurate information. That is the difference between a deliberate
intention to mislead and not taking due care to provide accurate
information.
Stephen
Hammond:
The problem with what the Minister is saying is
that someone could be reckless without any intention to mislead. The
Minister has spoken about an intention to mislead, and that is already
covered. I am still not clear that reckless is anything other than a
lower test that might catch a number of people who may have provided
false information, but did not necessarily intend to do so and had no
intention to deceive.
I hope that the Minister will
ensure that in any guidance she produces she gives a very tight legal
definition to the word “reckless,” because I think that
the provision is open to an extraordinary number of misinterpretations.
I am glad we have had the chance to explore it today; I hope the
Minister will take on board my concerns about the meaning of
“reckless” and that she will consider tightening the
definition to avoid unintended consequences. For now, I beg to ask
leave to withdraw the
amendment.
Amendment,
by leave, withdrawn.
Question proposed, That
the clause stand part of the
Bill.
The
Chairman:
With this it will be convenient to consider new
clause 8— Quality contracts: application of
TUPE—
‘(1) After section
134A of the TA 2000
insert—
“134B
Quality contracts: application of
TUPE
(1) Where subsection (2)
applies, the cessation of the provision of local services to which a
quality contract relates by one person and the commencement of the
provision of those services by another (“the new
operator”) shall be treated for all purposes as a relevant
transfer within the meaning of the Transfer of Undertakings (Protection
of Employment) Regulations 2006 (whether or not those Regulations would
apply apart from this
section).
(2) This subsection
applies where, immediately before the date of the making of a quality
contract, one or more persons were employed by a person other than the
new operator in the provision of local services in the area to which
the relevant quality contracts scheme relates (“the old
operator”).
(3) The date
on which the relevant transfer shall be deemed to take effect is the
day on which the quality contracts scheme is
made.
134C Quality contracts:
compliance with guidance
(1)
Where section 134B(2) applies, a local transport authority, in making a
quality contract
scheme—
(a) must deal
with matters affecting the terms and conditions of employment of the
employees of the old operator as at the date of the relevant transfer,
or the arrangements for their pensions, in accordance with any
directions given to it by the appropriate person;
(b) shall comply with guidance issued to it by the
appropriate person on matters relating to the terms and conditions, or
arrangements for their pensions, of the employees of the old operator
as at the date of the relevant
transfer;
(c) must provide for
the involvement of recognised trade unions in the tender preparations
and the evaluation process in accordance with any guidance issued by
the appropriate person;
(d)
shall comply with guidance issued to it by the appropriate person on
matters that must be taken into consideration in the award of a quality
contract, which shall include any earlier failure to comply with the
safeguards provided for employees under these provisions, including
those contained in the Transfer of Undertakings (Protection of
Employment) Regulations
2006.
(2) In subsection (1),
references to employees of the old operator are references to persons
to whom section 134B(2)
relates.
(3) The date of the
relevant transfer referred to in subsection (1) shall be determined in
accordance with section
134B(3).
(4) The
“appropriate person” shall be the Secretary of
State.
134D Quality contracts:
pensions
(1) The appropriate
person shall exercise his power to give directions under section
134C(1) so as to secure that where a local transport authority
concludes a quality contract with the new operator, it does so on
terms—
(a) that provide
for any employee working on services governed by a quality contract to
be eligible to join the Local Government Pension
Scheme;
(b) that, for those
employees who are not members of the Local Government Pension Scheme,
otherwise require the new operator to secure pension protection for
each transferring employee;
(c)
that, so far as relating to the securing of pension protection for a
transferring employee, are enforceable by the
employee.
(2) For the purpose
of subsection (1)—
(a)
“transferring employee” means an employee whose contract
of employment becomes, by virtue of section 134B(1), a contract of
employment with the new
operator.
(b) “pension
protection” is secured for a transferring employee if after that
change in his employer he has, as an employee of his new employer,
rights to acquire pension benefits and those
rights—
(i) are the same
as, or
(ii) under the
directions count as being broadly comparable to or better
than,
those that he had as an
employee of the old
operator.
(3) The appropriate
person shall exercise his power to give directions under section
134C(1) so as to secure that
where—
(a) a quality
contract between a local transport authority and an operator
(“the incumbent operator”) governs the provision of
services by an operator;
(b)
the local transport authority concludes a subsequent quality contract
under a quality contract scheme with an operator (“the
subsequent operator”) other than the incumbent operator;
and
(c) the application of the
TUPE Regulations results in one or more employees (“transferring
employees”) of the incumbent operator becoming employed by the
subsequent operator in relation to its operation of the subsequent
quality contract;
the local
transport authority concludes the quality contract with the subsequent
operator on terms satisfying the requirements of subsection
(4).
(4) Those requirements are
that the terms—
(a) provide for any employee working on services
governed by a quality contract to be eligible to join the Local
Government Pension Scheme;
(b)
require the subsequent operator to secure pension protection for each
transferring employee;
(c)
that, so far as relating to the securing of pension protection for a
transferring employee, are enforceable by the
employee.
(5) For the purposes
of subsection (4) “pension protection” is secured for a
transferring employee if after that change in his employer he has, as
an employee of his new employer, rights to acquire pension benefits and
those rights—
(a) are
the same as, or
(b) under the
directions count as being broadly comparable to or better than, those
that he had as an employee of the old
operator.
134E Quality
contracts: consultation
(1) The
appropriate person shall exercise his power to give directions under
section 134C(1) so as to secure that where a local transport authority
is seeking to introduce a quality contract scheme or to introduce a
quality contract with a new operator, it will, at the earliest
opportunity, consult with recognised trade unions as to the tender
preparation and evaluation
process.
(2) The appropriate
person shall, in further exercise of his power to give directions under
section 134C(1), provide guidance to local transport authorities
contemplating the award of a quality contract with a new operator as to
the matters that shall be taken into consideration, which shall include
any earlier failure to comply with the safeguards provided for
employees under these
provisions.”’.
Graham
Stringer:
To refer back to the previous debate, a wide
variety of bus operators operate in the private sector in this country;
some of them have the greatest integrity and provide a good service,
and some of them are cowboys. It is as well to be prepared for reckless
intentional and unintentional behaviour, given the statements of Brian
Souter, who said that he would withdraw all services if he lost a
contract, leaving the people of South Yorkshire without service. That
is the real world in which we
operate.
New clause 8
deals with how TUPE could apply. In one sense, TUPE normally applies to
a business or occupation—grass cutting, or whatever—which
continues, and the employees are protected doing a similar job with a
new company. That could happen in the bus industry. If a bus
operator—not Stagecoach, but some operator with
integrity—applied for a quality contract, lost it, and carried
on its operations until a transfer of undertakings, its employees could
transfer to a new bus company if there was an exact match between the
previous scheme and the new scheme.
I suspect that that situation
will be rare indeed, and that two things will happen. There will be
people such as Brian Souter, who take their bat and ball home, damaging
the service. Protection is needed for employees in that situation.
There will also be confusion, which I suspect will apply in all
metropolitan areas where a small number of bus companies and one or two
large bus companies operate across boundaries. The purpose of the new
clause is to protect employees who operate services in such areas by
allowing them to transfer to the new operator—the winner of the
contract. It also provides that if such people are contracted to
provide public services, they should be able to join and have the
benefit of the local government pension
scheme.
Ian
Stewart (Eccles) (Lab): First, I declare that I am a
member of the union Unite. I spent 20 years as a regional officer for
one of the unions that merged into Unite, the Transport and General
Workers Union.
Trade
unions are needed to protect vulnerable workers. Workers and their
families are vulnerable in times of redundancy and uncertainty. New
clause 8 would provide protection for bus workers, security of
employment and pensions for bus workers employed in an area that
becomes subject to a quality contract. Proposed new sections 134B, C
and D of the Transport Act 2000 are intended to strengthen the
application of TUPE and allow trade union involvement in the quality
contract process. Proposed new section 134B would protect the pensions
of bus workers who transfer to a quality
contract.
There are
three hurdles that local and transport authorities must cross before a
quality contract is made. Quality contracts will give specified areas
such as routes, timetables and fares to local authorities. That power
would be welcomed by my constituents in Pendlebury, Swinton, Eccles,
Irlam and Cadishead, and by people throughout the country. Once the
three hurdles—consultation to determine whether people want a
quality contract for their area, approval from traffic commissioners
and, should an operator not agree about the contract, an appeal to the
traffic commissioners—are cleared, an operator under a quality
contract effectively becomes a monopoly provider. Although that type of
regulation of bus services will result in greater control over the
services than is possible under complete deregulation, which is the
system outside London, important employment matters need to be dealt
with. That is the purpose of new clause
8.
12.30
pm
One clear
benefit of quality contracts is that once one is in place there will be
stability of bus service provision and—I hope—of
employment. The difficulty, which the Bill has not yet adequately
addressed, is in ensuring stability of service and employment during
the transition to quality contracts. Unless protections are
forthcoming, the process of introducing quality contracts has the
potential to result in significant redundancies among bus workers, as
my hon. Friend the Member for Manchester, Blackley mentioned. That is
surely not what the Government intend to result from what is clearly a
good-news measure. Fortunately, the Government will, I hope, table
their own amendments either in Committee or on
Report.
The potential
threat to jobs stems from the fact that there is no legislation
providing for staff transferring from a wholly private
company—any bus operator outside London, for example—to a
company regulated through quality contracts. Under the current
arrangements, therefore, there is nothing to stop service operator
employers terminating the service on learning of the intention to
introduce quality contracts. There is nothing, apart from the 56-day
notice requirement, to stop such a service provider simply walking away
from the service in question at any time.
The intention of proposed new
section 134B is, therefore, that persons being transferred to quality
contracts will come under the provisions of
TUPE—the
Transfer of Undertakings (Protection of Employment) Regulations
2006—whether TUPE applies or not. The proposal is that TUPE
protection should apply as early as possible and should be assumed to
run from the date on which the quality contract was made. The provision
would give the entire protection afforded under TUPE to all cases in
which the introduction of quality contracts meant the transfer of
employees from one employer to another. That implies that variations to
terms and conditions, and/or dismissals arising by reason of the
transfer, would be void and/or rendered automatically unfair, with
liability vested in the transferee. That protection would relate back
to any prior changes or dismissals made by the transferor, provided
that they were made by reason of the impending quality
contract. Importing
the protections of TUPE would ensure that the transferee had an
interest in the continued employment of the staff in question and in
the protection of their terms and conditions, given that it would stand
to pick up any liability for dismissals and so on relating to the
quality contract.
The
new clause would not only improve on the Government’s clause in
relation to when TUPE should apply; it would make an important
improvement with respect to which people it should apply to. Proposed
new section 143B provides for TUPE to apply to one or more
persons—that is, all workers involved in the operation of bus
services in the area to which a quality contract scheme related would
transfer to the operator who won the quality contracts bid. That would
provide operators with a disincentive to run down resources, with the
consequent redundancies and effects on passenger services. It would
also create a level playing field for operators that tendered, because
they would all understand the possible TUPE consequences. The
information and consultation provisions of TUPE would apply, so those
who tendered would understand where they stood and what the proper
employment costs were.
The
importation of TUPE might not, however, address the concern that former
service operators and employers could simply terminate the service
early on learning of the intention to introduce quality contracts. I
would therefore like local transport authorities to have the power to
act as providers of last resort in that respect. Proposed new sections
134C and 134E would mitigate such an effect by providing local
authorities with a sanction and allowing them to take such behaviour
into account when awarding future quality contracts. Similar practices
are provided for in other local government contracts, such as the code
of practice on work force matters in local authority service
contracts.
The new
clause provides further protection for the work force by allowing for
consultation with trade unions, and for trade union involvement in the
tendering preparations and the evaluation process in accordance with
any guidance issued. That would allow, at an early stage, the
employment implications of introducing quality contracts to be fully
factored into the preparation of invitations to tender and into
consideration of whether bids would adversely impact on
employment.
I turn to
the serious issue of pensions. The new clause highlights the aspiration
of trade unions and workers that bus workers who transfer to quality
contracts should be eligible to become members of the
local government pension scheme by virtue of the fact that they will be
employed under a local government contract. That would not only provide
them with obvious benefits, but tackle one of the biggest challenges
facing the bus industry—high staff turnover and poor recruitment
and retention. All the evidence has shown that a secure and fair
pension secures stability in employment. Furthermore, the new clause
would protect the existing pension benefits of employees who
transferred to a quality contract. That is necessary because TUPE does
not provide full protection for existing pension benefits. I therefore
hope that the Government will amend the Bill to ensure that bus workers
who transfer from the deregulated market to a quality contract have
their pensions protected. As the Conservative Front-Bench spokesman,
the hon. Member for Wimbledon, said, the proposal received cross-party
support during the Lords debate. The Government have also given a
commitment to give serious consideration to providing such
protection.
Pension
rights and benefits are not protected by TUPE. Occupational pension
schemes are not transferred by reason of a relevant transfer. Sections
257 and 258 of the Pensions Act 2004 require that where there is a
relevant transfer within the meaning of TUPE, a transferee must offer a
transferring employee the opportunity to participate in an occupational
pension scheme following the transfer if they were eligible to
participate in such a scheme before the transfer. The new scheme must
meet a minimum statutory standard, but it need not be as favourable as
the scheme provided by the
transferor.
The
amendments tabled by Lord Rosser in Committee in the Lords would have
had a beneficial effect on protecting pension rights. When the
Government responded on Report, they recognised that that was an
important issue and were sensitive to the fact that pensions should be
properly preserved. The need to protect existing pension benefits
attracted cross-party support in the
Lords.
The
Government have previously introduced legislation to protect existing
pension benefits in other reorganisations of the transport
sector—the privatisation of British Rail and the public-private
partnership for the London underground, for example. The Department for
Transport and the Department for Communities and Local Government have,
as I understand it, recognised that pensions protection is important
not only for employees affected by quality contracts, but for
companies, as it provides a level playing
field.
Will the
Minister table an amendment on Report to protect existing pension
provision? I hope that those two issues, which can be among the most
devastating parts of a family’s life—they affect not just
the workers, but the whole family—will be addressed and that
this good legislation, which is good news for passengers, will also be
good news for
workers.
Ms
Winterton:
I am extremely grateful to my hon. Friends for
their explanation of their new clause. As they said, substantial
improvements were made to the Bill in another place to ensure that some
of the concerns about the potential effect of quality contracts schemes
on bus workers have been addressed.
In preparing those improvements,
we wanted to ensure that there was the right degree of protection for
workers—in particular, by ensuring that the TUPE regulations
apply while also ensuring that we do not prevent quality contracts
schemes from being a realistic option for local authorities. I
appreciate that the period of transition to a quality contracts scheme
may not be easy for local authorities to manage. There are some
measures that we can take in regulations to help with that. In
particular, there is already a power to change, in specific
circumstances, the period of notice that an operator must give before
he may stop running existing services. Increasing that notice period
during the transition to a quality contracts scheme might make a
substantial difference, giving local authorities more time to make
plans for filling any gaps in service that might arise.
The Bill also provides a power
to make regulations modifying or disapplying the usual tendering
requirements that apply when a local authority wishes to enter into a
subsidy contract with a bus operator. There may be scope within the
constraints of EU law to make some changes that streamline the process
to give authorities a better opportunity to fill short-term gaps in
service provision during the transition to a quality contracts
scheme.
I can assure
my hon. Friends—particularly my hon. Friend the Member for
Eccles—that we have had quite detailed discussions with the
trade unions and with some members of Unite, and I pay tribute to the
work of the all-party group in pressing those cases. The discussions
with the trade unions have been fruitful and led to some of the changes
that we made in the other place.
With respect
to the changes to the regulations modifying or disapplying the usual
tendering requirements, I would like to consult on the proposals for
regulations in those areas later in the year. I can assure my hon.
Friends that I will involve the trade unions in those
discussions.
In
relation to the application of TUPE during the transitional period, my
hon. Friend the Member for Eccles expressed very strongly the points
that were made during some of the discussions with the trade unions. In
the light of his arguments, I am prepared to consider further whether
we can move in the direction that he and my hon. Friend the Member for
Manchester, Blackley
seek.
12.45
pm
Important
questions were raised about the degree of pension protection that
should be afforded to bus workers. Difficult issues need to be
considered here, such as the potential costs to local authorities. I
will have to give the matter a good deal of further thought. The
Minister for Local Government has been involved in some of the
discussions. He and I have written to Jack Dromey of Unite regarding
the agreement that a quality contracts operator will be eligible to
apply for admitted body status, but, as in other local government
contracts, there will not be an automatic right to join. The decision
on whether to join will rest with the operators. I have had discussions
about that and they will
continue.
The new
clause would also ensure that trade unions were duly engaged in the
process of moving towards a
quality contracts scheme. It is right that trade unions should be
consulted when a local authority is working up proposals to make
quality contracts schemes. The obligation on local authorities to
consult appropriate persons on proposed schemes is already
comprehensive and includes a general requirement to
consult “such other
persons as the authority or authorities think fit.”
I cannot imagine a situation in which
representatives of the appropriate trade unions would not fall into
those categories. I am happy to reassure my hon. Friends that that is
something we will consider reinforcing in the statutory
guidance.
Ian
Stewart:
Will my right hon. Friend ponder on the
distinction between when a contract is made and when it is implemented?
Will she also be mindful of the fact that we are keen for her to
understand that we want the protections in place when the contract is
made?
Ms
Winterton:
As I said, those are all matters on which we
hope to give some
reassurance.
We were
also asked what we will do about bus operators that fail to provide the
employment protection to which employees are entitled. It has been
suggested that we should specify it in the Bill that such failure
should be taken into consideration when that operator bids for other
quality contracts in the future. I have some sympathy with the
suggestion made by my hon. Friends, who seek to ensure that operators
who successfully tender for quality contracts have a good record in
honouring their commitments to employees. However, I am not convinced
that the matter should be dealt with in the Bill
itself.
Obviously,
when a local authority is considering tenders for quality contracts, it
must take into account a wide range of factors, not least the
reputation and standing of the operator submitting the bid. The
authority must also act in accordance with procurement legislation.
Where such legislation applies, it specifies the criteria on which a
contracting authority either must or may reject a tender. Obviously,
the appropriate procurement legislation is the right place for such
restrictions. I think it would wrong for us to apply different
restrictions in the
Bill.
That said, I am
prepared to consider whether it would be appropriate to include
references on that point in the next draft of the quality contracts
scheme guidance. I am certainly happy to explore that
further.
I hope that I
have indicated a number of steps that we might be able to take in
future regulations to help to manage the period of transition to a
future quality contracts scheme. I will very carefully consider the
points made about the application of TUPE during the transitional
period and the need to secure a fair degree of pension protection.
While I cannot guarantee it, I am happy to see whether there is
anything that we need to bring back on Report with regard to this and
also to look at regulations and guidance in relation to some of the
other points that have been made. I hope that, with those reassurances,
my hon. Friends feel able not to press their new
clause.
Question
put and agreed
to.
Clause 39
ordered to stand part of the Bill.
Clause 40
ordered to
stand part of the Bill.
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