Understanding the key staffing issues in Local Government Reorganisation
Sarah Lamont sets out some of the main employment considerations arising out of the Government’s plans for local government reorganisation.
Along with universal coverage for strategic authorities and the government’s strong preference for them all to have a mayor in the English Devolution White Paper, there is the “small matter” of the expectation of local government reorganisation.
Local government reorganisation (LGR) is the process in which the structure and responsibilities of local authorities are reconfigured. In the context of the English Devolution White Paper, the government has set out its plans to move away from the current two-tier system of district and county councils to unitary coverage for everyone.
Whether that results in county areas being split or district, borough and city areas being merged, all those involved are now thinking about the questions to ask themselves and the practical impacts of the incorporation of one or more predecessor councils’ functions and assets moving into a successor council that, to a greater or lesser extent, will impact on everyone involved.
Key amongst those questions and impacts will be, what does that mean for staff? Usually a transfer or assets, functions and activities in this way would mean that employees working in the transferring organisations would transfer to the new councils under the Transfer of Undertakings Employment (Protection of Employment) Regulations 2006 (TUPE). Fairly simple.
However, under TUPE, there is an exception to such a transfer. Regulation 3(5) of TUPE states that “An administrative reorganisation of public administrative authorities or the transfer of administrative functions between public and administrative authorities is not a relevant transfer”. This is also known as the “Henke exception”.
There has been some debate as to whether this means that TUPE does not apply LGR. So, to deal with any potential uncertainty, and to facilitate the transfer of staff to support delivery of services post LGR, the government introduced the Local Government (Structural and Boundary Changes) (Staffing) Regulations 2008 (the Staffing Regulations). These state that, notwithstanding regulation 3(5) of TUPE, the transfer of functions from a predecessor council to a single tier council in connection with one or both of a structural change and a boundary change shall be treated for all purposes as a relevant transfer within the meaning of TUPE.
But, whilst this clarity is helpful, there are still a number of complex issues that can arise in relation to staff in LGR and we look at some of these below:
Heads of Paid Service
The Staffing Regulations state that TUPE is not deemed to apply to heads of paid service of predecessor authorities. Instead, a chief executive of a predecessor council who does not obtain the post in the new unitary council is to be treated as if they had been dismissed by reason of redundancy by their employing authority for the purposes of entitlement to a redundancy payment and, if 55 or over (57 from 6 April 2028), an unreduced LGPS pension. This is the case, even if the chief executive did not apply for the post. Whilst raising issues as to how a predecessor council is to manage such a redundancy dismissal in the context of LGR, it also begs the question whether, notwithstanding the Staffing Regulations, chief executives do still have the right to transfer to the new unitary council under TUPE if they wish to. In previous rounds of LGR, before the disapplication of the short lived (and not at all lamented) Exit Pay Cap Regulations, this was a real issue and one that has not been resolved by the courts so remains a live point.
Disaggregation of staff where there is more than one new unitary council for the area
In many areas there will be or is more than one unitary being proposed and, where that is the case, informed planning needs to be done to determine to which of the new unitaries the staff of the various predecessor councils should transfer. While there may be many employees for whom it will be clear to which new unitary the work function to which they are assigned will transfer (particularly where they are linked to specific locations such as schools), previous experience has shown that there will also be some employees who cannot be so readily assigned to functions transferring to a particular new unitary, (such as staff engaged in corporate functions and senior managers). There are practical ways to try to achieve this disaggregation of staff, but it will need careful consideration to ensure that the new councils have the staff they need to deliver services and employees have as much certainty as possible so that they remain on board during the process. Communication and engagement with staff and unions is key, as is preparation of accurate employee data around roles and functions.
What about restructuring for the new unitary?
LGR can, like any other merger, inevitably result in a level of duplication of roles, which means that restructuring is not only likely, as with any new organisation, but will be a necessity. It can also mean the creation of new roles, or changes to existing roles and the bringing together of different terms and conditions and pay and grading arrangements. Thought should be given at an early stage to the changes that will be needed, because this then feeds into the predecessor and new unitary councils’ legal obligations to inform and consult with staff and unions. Primarily these are the obligations for consultation where collective redundancies or widespread changes to terms and conditions are proposed and/or where the envisaged changes will amount to “measures” under TUPE, in which case this information must be shared with employee representatives in advance of the staff transfer. This is not only critical to supporting a smooth transfer of staff: a failure to inform and consult where these legal obligations are triggered can lead to extremely high levels of compensation when restructuring is on this scale. Finally, establishing the senior management team as soon as possible, so that it can lead on implementing proposals and any change needed, is of key importance. This can lead to tricky selection and pooling questions as the scope and scale of roles that might be the same in title may not be equivalent in terms of duties and responsibilities. To manage this, it is vital to ensure that there is a clear understanding of what the top tier officers are actually doing, as that may be different from a job description that could be years out of date. Where there is a need for the unitary to change terms and conditions after the vesting date and agreement cannot be reached with unions/staff, the planned changes to the law in the Employment Rights Bill, which will restrict an employer’s ability to use dismissal and reengagement as a mechanism for achieving such change, will make this much more complicated.
What about employees of contractors?
Councils need to be thinking about what will happen to the existing contracts that the predecessor councils have with providers in the context of LGR. For example, there may be areas of overlap and surplus that mean contracts can be terminated and services either taken in house by a new unitary or re-procured. It is important to remember that, where provider staff are essentially dedicated to the services under that contract, they are likely to be entitled to transfer under TUPE to the new unitary, or to a new provider if the services are to be reprocured. In addition, where the reprocurement is repackaged, with services covered by a number of such contracts, this can complicate the question of which staff are in scope to transfer, so there will need to be careful planning to support an efficient procurement that does not expose the unitary to unnecessary risk.
The overall message is that, it may seem that the destination is many months off, but there is a lot that can be done from now to ensure the journey is as smooth as it can be from an employment perspective.
Sarah Lamont is an Employment Partner at Bevan Brittan LLP, specialising in advice to local government.
This is part of a series of articles on specific aspects from the White Paper and sits alongside other articles on overview, constitutions, standards, the impact of town councils and planning for the management of contracts, assets and mechanics of local government re-organisation.
