TheGovernment aims to head off criticisms of a two-tier workforce in the NHS byputting staff on long-term secondment. But this could create more problems thanit solves, argues Jim Young Itseems that nothing can dampen the Government’s enthusiasm for private sectorinvestment in public services. In a recent speech reaffirming New Labour’scommitment to the Private Finance Initiative, deputy prime minister JohnPrescott said it remained “central to the modernisation of public services”.He added that private investment in public sector projects had increased from£3.5bn in 1997 to more than £14bn today.Yetthere is continuing unease about the effects on the workforce of Public PrivatePartnerships. The public sector unions have been vociferous in their insistencethat this flagship government policy will do irreparable damage to the qualityof public services.BeforeJune 2001, it was accepted practice that the TUPE Regulations applied where aservice function was contracted out to the private sector as part of a PPPproject. This was confirmed by the Cabinet Office Statement of Practice, StaffTransfers in the Public Sector issued in January 2000.However,in June 2001, the Government announced a new proposal, which provided thatfacilities management employees would not transfer to the private sector. Theywould remain employed by the public sector and be seconded to the privatesector for the duration of the project. This is called the Retention ofEmployment Model (REM).Thechange came as a result of pressure on the Government from trades unions,Unison in particular. Unison believes staff transfers from the NHS”threaten the terms and conditions of staff and risk damaging morale andthe quality of service in the Health Service” and that they are creating atwo-tier health service workforce.Asa result, four NHS Private Finance Initiative projects are piloting REM atWalsgrave, Stoke Mandeville, Queen Mary’s Roehampton and Havering.REM– how does it work?Thenew policy, formalised by the Government last November, works as follows: –Under REM, the private sector remains responsible for the provision offacilities management services –Blue-collar staff in cleaning, catering, laundry, portering and security (ifthis includes portering) remain with the NHS but are seconded to the privatesector –Supervisors and above in these sectors and staff in other occupations, such asIT, transfer as normal under TUPE–If employees are promoted to supervisor level, they become employed by theprivate sector–The private sector managers will have a limited role in disciplinary proceduresfor seconded employees. For example, they will be able to issue a verbalwarning, but not a final written warning. Only the NHS has the power to dismiss–The NHS, private sector and unions will discuss output specification andstaffing levels. Any changes to working practices will be negotiated underlocal procedures–NHS staff remain on existing terms and conditions. Changes are bargained andagreed by the NHS–The private sector will participate in recruitment of new staff–The private sector will administer payroll and in limited circumstances be ableto employ staff as agreed at local level–On second-generation market testing, NHS-retained employees remain retainedThroughunion pressure, this model is now being promoted in other areas of the publicsector, such as schools and even in some private sector deals.Doesit work in practice?Thereare many employee relations and legal questions which remain to be answered.Critics of REM argue that it breaks up teams and inhibits promotion prospectsby creating a split between operatives and supervisors. It could also severelyrestrict employers’ ability to introduce innovation, multiskilling and otherefficiency measures. Norman Rose, director general of the Business ServicesAssociation which represents some of the private sector players in the PFIarena, has called it a “political fix to buy off trade union opposition”.Quiteapart from these concerns, does REM work as a device to avoid TUPE? Couldemployees who are seconded for 25 years argue that they are in fact employed bythe private sector under the ‘control test’? Does REM eliminate the two-tiersystem? Does it offer value for money? Is it workable? Many of these questionswill only become clear once the first pilot schemes are implemented. It isanticipated that the first pilot scheme (Havering) will come on line in June2005. However, some of them can be discussed now.TUPETUPEprovides that where there is a transfer of undertakings (for example,contracting out of a service) the employees providing the service automaticallytransfer to the new service provider. The REM Model seeks to overcome theprinciple of automatic transfer by retaining the staff. The rationale is thatRegulation 5(1) provides that only contracts of employment “which wouldotherwise have been terminated by the transfer”, transfer. Thus Regulation5(1) allows the NHS to keep the staff as long as it does not intend to dismissthem. However, this provision is not contained in the Acquired Rights Directiveand case law on the interpretation of Regulation 5 (1) is fairly inconclusive.Therefore it may not be prudent to rely on this.Thealternative is to accept that TUPE applies, but allow staff to exercise theirright to object to the transfer. This has the effect of terminating thecontract of employment and means that the staff do not transfer. The staff canthen be immediately re-employed by the NHS and their continuity of servicemaintained.IfTUPE is found to apply then the risk is that contrary to the model, the privatesector inherits all employee liabilities. The private sector will want to beindemnified against this risk but it is not clear that the NHS will agree tosuch demands. It may be that the likelihood of claims is low as the employeeswill be content to remain NHS employed – even so, it cannot be ignored.Theapproach currently being adopted by bidders for the pilot projects is to insistthat all retained employees object to the transfer and that the NHS re-employsthem.Secondeeor employee?Oneof the tests applied by employment lawyers when determining who is the legalemployer of a worker is the control test. If a person has control over a workerin respect of the way in which work is carried out, when it should be carriedout and what work is carried out then they may be found to be the legalemployer of that person. Somesuggest that an NHS employee who is seconded to work for the private sector forthe period of the project may become an employee of the private sector as aresult of the control test. However, this is only one of the tests applied, andrecent agency cases (such as Esso Petroleum v Jarvis, EAT 18 January 2002 – seeCase Round-up, May 2002) suggest that what the terms of the agreement say ismore significant. Furthermore,it seems the private sector will only have limited control over the retainedemployees, particularly in relation to disciplinary procedures. If the retainedemployees are clearly employed by the NHS under their contracts of employment,it will be difficult to argue otherwise. In any case, the risk of employeesbringing claims is likely to be low.Two-tiersystemItseems that REM replaces one two-tier health service with another. Privatesector staff may be provided with bonuses, share options and other incentiveschemes not open to public sector employees and may have their terms andconditions changed over time. New staff may be employed on different terms andconditions from those of transferring staff such as supervisors and from theretained staff. Tomake matters worse, transferring supervisors will be managing employees who areretained by the NHS and the danger is that the split in terms and conditionswill be even more marked. If this creates unrest and a breakdown in staffrelationships, it will not produce value for money.Someconclude that the only way to overcome this problem and to avoid equal payclaims is for all employees to be employed on terms equivalent to the NHSWhitley terms and for all employees to participate in broadly comparablepension schemes.Theway forwardThereare differing views on whether REM will become the norm in PFI. Someconsider the Government is likely toapply REM to all future NHS projects. However, Norman Rose of the BSA believesthat the practical difficulties of implementing REM mean it will not extendbeyond the pilots. After all, as the employees would remain within the publicsector, then all risks in relation to employment would remain with the publicsector. Thesewould include employment tribunal claims, redundancy, losses arising from anyunion dispute, public liability claims, and employer’s liability claims.Willthe public authorities really want to retain these liabilities when one of thecore elements of setting up a PPP is the transfer of risk?TheEuropean Court viewMeanwhile,arguments about alleged inequality and treatment of transferring staff have nowreached the European Court of Justice. The Advocate-General’s opinion in arecent case referred from the Court of Appeal to the ECJ could haveimplications for the Government’s proposals on contracting out. Lawrence vRegent Office Care [Opinion of the Advocate-General, 14 March 2002 – see CaseRound-up, April 2002] involved a group of dinner ladies and cleanerstransferred from the local authority to a private contractor. Thequestion was whether female employees could bring a claim for equal pay broughtagainst their present employers using male workers who worked for theirprevious employer as comparators. The workers believed there had been atransfer of an undertaking and the work was of equal value to the jobs of theirchosen comparator. TheA-G was of the opinion that for there to be discrimination under Article 141 ofthe EC Treaty (equal pay for men and women), the regulation of terms andconditions on employment must be traceable to one source. If differences in payarise between undertakings or establishments in which the respective employersare separately responsible for the terms and conditions of employment, theycannot possibly be held individually accountable for any differences in theterms and conditions between those undertakings. Thus he would reject theclaim. The ECJ is now expected to rule on this case within the next few months– it usually follows the A-G’s decision. Thisdecision will have to be considered in the Government’s proposals for thefuture of contracting out of services and achieving equality in employment.Sowhether the REM model solves a problem or just creates the same one under adifferent guise is open to debate. One thing is for sure: the debate is by nomeans over. JimYoung is national head of employment at McGrigor Donald Scotland, member ofKLegal InternationalFindout more…–on the Government’s policy on staff transfers in PPPs www.cabinet-office.gov.uk/civilservice/2000/tupe–on the Business Services Association’s policies www.bsa-org.com Previous Article Next Article Comments are closed. Commission chairman resigns after guilty pleaOn 1 Jul 2002 in Personnel Today Related posts:No related photos.