If you’re buying or selling a business (other than by share sale) or entering into a contract for the provisions of services (whether as a service provider or service user), you need to know about TUPE and how it works.
Comprehending the intricacies of TUPE transfers is crucial to ensure the seamless transition of employees and the protection of their rights. In this comprehensive guide, we'll break down the fundamental aspects of TUPE to ensure you remain compliant.
What is TUPE?
TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations 2006. At its core, TUPE is a set of regulations that safeguard employees' rights when the business or service they work for is transferred to a new employer.
This can happen for various reasons, such as mergers, acquisitions or outsourcing. The regulations ensure that employees' terms and conditions of employment are preserved and their rights aren’t compromised during the transfer.
How does TUPE work?
The TUPE process involves the automatic transfer of employees from the old employer to the new one. This means that the employees affected by the transfer and all their employment rights and obligations move to the new employer as if their contracts were originally made with the new employer.
This includes rights such as holiday entitlements, working time regulations and terms and conditions of employment. However, some conditions don’t transfer, such as pensions and special rules concerning collective agreements and union recognition.
Where TUPE applies, it's called a "TUPE Transfer." During this transfer, the new employer (also called the "Transferee") essentially takes on the responsibilities of the old employer (known as the "Transferor"). The Transferee automatically gets the employees connected to the business or moving job, and they keep their old job rules. Their time working there continues without a break.
Moreover, the TUPE rules protect employees from being fired, changing their job rules, or facing big problems in their new work conditions because of the TUPE Transfer.
Does TUPE still apply post-Brexit?
Brexit has undoubtedly brought changes, but it's important to note that TUPE regulations remain in place post-Brexit. While the regulations are UK-based, many of the principles were derived from EU case law. Thus, the core protection provided by the regulations remains a fundamental aspect of UK employment law.
When does TUPE apply?
TUPE applies when there’s a ‘relevant transfer’ that occurs on or after April 6, 2006. A relevant transfer automatically takes place in two ways:
Firstly, where there is a transfer of a business (or undertaking) or part of a business (or undertaking), as long as that business transferred is an economic entity which retains its identity following the transfer.
Secondly, when work carried out by an employee is outsourced, brought in-house or reassigned to another service provider (which is known as a service provision change). Some transfers can be both business transfers and service provision changes.
When does TUPE not apply?
While TUPE is comprehensive, there are instances when it doesn't apply. For example, the regulations don't apply to transfers of shares in a company (although it can apply, for example, to a transfer that is a precursor to a share sale or a transfer to the holding company following a share transfer).
Additionally, if the business undergoing the transfer is in administration and the primary purpose is the realisation of assets, the regulations might not apply in the same way.
There are many issues that arise with TUPE. Quite often, whether a transfer or service provision change is actually caught by the TUPE regulations.
In addition, there are times when the information the employer needs to share about transferring employees under TUPE isn't complete. For example, they haven’t included details of employees who’ve been absent for a long time or details of employee benefits they believe aren’t part of their job agreement.
Sometimes, too much information is given beyond what TUPE requires, and this often leads to the breaking of GDPR rules. Employers usually don't anonymise personal information correctly when sharing it, which is against GDPR rules.
Furthermore, new business owners might decide that they don’t want to keep some of the employees being transferred. Liability for such dismissals depends on the reason for the dismissal. For example, if the pre-transfer dismissal is by reason of the transfer itself, the dismissal will be automatically unfair, and the transferee will be liable. If the pre-transfer dismissal is by reason of the transfer itself, but it’s an ETO reason, and the dismissal is unfair under the normal unfair dismissal rules, the transferor will be liable.
After the employees are transferred, the new owners (transferee) will be liable for such claims as automatic unfair dismissal if the dismissal is because of the transfer itself and not for an ETO reason. Even if there’s an ETO reason, they must follow the rules for fair dismissals; otherwise, they may be liable.
A problem that's often not considered is related to rules about what employees can't do after leaving a job, like not working for a competitor. These rules are usually in the employee's employment contract with the transferee. But sometimes, these rules protect the old owners' business, not the new owners'. Even if the employee agrees, the rules might stop the new owners from changing these rules for their own protection.
TUPE consultation process
Additionally, the rules say that before the move happens, both the transferor and the transferee must inform and (if appropriate) consult with recognised trade unions, elected employee representatives (if there isn’t a recognised trade union) or the employees themselves (where there are fewer than ten employees who’re affected by the transfer).
There are rules as to what information the transferor must provide to the transferee (and when that must occur) and when that information must be provided to the employees. This means that everyone knows what's going on and can ask questions if needed.
The new owners might not want to fire the incoming employees, but they might want to change their job conditions. The rules say they can't do this unless there are special reasons.
Can an employee refuse TUPE transfer?
Employees have the right to object to their transfer to a new employer; if they do this, their contracts of employment (and rights and liabilities) won’t transfer to the transferee.
Their employment will be terminated with effect from the transfer date, but there is deemed to be no dismissal. So, they wouldn’t usually be entitled to any statutory or contractual compensation unless the objection was in response to the employer’s repudiatory breach or a substantial change to their working conditions.
How long does TUPE protection last?
The protection provided by TUPE isn’t indefinite, but it all depends on why changes might need to be made and/or why a dismissal takes place. It covers the terms and conditions of employment that exist at the time of the transfer.
Changes made for an economic, technical, or organisational reason (ETO reason) may be acceptable (but there may be unfair dismissal claims if the dismissal procedure wasn’t followed fairly), and changes solely due to the transfer itself are likely to lead to claims for automatic unfair dismissal.
What TUPE terms can be changed after the transfer?
The starting point under TUPE is that any changes will be void if the sole or principal reason for the change is the transfer. Changes unrelated to the transfer must be for an ETO reason. The employee's agreement is necessary for the changes to be valid.
Note that harmonisation of terms to bring the transferred employees’ terms and conditions in line with the existing staff will be seen as a change because of the transfer.
Does TUPE cover agency workers?
Agency workers fall under the scope of TUPE if they meet the conditions of being an "employee" under the regulations. If the agency worker has a contract with the old employer and is integrated into their workforce, TUPE can cover them.
Do Collective Agreements transfer under TUPE?
Collective Agreements, which are agreements between an employer and a trade union, do transfer to the transferee. Whilst Collective Agreements aren’t usually legally enforceable between the employer and the trade union, certain provisions may be binding.
Does TUPE apply in administration?
In cases of administration, TUPE can apply, but the focus shifts. The administration's main objective must be to rescue the company as a going concern. If this objective is maintained, the employees' rights and protections under the regulations will still be upheld.
Get legal assistance from LawBite
TUPE is difficult to avoid and is complex, so problems do arise. The best way to deal with them before a TUPE transfer includes ensuring the sale and purchase documentation contains the appropriate indemnity and warranty provisions; making sure you carry out the appropriate warning and consultation obligations with affected employees; carrying out appropriate diligence before the transaction and being as open and straightforward with your staff as possible.
If you’re unsure how to handle TUPE or if you encounter an issue during the process, our experienced solicitors can guide you through the entire process. From determining when TUPE applies and navigating consultation processes to understanding the complexities of relevant transfers and Employment Tribunal representation, we've got you covered. We're here to ensure the transition is as smooth as possible for you and your employees.