What is TUPE?
TUPE is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations.
The purpose of TUPE is to protect employees if the business in which they are employed changes hands. Its effect is to transfer employees and any liabilities associated with them from the old employer to the new employer automatically by operation of law. TUPE is a significant and often tricky piece of legislation adopted by the UK in order to implement the European Acquired Rights Directive.
TUPE is a significant and often tricky piece of legislation adopted by the UK in order to implement the European Acquired Rights Directive.
TUPE for individuals
Employees have the legal right to transfer to the new employer on their existing terms and conditions of employment, with all their existing employment rights and liabilities intact (although there are special provisions dealing with occupational pension schemes). Effectively, the new employer steps into the shoes of the old employer as though their contract of employment was always made with the new employer.
As an employee, the existing terms and conditions of your employment cannot be changed if the basis of that change relates to the transfer. Dismissals in connection with the transfer are, in most cases, unfair.
TUPE for businesses
If employers are planning to take over a contract or buy a business, it is essential that they know all about the employees they might inherit and identify any employment liabilities which they will inherit.
The old employer is required to provide the new employer with written details of all employee rights and liabilities that will transfer.For example, if a company has failed to pay its employees’ wages for the past few weeks, and a transfer occurs, under TUPE the new business will inherit the liability to the employees for the unpaid wages.
Any dismissals will be automatically unfair, where the sole or principal reason for the dismissal is the transfer or connected to the transfer. The only exception is an “ETO” reason, relating to economical, technical or organisational reasons that would require a change in the workforce. This ETO defence can be difficult to rely on and, even if an employer can do so, a dismissal may still be unfair for other reasons; such as a failure to consult properly in a redundancy situation.
Where an independent trade union has been recognised by the outgoing employer in respect of transferring employees, recognition will also transfer to the incoming employer.
What does TUPE mean legally?
Employees can refuse to transfer but, depending on the circumstances of the case, they can lose valuable legal rights if they do. By opting out, they could lose their rights under the contract of employment, statutory rights and continuity of employment, as well as their rights to bring a claim against their employer for unfair dismissal or redundancy.
What does TUPE Insolvency mean?
TUPE can be relaxed to protect incoming employers where the exiting employer is insolvent. The liability for redundancy, notice and some other payments to employees will then not transfer to the incoming employer. Also, if it is agreed with the trade union or employee representatives, terms and conditions of employment can be changed (without an ETO), so long as the change is designed to save a failing business. The idea is that companies will be more inclined to “rescue” insolvent businesses, thereby safeguarding employment.
Lessening the effects of TUPE
Although there’s nothing that anyone can do to prevent TUPE applying, and employment liabilities will always transfer to the incoming employer, there are steps which can be taken to divide up TUPE liabilities between the outgoing and incoming employers. This should be done by means of contractual indemnities and should always involve specialist legal advice.
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