TUPE (Transfer of Undertakings)

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) are intended to protect employees when their employer’s business changes hands.  It protects them against dismissal and any changes to their contractual terms.

When does TUPE apply?

TUPE applies to a ‘relevant transfer’ which means:

  • a transfer of a business, undertaking, or part of a business or undertaking, where there is a transfer of an economic entity that retains its identity (a business transfer); or
  • a client engaging a contractor to do work on its behalf, reassigning such a contract to another provider or bringing the work back in house (a service provision change).

Automatic transfer principle

Where there is a relevant transfer, all employees assigned to the part which is transferring have their contracts of employment transferred to the incoming employer on their existing terms.  Similarly, all the outgoing employer’s rights, powers, duties and liabilities under or in connection with the transferring employees’ contracts pass to the incoming employer.  Any acts, or failures to act by the incoming employer are then treated as being done by the incoming employer.

Employees who object to the transfer do not become employees of the incoming employer and their contract terminate by operation of law on the transfer date.

Terms of employment

Transferring employees remain employed on their existing terms of employment.  Changes to the terms will be void if made by reason of the transfer or for a reason connected with it, unless it can be shown there was justifying reason.  This is a complex area of law and advice should be sought.

Protection against dismissal

Any dismissal of an employee with at least the qualifying period of service will be automatically unfair where the sole or principal reason for the dismissal is either the transfer itself or a reason connected with the transfer that is not an Economic, Technical or Organisational reason entailing changes in the workforce.

Where employees resign due to substantial changes in their working conditions which amount to a repudiatory breach of contract, they are deemed to have been dismissed to which the enhanced protection for unfair dismissal applies.

Obligation to inform and consult

Both the outgoing employer and the incoming employer must inform and (if appropriate) consult with recognised trade unions or elected employee representatives in relation to their own employees who may be affected by the transfer or any measures in connection with it.  There will be a duty to inform the employees on every transfer, but there will only be an obligation to consult with them where measures are envisaged.  Measures are any positive acts or omissions by the employer which will affect the employees’ employment.

A failure to comply with these obligations exposes the parties to compensation equivalent to up to 13 weeks’ uncapped pay. The outgoing and incoming employer may, in certain circumstances, be held to be jointly and severally liable for this compensation

Obligation to provide employee liability information

The outgoing employer is required to provide the incoming employer with certain information about the transferring employees not less than 28 days before the relevant transfer takes place.

If the outgoing employer fails to provide this information, then the incoming employer can bring a claim in the employment tribunal. The tribunal can order that the outgoing employer pays the incoming employer such amount as the tribunal considers just and equitable, having regard to the incoming employer’s loss and any contractually agreed terms between the parties, subject to a minimum of £500 for each employee in respect of whom the information was not provided.

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