The Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended in 2014) are more commonly known as the TUPE Regulations. The purpose of TUPE is to protect employees if the business in which they are employed changes hands. The effect of TUPE is to transfer all employees any rights and liabilities associated with them from the old employer to the new employer. Effectively, the new employer steps into the shoes of the old employer and it is as though the employee’s contract of employment was always made with the new employer. Their continuity of employment is preserved and they will continue on their current terms and conditions with their new employer.
When will TUPE apply?
TUPE can apply in many different cases. Set out below are some examples of when TUPE may apply:
- When employers sell or buy all or part of a business as a going concern
- When an employer outsources a service or makes a service provision change
- Where an employer grants or takes over a lease of the license of premises and operates the same business from those premises.
- Where a client takes the services the employer has previously supplied back in-house.
There are also complex rules about whether TUPE applies in an insolvency situation.
What is transferred under TUPE?
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 catch-all concept includes 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, etc.
Employees have the legal right to transfer to the new employer on their existing terms and conditions of employment and with all their existing employment rights and liabilities intact (although there are special provisions dealing with old age pensions under occupational pension schemes).
Employees who object to the transfer do not automatically transfer to the new employer. Rather, their contract will terminate on the date of the transfer.
Obligation to inform and consult
Under TUPE there is an obligation on the employer to consult, long enough before the transfer, with either the Trade Union or if there is not one, then elected staff representatives. TUPE sets out the requirements for (a) how elections of staff should take place and (b) consultation with those staff elected and/or a Trade Union.
Failure to carry out elections and consultation in accordance with the requirements stipulated under TUPE would likely give rise to a claim by any or all affected employees for a punitive award in the Employment Tribunal of up to 13 weeks pay. As part of the consultation process, the employer is required to give specific information to the Trade Union and/or elected staff representatives which in essence relates to the transfer and its impact on staff. The precise information to be given is clearly set out in the TUPE regulations.
Micro-businesses with fewer than 10 employees and no appropriate representatives in place can consult directly with the affected employees.
Protection from Dismissal
Any dismissals will be automatically unfair, where the sole or principal reason for the dismissal is the transfer. This is also the case where the sole or principal reason for the dismissal is the transfer unless it is for an economical, technical or organizational reason (an “ETO” reason) entailing changes in the workforce. However, even if the employer can rely upon an ETO defense and the dismissal is not automatically unfair, it may still be unfair for other reasons (e.g. unfair selection).
Variation of terms and conditions of employment under TUPE
As the new employer is required to take on the employees on their existing terms and conditions of employment, it is prohibited from making any changes to the terms and conditions of employment of the transferred employees if the sole or principal reason for the variation is the transfer. This is also the case where the sole or principal reason is the transfer unless there is an ETO reason for the change and both the employer and employee agree that variation or the terms of the contract permit the employer to make such a variation. An ETO reason might include a change in the number of the workforce e.g. redundancy. In some insolvency situations permitted variations are allowed.