Understanding TUPE
When an employer sells their business, the provisions of the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006 are triggered to provide protection to the existing employees of the organisation being transferred. Therefore, it is important that both the outgoing and incoming employers understand their obligations under TUPE.
What rights does TUPE protect?
In general, in the event a business changes hands, TUPE automatically transfers the employees and their existing employment contracts and rights to the new owner.
If the new owner dismisses any employees because of the transfer of the business, that dismissal will be deemed automatically unfair. If an employee was unfairly dismissed in advance of the transfer, liability for this would rest with the transferee.
When does TUPE apply?
TUPE applies in two situations:
- business transfers: a transfer of an undertaking, business or part of an undertaking or business,
- a service provision change: where the provider of a service changes, i.e. a client 'outsourcing' work to a contractor (first generation outsourcing), bringing that work back in-house ('insourcing') or re-assigning that work to another contractor (second generation outsourcing), where certain criteria are satisfied.
Do transferors have to inform employees of the transfer?
Yes. The obligation to inform under TUPE is fairly strict. Employees or their representatives must be informed of not only the transfer of the business but:
- the date of the transfer
- the reason for it
- the legal, social and economic impact on the employees
- how the existing employer and incoming employer will deal with the affected employees
If the employer fails to inform his or her employees, a penalty of up to 13 weeks' (uncapped) pay per affected employee may be imposed.
What method should employers use to inform employees of the transfer?
Information and consultation must be with trade union representatives or, if there are none, with elected employee representatives. If there are no elected representatives, the employer must inform each employee individually. In companies with fewer than 10 employees, the employer can simply inform employees directly.
Can an incoming employer vary the existing employment contracts?
Not easily. Just receiving consent from the employer to change existing terms and conditions under an employment contract is not enough. TUPE imposes additional restrictions. Any purported variation of a contract of employment that is, or will be, transferred is void 'if the sole or principal reason for the variation is the transfer.'
If you are transferring a business or service, you can get expert advice on TUPE by searching for an experienced employment law solicitor in your area on Solicitors Guru.