TUPE stands for the ‘Transfer of Undertakings (Protection of Employment) Regulations’. This is a complex area of law which governs business transfers. The aim of the regulations is to protect employees’ rights when the organisation they work for transfers to a new employer.
TUPE applies to 2 types of transfer, which includes:
- Business transfers; and
- Service provision changes.
A business transfer arises where a business, or part of a business, moves from one employer to another. It also includes mergers, where two companies combine in order to form one new company. In order for TUPE to apply, the identity of the employer must change during the business transfer.
Service Provision Transfers
TUPE also applies to service provision transfers, whereby:
- a contractor takes over activities from a client (known as outsourcing);
- a new contractor takes over activities from another contractor (known as re-tendering); or
- a client takes over activities from a contractor (known as in-sourcing).
When does TUPE apply?
TUPE applies to a ‘relevant transfer.’ A relevant transfer has been defined as ‘a transfer of an economic entity which retains its identity’. In determining whether TUPE applies to a sale of a business, the Court will give consideration to the following factors:
- the type of undertaking being transferred;
- whether any tangible assets are being transferred;
- the value of any intangible assets being transferred;
- whether the majority of the employees are taken on by the new employer;
- whether any customers are transferred;
- the similarity between the activities carried on before and after the transfer;
- the period of suspension of any activities, if any.
For service provision changes, such as outsourcing and insourcing, whether or not TUPE applies will typically depend on whether:
- the activities undertaken pre and post transfer remain fundamentally the same; and
- staff providing the activities are organised into groupings which provide the activities to the client.
The duty to ‘inform and consult’
Both the outgoing and incoming employer have a duty to inform and, if appropriate, consult with any recognised trade unions or elected employee representatives in relation to the transfer and any proposed measures taken in connection with it. Whilst there are no specific time limits, certain information must be provided by the incoming employer long enough before the transfer takes place to enable the outgoing employer to consult with the affected employees’ representative. The outgoing employer should provide the following information to the representatives:
- the fact the transfer is taking place, the date of the transfer and the reason for it;
- the legal, economic and social implications of the transfer;
- any envisaged measures, including any measures anticipated by the incoming employer.
Since 31 July 2014, the amendment regulations allow micro-businesses with fewer than ten employees to inform and consult directly with affected employees in certain circumstances.
A failure to comply with these obligations exposes the parties liable to pay compensation equivalent to up to 13 weeks uncapped pay.
The obligation to provide ‘employee liability information’
No less than 28 days before the transfer takes place, the outgoing employer has a duty to provide the incoming employer with certain information regarding the transferring employees. If this information is not provided then the incoming employer has a remedy under regulations 11 and 12 of TUPE. The following information must be provided:
- the identity and age of the employees who will transfer;
- information contained in the written statement of those employees;
- details of any disciplinary action taken against an employee in the last two years;
- details of grievances raised by an employee in the last two years;
- instances of legal actions taken by employees against the outgoing employer in the last two years; and
- information regarding any collective agreements.
Any failure to comply with this duty by the outgoing employer can result in compensation being paid to the incoming employer. This will be assessed with regard to the losses suffered with a minimum award of £500 per employee.
If an employee is dismissed either before or after a transfer and the sole or principal reason for the dismissal is the transfer, it will be deemed automatically unfair.
These regulations apply to businesses of all sizes and it is important that both the incoming and outgoing employers understand their obligations and duties under TUPE. Whether or not TUPE applies is not always straightforward and specialist advice ought to be taken if you think your business transaction is affected by TUPE.