Transfer of Undertakings (Protection of Employment) (TUPE)
Transfer of Undertakings (Protection of Employment) 2006 (TUPE) involves the transfer of a business or service to another entity.
A TUPE transfer occurs when:
An organisation, or part of it, is transferred from one employer to another;
A service is transferred to a new provider.
The purpose of TUPE is to protect employees if the business in which they are employed changes hands. Its effect is to move employees and any liabilities associated with them from the old employer to the new employer by operation of law.
Employers must comply with TUPE in order to provide information to the new employer ahead of the transfer. It also requires that both the existing and new employer inform and consult with employees about the transfer of the business or service. In short, there are several important steps the employer needs to take to ensure they complete the process compliantly, and avoid any Employment Tribunal claims.
Restructuring and Exits:
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If you’re going through the process, it’s helpful to keep the following basic principles of TUPE front of mind:
- All the rights, obligations and liabilities in relation to the transferring employees – including the terms of their contracts, but also personal injury claims, unpaid wages or existing Tribunal claims – automatically transfer to the incoming employer.
- Employees should not be disadvantaged by the transfer.
However, there is much more to consider to ensure that you stay within the law. You should seek professional advice to avoid claims being brought against your business.
Here at Loch Associates Group, we are an experienced team of solicitors who are specialists in employment law and know TUPE in and out. We can make sure you efficiently comply with your TUPE obligations and avoid disputes.
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What do you need to know about TUPE?
In order to ensure you legally comply with TUPE to protect your business from claims, you need to know:
- When TUPE will apply;
- What TUPE means legally;
- What you need to do to comply with TUPE;
- The penalties for not complying with TUPE.
When does TUPE apply?
Simply put, TUPE applies whenever there is a ‘relevant transfer’, which means the ‘transfer of an economic entity which retains its identity’. In determining whether or not this happened, the following factors are taken into account:
- The type of undertaking being transferred;
- Whether any tangible assets (buildings, moveable property etc) are transferred;
- The extent of the value of any intangible assets;
- Whether the majority of the employees are taken on by the new employer;
- If any customers are transferred;
- How similar the activities are after the transfer compared to before;
- The time for which any activities were suspended.
However it is important to note that TUPE also applies where a contract changes from one contract to another - for example, where a cleaning contract ends and is taken over by a new cleaning company. The question of exactly when TUPE does and does not apply can be very complex. If you think a transaction you are involved in might be covered by TUPE, you should always take specialist legal advice. Contact us today for a call back to discuss your options.
What does TUPE mean legally?
If TUPE applies, employees who were assigned to the existing employer will automatically transfer to the new employer with their terms and conditions protected. TUPE states that "all the transferor's rights, powers, duties and liabilities under or in connection with the transferring employees' contracts of employment are transferred to the transferee.”
This all-embracing concept encompasses rights under the contract of employment, statutory rights, and continuity of employment. It also includes employees' rights to bring a claim against their employer for unfair dismissal, redundancy or discrimination, unpaid wages, bonuses or holidays, and personal injury claims.
Therefore, it is vital that the new employer knows all about the employees they might inherit if they are planning to take over a contract, or buy a business. Crucially, they should make sure that the agreement to take over the contract or to buy the business protects them from having to be liable for the employment liabilities which arose before they became the employer.
Can an employee refuse to TUPE transfer?
Employees can refuse to transfer, but can lose valuable legal rights if they do so and their employment will automatically end at the date of the transfer.
Any TUPE connected dismissals will be automatically unfair where the sole or principal reason for the dismissal is the transfer. Dismissals may not be automatically unfair where the dismissal is for an economical, technical or organisational reason (an "ETO" reason).
Legally, what do you need to do to comply with TUPE?
There are two main considerations in order to comply with TUPE:
Inform and consult with staff.
The outgoing employer must provide employee liability information to the incoming employer.
Consultation with affected employees must take place in ‘good time’ ahead of transfer. Ideally, this means it should begin as soon as the decision has been made that the transfer is going ahead. Depending on the size of business, it may be necessary to elect employee representatives to consult with. If there are fewer than 10 employees, it is classified as a micro business, and the requirement to elect representatives does not apply.
To allow for consultation between the outgoing employer and representatives, certain specified information around any changes following the transfer must be provided to the representatives long enough before the transfer.
If there is a failure to inform and consult, a complaint can be made to the Employment Tribunal. If successful, the Tribunal can award whatever compensation it considers just and equitable with regard to the seriousness of the employer's failure, equalling up to a maximum of 13 weeks' pay per affected employee.
Information and consultation failures can result in joint and several liability between the outgoing and incoming employers. However, the contract governing the transfer can cater for apportionment of liability here. A failure to comply with TUPE could therefore expose employers to claims potentially large enough to undermine the entire transaction.
As experienced providers of clear, easy-to-understand TUPE legal advice, our team will be more than happy to discuss your requirements with you. Speak to a solicitor by clicking here.