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29 Jul 2015
Having looked at what you need to do in order to comply with TUPE, it’s likely that you probably have a lot more questions about the Transfer of Undertakings (Protection of Employment) Regulations. If your business, or part of it, is in the process of changing hands, we’ve put together some answers to a few of the questions we’re often asked by employers who are in the same position.
The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) are designed to protect employees if the business (or the part of the business) in which they work changes hands. The main impact of TUPE is that employees transfer into the employment of the acquiring employer, as do most employment rights and liabilities associated with them.
In business transfers, the TUPE regulations apply if a business or part of a business moves to a new owner or merges with another business to make a brand new employer.In service provision transfers, TUPE regulations apply if 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 if a client takes over activities from a contractor (known as in-sourcing).
TUPE only applies to employees, so workers (PAYE workers who don’t meet the legal test for employees, like agency workers) or self-employed contractors don’t transfer under it. Employees have to be employed by the transferor and assigned by them (other than on a temporary basis) to the economic entity or contract being transferred.
Employees are given the right under TUPE to formally object to being transferred. If they do “object” in this way, this counts as a resignation and they leave as of the moment of transfer with no claim on the transferee or incoming contractor. The transferor or outgoing contractor just has to settle with them up to the point of transfer for wages, holiday pay and the like.
Any attempt to vary the transferring employees’ T&Cs of employment will be void where the sole or principal reason for the variation is the transfer itself, and it is not an economic, technical or organisational reason entailing changes in the workforce. The amount of time that has passed since the transfer does not play a part, other than the fact that it’s less likely that a variation of contract will be seen as due to the transfer if it happens after some time has passed.
Employees who transfer from the outgoing employer to the incoming employer are not regarded as dismissed under TUPE, so a transfer does not trigger an entitlement to redundancy pay or pay in lieu of notice unless there is an actual dismissal.If the sole or principal reason for an actual dismissal is the transfer itself, this dismissal will be treated as automatically unfair under TUPE (provided the dismissed employees have the 2 years’ service needed to bring unfair dismissal claims). The only time that this may not apply is when the dismissal is for an economic, technical or organisational reason.
If redundancies were going ahead regardless of the transfer (for example because a big contract had been lost) or they are necessary because something new happens (e.g. a key customer goes out of business around the time of the transfer), then TUPE is unlikely to make the redundancies automatically unfair dismissals, whether they are made by the transferor in the run up to the transfer or by the transferee not long afterwards.
Where a genuine redundancy situation arises as a result of a transfer, there is a need both collectively and individually to consult with affected employees when the new employer is making (or intending to make) 20 or more redundancies within a 90-day period. Where there are fewer than 20 employees being made redundant within a 90-day period, there is still a legal requirement to individually consult but there are no prescribed time limits in which to do so.
The outgoing employer must provide information to the incoming employer not less than 28 days before the transfer. This is called Employee Liability Information and includes;
Employees of the newly-acquired business or activity will transfer automatically from the seller or outgoing contractor to the buyer or incoming contractor. The employee’s terms and conditions of employment and continuity of service transfer over and are preserved and they are also protected from dismissal because of the transfer.
Business people should therefore take the impact of TUPE into account when deciding whether to pay for a business, and if so how much to pay, or how much to bid to win a service contract. TUPE can also affect the timescale for a transfer because of the resulting need for employee due diligence and informing staff.
Despite the fact that we’ve highlighted a few of the questions you’re likely to have, TUPE is such a complex process that you’ve probably got plenty more. We’re more than happy to answer these in more detail, just get in touch with one of our specialist team.