Transfer of Undertakings (Protection of Employment) Regulations 2006 – TUPE
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) can have ramifications for you if you are an employer or employee and your business is undergoing a transfer because the business is being partly or wholly bought or sold, or if there is ‘service provision change’ because part of your business is being outsourced, changing contractor, or in-sourced. Whether TUPE applies and what the obligations and rights are under TUPE is a complex area of law, and so involving specialist TUPE lawyers at an early stage, whether you are an employer or employee, is advisable.
TUPE for employers
Knowing whether TUPE applies in your business’ specific circumstances can be difficult. If all or part of your business is being bought or sold or you are changing how a service is being provided (if it is being outsourced to an external contractor, the external contractor is changing from one contractor to another or the service is being brought in-house) and the business will retain its identity, it is worth seeking legal advice, as TUPE is likely to apply.
The following factors are often considered when determining if there has been a relevant transfer under TUPE:
- the type of business being transferred;
- how similar the activities carried out by the business are before and after the transfer;
- whether business activities are suspended and if so how long that suspension lasts;
- what is being transferred (tangible assets like equipment or buildings and intangible assets like goodwill and contacts);
- whether clients or customers are transferring; and
- whether employees are being transferred.
You may wish to seek advice on TUPE if your business is seeking a service provision change and the factors which are considered when determining whether TUPE applies in this case include:
- Consideration of how similar activities before and after the transfer are and whether they are fundamentally the same
- Looking at how the staff who provide the activities to the client are grouped. This is to see whether the same identifiable team of people (an organised grouping) provide the service to be transferred or whether different individuals are used for different tasks on an ad hoc basis.
- Considering whether the service is provided to the same client before and after the transfer.
- Ensuring that it is a service and not the supply of goods which is being provided.
- Considering whether provision of the activities is short term or for a limited period or whether it was intended that the services would be provided more permanently by those staff providing the activities before the change.
If TUPE does apply, your business will have legal obligations relating to your employees.
The obligation to ‘inform and if appropriate consult’
You will have an obligation to ‘inform and consult’ with ‘affected employees’, which are those employees affected by the transfer or measures taken in connection with it. If an employee is likely to be transferred or made redundant due to the transfer or is an employee of the transferee and their job may be affected, for example, they will be an ‘affected employee’ with the right to be informed and consulted prior to the transfer. ‘Measures’ are changes to an employee’s contract and might include a change to the scope of a role or a requirement to make an employee redundant.
A worker may also qualify as an ‘affected employee’ for the purposes of informing and consulting under TUPE. The duty to inform and consult must be through ‘appropriate representatives’ of the ‘affected employees’ which means this should be carried out through recognised trade unions or employee representatives, which if there are not any should be elected. We can guide you through this process if you are in doubt.
If your business has fewer than ten employees, it is not required to elect appropriate representatives and can inform and if appropriate consult affected employees directly, if your business does not already have employee representatives or recognised trade unions.
Failure to inform and if appropriate consult in the correct manner and in the timeframe set out in the TUPE Regulations can lead to a claim for compensation by employees of a maximum of 13 weeks’ actual pay, each. To avoid these costly claims our experienced employment solicitors can assist with the process, if instructed at an early stage.
What happens to the employee’s employment on a TUPE transfer?
The employee has a right to object to the transfer, but if an employee does not object to the transfer, their employment is transferred to the new employer on the same, improved or equivalent but no less favourable terms and conditions, and will retain their continuity of service, from the start of their employment with the old employer.
Employee Liability Information
There are special provisions relating to pensions, but otherwise all rights and liabilities relating to that employee transfer to the new employer. For this reason, if you are buying a business or inheriting employees through a service provision change under TUPE, you will need to carry out due diligence in respect of the relevant employees who will transfer to you.
There is a requirement for Employee Liability Information to be provided by the transferor to the transferee under TUPE and so if you are selling your business or your employees are transferring to anther employer through a service provision change under TUPE, you will be expected to provide information at least 28 days before the date of the transfer about length of service and any outstanding grievances or employment claims, amongst other details. If you fail to comply with this the new employer can seek compensation from an employment tribunal dependent on losses suffered but set at a minimum of £500 per employee. Again, the potential for liability and high costs for your business if you fail to comply fully with TUPE means that seeking early advice from specialist TUPE lawyers on your obligations is recommended.
If the sole or principal reason for dismissing an employee is a TUPE transfer, this is an automatic unfair dismissal, but if there is an ETO (Economic, Technical or Organisational) reason requiring a change to the workforce dismissal can be justified. This is a narrow defence and so it is strongly advisable that you seek professional advice before dismissing or changing an employee’s terms and conditions after a TUPE transfer, for an ETO reason.
Engaging specialist TUPE lawyers at an early stage, to understand TUPE fully and best protect your business from future claims, is a worthwhile investment.
TUPE for employees
It can be a great cause of concern and uncertainty when your employment is due to change because it is being sold or bought, or if a service is being provided in a different way. Whilst you may not have previously heard of it, TUPE is in place to protect employee’s employment rights before and after a relevant transfer or service provisions change, so that your terms and conditions should not be worse as a result of a TUPE transfer. Your employer must inform, and if appropriate consult, with you if you are affected by a transfer, before the change, or it could be liable to fines and claims under the TUPE Regulations 2006.
If you would like to speak to specialist TUPE lawyers, because you have concerns or questions about TUPE, or if your terms and conditions have been negatively affected or you have been dismissed as a result of a TUPE transfer, we would be happy to assist you. We can assess whether you have any employment claims arising from TUPE and/or other employment claims and guide you through how to gain the appropriate compensation in your circumstances.