New Zealand looked beyond its borders to international jurisdictions for models of protective legislation for contract workers, where employee regulation covering a transfer of undertakings was relatively common (Churchman, 2002b). In 2001, it was estimated that protective legislation existed to cover some 360 million people worldwide (Minimum Standards Review, 2001). The models varied with different limitations placed on its application. For instance, while 10 percent of workers covered by Federal Canadian law enjoyed mandatory rights of transfer, those in Ontario were covered only in the event of the sale of a business and not for situations of contracting out. Further, continuity of employment only applied if workers were first offered employment by the new owner (Churchman, 2002b). Other legislation has evolved over time, such as the Australian legislation, where continuity of employment protection initially applied only to workers on collective agreements but was extended to all workers under the Fair Work Act 2009 (Fair Work Ombudsman, 2009).
The concept of employment protection legislation emerged first in Europe in response to the rise of business transfers in the 1970s, which were estimated to have doubled every three years in the European Union during the 1980s, accounting for 40 percent of the global business transfers at that time (Marchington, Cook, Earnshaw, & Rubery, 2004). The European Community developed a policy instrument called the Acquired Rights Directive 77/187/EEC (ARD) to specifically address these transfers. The passage of this law over the next 30 years reflected the tensions between equity and efficiency that later characterised the New Zealand debate. In the next section, consideration will be given to the European developments, with particular reference to legislation in the United Kingdom.
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2.5.1
The Acquired Rights Directive
The European Acquired Rights Directive (“ARD”) guaranteed that if a business “undertaking” was transferred, resulting in a change of employer, the employees and their associated rights would also transfer to the new employer. Workers were protected from dismissal unless the termination occurred for economic, technological or organisational reasons (Eur-Lex, 2001). As the types of business transfer expanded, including into contracting out, the ambit of the ARD, via revisions (Council Directive 2001/23/EC) or European Court decisions, also expanded. It captured the new forms of restructuring to such an extent that the ARD had “the controversial status as a champion of employee‟s rights” (More, 1995, p.135 cited in Hunt, 1997, p. 337). In particular, this was attributed to the protection afforded workers against cuts in their pay and conditions at the time of a transfer, thus constraining cost-cutting in the tender process (Hunt, 1997). The developments in the ARD were evolving to maintain consistency with the original purpose: to safeguard workers‟ rights in the event of a transfer of an undertaking, business, or part of a business (Eur-Lex, 2001).
While one of the ARD‟s objectives was social protection of workers, the directive also aimed to “assist in the process of restructuring, allowing more competitive and efficient undertakings to emerge” (Barnard, 1993, cited in Hunt, 1997). The ARD attempted to “balance employment protectionism with commercial realism” (Hunt, 1997, p. 347). Its detractors argued the employment protection available to workers threatened to make a “failed economic experiment” of competitive tendering (Adnett, Hard, & Painter, 1995, p.21 ), acting as a deterrent to the transfer of a business, rather than facilitating the transfers (Barnard, 1993, cited in Hunt, 1997).
Adnett et al (1995) draw attention to the importance of the cultural context for understanding social protection developments and compare the experiences of Europe and the United Kingdom. They argue the ARD emerged out of a European social policy model characterised by cooperation and cohesion, in which workers secured stable jobs and high wages in return for high productivity. Within this context driving down wages
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through competitive tendering processes could be seen to threaten the “efficiency- generating” social contract (Adnett et al., 1995, para. 4). The United Kingdom, by contrast, was legislating at a time when its Government had embraced liberal market ideology with a strong emphasis on self-regulation (Adnett et al., 1995). It is the experience of the ARD in Britain that relates most closely to the New Zealand situation, where industrial relations leading up to the introduction of the new law was similarly shaped by economic liberalisation.
2.5.2
Transfer of Undertakings (Protection of Employment)
Regulations, UK
The ARD, while binding, required member states to legislate its local form and, therefore, varied from one jurisdiction to the next. The Directive was implemented in Britain through the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) and its history exemplifies the challenge of balancing economic and social needs in a neo-liberal market economy. From 1979, the Conservative Government in Britain adhered to the view that market forces were self-regulating in a competitive economy and government regulation would distort the market (Adnett et al., 1995, para. 5). Compulsory competitive tendering was introduced as part of a programme of privatisation of public services in the 1980s, explicitly designed to reduce costs and increase efficiency in a free market (Kelliher, 1996). Regulation of the competitive tendering environment and the ARD, with its goal to safeguard the rights of employees during a transfer, ran counter to the prevailing policy in the United Kingdom (Adnett et al., 1995).
The key planks of the ARD were incorporated into TUPE, including the right of employees to be assigned to a transferred undertaking on their existing terms and conditions (McMullen, 2006, p. 116). There was also a duty to inform and consult with workers and their representatives prior to any transfer. TUPE was revised a number of times in response to European Community Commission litigation, to a revision of the
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ARD (2001/23), and to address uncertainties (McMullen, p. 113). In 2006, TUPE codified European case law on the definition of a transfer; restricted the ability of employers to vary workers‟ terms at transfer; required a new company to be given timely written notification of individual employee liability information; and extended the coverage to changes of service contracts, including subsequent contracting situations (McMullen, 2006). The latter amendment resulted in the United Kingdom providing protections superior to the ARD (McMullen, 2006).
The Conservative Government resisted introducing protective legislation and, from its inception, TUPE law was unpopular with employers (Adnett et al., 1995). A number of studies showed active resistance to its implementation. One survey of 68 employers in the late 1990‟s revealed widespread non-compliance (Painter & Hardy, 1999) and a Unison survey in 2000 indicated 90 percent of contractors were paying new workers less than those who had transferred, creating a two-tiered wage structure (Foley, 2002). Evidence in a 2004 study also suggested that a large gap existed between the requirements of the law and the reality for workers, particularly with respect to terms and conditions of employment and work intensification (Marchington et al., 2004; Marchington, Cook, Earnshaw, & Vincent, 2000). As noted by Adnett et al the political and judicial climate in which TUPE law matured was resistant to any challenge to managerial prerogative and provided a stark contrast to the emphasis on social cohesion in the policy of the European Union (Adnett et al., 1995) and a challenge to the goal of the ARD to safeguard workers‟ rights in the transfer of an undertaking.