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TUPE Transfers

What is TUPE?

TUPE stands for the “Transfer of Undertakings (Protection of Employment) Regulations”. They are regulations designed to protect an employee’s rights when their employment transfers form one employer to another. This type of transfer is often referred to as a TUPE transfer.

When will a TUPE transfer happen?

It will happen in one of two situations:

  • When a business, or part of a business, transfers from one entity to another, e.g. when a business is sold (often referred to as a “business transfer”); or
  • When a service or contract is transferred from one provider to another, e.g. when a contract for cleaning an office transfers from one company to another (often referred to as a “service provision change”). A service provision change can also happen when a company loses a contract and that contract is transferred in house (i.e. the service becomes a service provided in house).

Who will TUPE apply to?

TUPE applies only to employees. As such, those who are self-employed or consultants will not transfer under TUPE. That said, the definition of the term ’employee’ under TUPE is slightly wider than is usually the case, so it’s likely that it will cover those working under apprenticeship contracts, and in certain circumstances, those who are workers. In relation to agency workers, there is very little case law dealing with whether TUPE applies to them, but it’s very possible that it could depending on the nature of the agency work. So whilst there may be a temptation to assume that only the employees of a business will be caught by TUPE, it’s usually worth stopping to consider whether TUPE applies to any other individuals as well.

What does a TUPE transfer process look like?

Usually, a TUPE transfer process will look this this:

  • The old and new employers will identify which employees of the old employer are affected by the relevant transfer;
  • In good time before the transfer, the old and new employers will consult with the affected employees (or their elected employee representatives) by explaining to them how the transfer will affect them (this duty is technically known as the “duty to inform and consult”). The duty to inform and consult with employee representatives rests equally on the previous employer and the new employer. One important part of this duty is for the new employer to explain to the employees anything it intends to change after the transfer (technically such changes are referred to as “proposed measures”). Examples of measures proposed could include changing the date that employees are paid their salaries.
  • At least 28 days before the transfer, the old employer will provide the new employer with information about the employees who are transferring, e.g. their identity, age, salary, holiday entitlement, information about disciplinary or grievance records, and whether any collective agreements apply. This information is collectively known as “employee liability information”.
  • On the date of the transfer, the affected employees will automatically transfer from the current employer to the new employer with their length of service and contracts intact. In other words, the new employer steps into the shoes of the outgoing employer.

What happens on the day of the transfer?

On the day of the TUPE transfer, the employees affected affected will automatically transfer from the employment of the former employer to the employment of the new employer. This will mean that the employees’ contracts will also automatically transfer with them, and their length of service will remain intact.

Can changes be made to employment contracts after a relevant transfer?

The default position is that contracts of employment should transfer unchanged, and that any changes to contracts of employment that are connected to any TUPE transfers will be automatically unfair. However, an employer will be able to justify changes to contracts of employment after a TUPE transfer where there is an economic, technical or organisational reason for doing so (often referred to as an “ETO” reason). An example would be where an employer needs to undertake a wider re-organisation of staff and where the transferring employees are caught up in that re-organisation. Employers however need to be careful when trying to argue that there’s an ETO reason in existence, because where a dismissal would otherwise have been automatically unfair, the onus will very much be on the employer to prove the ETO reason.

Can employees bring a claim to an Employment Tribunal for a breach of TUPE?

Potentially yes. For example, say that a certain contract changes hands (i.e. a service provision change occurs) and employees transfer from an outgoing employer to an incoming employer, if the incoming employer then terminates an employee’s contract (and the sole or principal reason for that termination is the TUPE transfer itself), that termination will be deemed an automatically unfair dismissal. To give another example, if individuals transfer from an outgoing employer to an incoming employer and that incoming employer fails to stick to the employees’ terms of employment (i.e. they change them without a valid ETO reason), the transferring employees will have a potential constructive unfair dismissal against the new employer. This will be the case if an employee can show that the sole or principal reason for the change in an employee’s terms of employment was the TUPE transfer itself.

As you can see therefore, a TUPE transfer presents a real risk to employers if things go wrong. You can read more about how to defend Employment Tribunal claims here.

What if an employee doesn’t want to transfer under TUPE?

If an employee affected employee objects in writing to their employment transferring under TUPE to a new employer, their employment will come to an end on the date of the transfer. Therefore, whilst transferring employees will move across to the new employer, the objecting employees will be out of employment as of the transfer date.

What if affected employees aren’t consulted ahead of a transfer?

If the affected employees (or their employee representatives) aren’t consulted, or aren’t consulted properly, about the TUPE transfer, the employees can potentially sue both the old and new employer. If such a claim is successful, the employees can be awarded up to 13 weeks’ pay as compensation. It will usually be sensible for the old employer and new employer to co-operate, well in advance of the transfer, on how best to inform and consult with the employees and their representatives. There is a real incentive to do this for both the old employer and the new employer, because both can be held equally at fault for any failure to inform and consult (the technical phrase for this is that both are held “joint and severally liable”.

What role do employee representatives play?

Where the employers involved (i.e. whether outgoing or incoming employers) officially recognise an independent trade union, there should already be appropriate representatives in place (via the union) to represent the employees affected. However, where no trade union is officially recognised, the employees will need to elect representatives to act as appropriate representatives for them during the process of informing and consulting with staff. In some cases, (for example, where a very small number of employees are involved – e.g. less than 10 employees), employers may decide that electing representatives is excessive. In such a situation, employers can consult directly with the employees rather than consult representatives.

What if the former employer doesn’t give TUPE information to the new employer?

If the former employer fails to give the new employer details of the employees transferring to its employment, the new employer can potentially sue the former employer for losses that they’ve suffered as a result of that failure. The compensation that a Tribunal will give is a minimum award of £500 for each affected employee in which information was not provided. In a large-scale business transfer or service provision change with a significant number of transferred employees, this can become a substantial potential liability.

How does TUPE affect pensions?

This will all depend on the type of pension scheme that an individual has in place. For example, with occupational pension schemes, most pension rights under such schemes will not transfer under TUPE. This is often referred to as the “pension exception”. On the flip side, with personal or stakeholder pension schemes, rights under those types of schemes will always transfer under TUPE.

Can employers settle TUPE claims?

Yes. Employers can use settlement agreements to settle potential claims linked to TUPE. Sometimes, tripartite settlement agreements will be used in TUPE situations, i.e. settlement agreements with 3 parties to them; the old employer, the employee, and the new employer. This way, the risk of a potential claim against anyone is eradicated.

What happens if TUPE doesn’t apply?

If a business changes hands from one company to another but TUPE doesn’t apply, an employee will need to consent to their employment transferring from the first company to the new company. If an employee does agree to their employment transferring, their period of continuous employment will be maintained (because there won’t be a break in service). However, the employee won’t necessarily keep their existing terms of employment; because it is only under TUPE that an employee is guaranteed to transfer on their same terms.

Does TUPE still apply to insolvent businesses?

Where a business is facing insolvency, some of the main TUPE rules and protections are relaxed. The idea behind this is to try and help the recovery of struggling businesses by removing some of the additional obligations that TUPE places on them. By how much the TUPE rules are relaxed will depend entirely on the type of insolvency proceedings involved. For example, generally, the further down the insolvency line a business is (e.g. where a business is closer to liquidation), the greater the relaxation and removal of the TUPE rules.

What does the future hold for TUPE?

Following the UK’s exit from the European Union, there has been much debate about the future of the Transfer of Undertakings (Protection of Employment) Regulations. The TUPE Regulations themselves originally derive from EU law, so it’s not surprising that Brexit has raised a question mark about its future. TUPE (and the whole concept of “transfer of undertakings” and protecting existing terms of employment) is unpopular in some business circles, and many have called for TUPE to be revised. The argument put forward by others is that when TUPE applies (e.g. where a particular contract changes hands or goes in house), TUPE plays an important role in protecting employees’ existing employment rights.

If you need any advice on TUPE, please contact a member of our employment law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.

To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.

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