What is TUPE (Transfer of Undertakings)?

TUPE stands for the “Transfer of Undertakings Regulations” and they are designed to protect the rights of employees when their employer changes, when the business is sold or the job is outsourced to a different organisation. These regulations were revised in January 2014. Here we will look at how TUPE affects employers and employees.

When do you need to consider TUPE?

TUPE applies to many business transactions, so it is advisable that all employers understand employment liabilities that could arise from them. Some of the situations covered by TUPE are:

  • When an employer buys or sells a business that is a going concern
  • When an employer outsources a service, for instance to an external contractor; from one contractor to an alternative contractor; or from an external contractor to in house
  • When the business moves to different premises
  • When two businesses merge

 When does TUPE apply?

The TUPE regulations are complex, and can involve case law, though the 2006 and 2014 regulations have to some extent simplified them. TUPE applies when there has been a “relevant transfer”, which is a transfer of an economic activity that keeps its original identity.

This can be difficult to determine, and if you think that any transaction you’re involved in could be covered by TUPE, then you should consider taking specialist legal advice.

What is the effect of TUPE?

When the undertaking is being transferred, employees have their employment transferred to a new employer. When this happens their rights under their existing contract are also transferred (this is covered under employment law).

These rights of the employee include such things as bringing a case of unfair dismissal against their new boss, personal injury claims (even if the injury occurred when employed by the previous employer), unpaid wages, holidays, decimation, and redundancy.

Essentially, the employer changes but the contact of employment remains the same.

Thus it is very important for the new employer to fully understand the potential consequences of taking on the workforce, including potential employment liabilities that might have arisen prior to them becoming the employer, and to ensure that the contract to take over the employees protects them from these liabilities.

The old boss must provide written details of these employee rights and liabilities to the new employer.

Any dismissals that are made because of the transfer are automatically considered to be unfair dismissals except when they are for “economical, technical or organisational” (ETO) purposes. However, defending a dismissal by claiming an ETO is very rarely successful.    

As the new staff might have different terms and conditions of employment from the existing employees, these can be very difficult to harmonise.

How do employers comply with TUPE?

The new employer is obliged to consult with staff and provide representatives with specified information sufficiently in advance to enable consultation.

The employer is also obliged to provide the outgoing employer on any intended changes to employment following the transfer so that he can inform the staff.

The outgoing employer must inform the new employer in writing of all employment liabilities; failure to do so can result in large penalties. The information that must be provided includes their identity and age, any disciplinary action over the last two years, any grievances raised, any legal actions, and information on collective agreements.

Is there any way of avoiding TUPE?

Although there is no way of avoiding TUPE, potential resultant liabilities can be shared between the outgoing and new employer by agreeing a contractual indemnity. If this is something that might apply to your business then you will need specialist legal advice.

If you need guidance or help with dealing with TUPE, find your local QualitySolicitors firm here

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Posted in: Employment law

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