As business needs change and resources are restructured in the ever-evolving global economy, it is common to see employees changing from one employer to another. The creation of franchises, merging of competitors, acquisition of other companies in a supply chain, and movement of companies within a group can all give rise to a ‘relevant transfer.’ The effect of these regulations is to ensure a smooth transition of individuals and their associated contracts of employment.
The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) is a complex area of law designed to protect employees’ rights and to preserve the terms and conditions set out in an employee’s contract of employment when the organisation they work for transfers to a new employer.
These regulations protect an employee from dismissal if the reason for the dismissal is the transfer itself. It also creates an obligation to inform and consult the workforce whenever a transfer is proposed. In addition, a framework is provided which allows for the protection of existing terms and conditions at the date of the transfer.
When does TUPE apply?
In order for this legislation to apply, there must be a relevant transfer which means “the transfer of an economic entity which retains its identity”. The courts would take into account, among other considerations, the type of business being transferred, whether any tangible assets (buildings, vehicles or other moveable property) are being transferred and whether the majority of employees are taken on by the new employer. Whether or not TUPE applies is not straightforward, so if you are in any doubt as to whether TUPE applies to your employer’s business, you should ensure that you take specialist legal advice.
Furthermore, the employee must be assigned to the undertaking being transferred so must work within the transferred entity. It is important to note that there are many complex organisational structures which businesses operate and this can lead to difficulty in ascertaining which business an employee actually works within. For instance, a number of small subsidiary companies may share payroll or HR staff who routinely undertake work for each of the businesses. Consideration of the employee’s terms and conditions, the time spent in that part of the undertaking, the amount of value they contribute to that particular business division and the way in which the employee is paid will assist in answering this question.
How are you protected?
The effect of TUPE is that, if the conditions for a relevant transfer are satisfied, the new employer steps into the shoes of the transferring business, thereby taking on any duties, rights, powers and liabilities associated with the employees transferred. Any variations in a contract of employment are void if the transfer is the sole reason for the variation. However, it is possible for the employer and employee to agree upon a change in the terms of employment if it is for an economic, technical or operational reason (ETO) or if the terms of the transferring employee’s contract permit variations.
With regards to dismissal, any dismissal whether before or after the date of the transfer, is automatically treated as unfair if the principal reason for the dismissal was the transfer itself. The exception to this is where there is an Economic, Technical or Operational (ETO) reason which has led to changes in the workplace being required. The ETO defence may only be relied upon if the employer is able to establish that it was a reason which related to the production processes, profitability of the business or management or organisational structure. A dismissal for an ETO reason may still be unfair even if not connected with the transfer.
Finally, ‘all affected employees’ have a right to be informed or consulted when a transfer is proposed. The employer must give information about the date of the transfer, the reason for the transfer, any proposed measures and the legal, social and economic implications