What is TUPE?
The Transfer of Undertakings (Protection of Employment) Regulations have been in existence since 1981 and were amended in both 2006 and 2014. The expression “TUPE” is an acronym for the latest piece of legislation from 2006, as amended in 2014.
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TUPE is designed to protect employees if:-
- the business they are employed by changes hands, or
- there is an outsourcing or an insourcing of a service to which the employee’s employment in dedicated.
Essentially, the “rights and liabilities” of the old employer (the “transferor”) move to the new employer (the “transferee”) by operation of law. This is sometimes referred to as the “automatic transfer” principle.
What do you need to know about TUPE?
As we have mentioned above, TUPE can apply in a number of scenarios. To explain further, TUPE can apply when employers:-
- buy or sell the whole or part of a business
- outsource or take over (namely insource) the provision of a service – this is called a service provision change.
To minimise the risk of employment-related claims, you should understand the following:-
- when may TUPE apply
- if TUPE applies, what are the legal implications
- what you should do to comply with TUPE
- the steps you can take to protect your business from the effects of TUPE.
When may TUPE apply?
The legal definition of a “relevant transfer” is covered by regulation 3 of TUPE. Essentially, it refers to either a business transfer (in whole or part) or a service provision change, which we have described above.
If you are buying or selling a business, or outsourcing/insourcing a service, you should seek specialist legal advice as to whether TUPE may apply. This is where Centurion Legal can help you.
If TUPE applies, what are the legal implications?
TUPE provides that:
- for a business transfer, employees who are immediately employed in the undertaking, which is being transferred to a new employer; or
- for a service provision change, an employee whose principal purpose is to perform the service and they form part of that organised group providing the service,
will transfer to the employment of the new business owner, or service provider, as applicable.
Employees may “object to the transfer” pursuant to regulation 4(7) of TUPE. However, if they do so, they may lose their legal rights and are deemed to have resigned when the transfer takes place.
Typically, an employee may exercise the right to object if the transferor has offered them a different role, or a severance package is on offer.
If the employee does not object, their contract of employment with the transferor effectively becomes with the transferee – this means an employee should transfer on exactly the same terms and conditions that they had with the former employer to the new employer. In doing so, all statutory and contractual rights are preserved, including length of service, or continuity of employment.
Sometimes, the new employer may not be able to honour the exact terms and conditions which the employee previously enjoyed with the former employer. Accordingly, these “measures” must form part of the consultation process described in more detail below.
Here are some important things to remember about TUPE:
- TUPE may apply whenever a client buys something that has employees associated with it: this might look like an asset, or an activity, and not a business, but TUPE may well protect those employees’ rights. For example, a shopping centre is likely to have cleaners, security guards or caretakers, whose employment may be transferred to a client when it buys the building. Equally, if a client is taking over the provision of a service, the employees currently providing that service may become the client’s employees by virtue of TUPE.
- TUPE may apply regardless of who the employees’ current employer is (i.e. whether or not their employer is the seller in the transaction).
- If the rights of those employees are threatened (for example, by dismissal or reduction in pay or other rights), it is reasonable to expect that an employment tribunal will try to find that their rights are protected by TUPE, in light of the purposive construction they are required to give to the regulations.
What should you do to comply with TUPE?
The old or former employer must:
- inform their employees about the transfer and consult with them about it – this is usually done via elected representatives and the old employer should make provision for their election. Sometimes, an employer may be able to directly consult with the “affected employees”, but you should take specific legal advice to avoid pitfalls in this regard; and
- provide employee liability information to the new employer.
The new or incoming employer must:
- provide the old employer with specific information so that the old employer can comply with its information and consultation obligations. Of particular importance are any changes that the new employer cannot avoid making. These are known as “measures”. This is a complicated subject and you should take specific legal advice; and
- from a practical perspective, focus on welcoming the new staff into their organisation and keep existing employees informed of the changes. This should help maintain a good working environment and avoid commercial disruption.
It can be helpful if the new employer takes an active role in the consultation process between former employer and employees, such as being on hand during meetings to deal with queries.
Steps you can take to protect your business from the effects of TUPE;
- Take detailed legal advice on the process from a specialist employment lawyer, such as Roscoe Fernandes at Centurion Legal.
- Involve your HR department in the “information and consultation” process.
- Work in tandem with the old/new business owner/service provider.
- Of particular importance is to ensure that you have warranties and indemnities within the transfer agreement to protect you against liabilities – Centurion Legal provides expert advice and drafting in relation to the same.
As an employer, whether TUPE applies will be a matter of law and for the Tribunal to decide. However, you can protect yourself by taking the above steps. Indemnities and warranties can prove useful in terms of any financial liabilities arising from claims.
DISCLAIMER: This document is intended to be a guide to the current law only. It does not constitute legal advice and you are not entitled to rely upon it. You should always take proper legal advice relating to your own situation before acting.Centurion Legal