The "two tier code", used in public-sector outsourcing contracts, may be abolished in April 2011, Eugene Wojciechowski, partner at Shoosmiths, told delegates.

Wojciechowski, who was speaking in a session on the Tupe transfer regulations, said he had heard a rumour that the government were planning to abolish the code but had no further details as yet on how the change would be made.

The code, introduced by the previous government in 2003, is intended to protect employees recruited to work on outsourced public sector contracts from being hired at inferior rates compared to transferred employees, whose public-sector terms are preserved under Tupe. The aim was to prevent the creation of two-tier workforces.

The change will have a detrimental effect on those employees recruited to work on outsourced public-sector contracts, but will reduce the costs of the private-sector contractors taking on the work. This could ultimately be an incentive for the public sector to outsource more services, it is speculated.

Wojciechowski also said he had heard that a particularly contentious Tupe case, Alemo-Herron v Parkwood Leisure, was set to be appealed. The case, involving work outsourced from the London Borough of Lewisham, dealt with whether Tupe-transferred employees’ terms and conditions could be changed to reflect collective negotiations happening between the transferor and employee representatives after the transfer had taken place. If the employees’ claim were ultimately successful, this would be “pretty harsh on the new employer”, Wojciechowski said. The organisation would find itself covered by negotiations to which it was not a party.

On the first appeal, the EAT found in favour of the employees, but earlier this year the Court of Appeal found in the employer's favour and said only those terms in force at the time of the transfer applied. If the case is appealed again, it will go to the Supreme Court.

Source:

http://www.peoplemanagement.co.uk/pm/articles/2010/11/two-tier-code-for-public-sector-outsourcing-may-be-abolished.htm