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Managing a TUPE transfer

Managing a TUPE transfer

For someone confronted with a TUPE transfer for the first time it can be a fraught and daunting process. If you have already being involved in a TUPE transfer then you will be aware of the headaches they can cause, regardless of whether you are buying or selling a business or have won or lost a contract.

As well as dealing with the tricky legal requirements which the parties must satisfy there are also many practical considerations and tasks to be dealt with such as preparing for the loss or arrival of staff.

The following article will provide you with some valuable advice on managing TUPE transfers and avoiding many of the pit falls that are present during the process.

Changes to the TUPE Regulations in 2014

The government has introduced new legislation which amends the provisions of the existing TUPE Regulations. These changes will be effective from 31 January 2014. We have listed the changes below and updated the guidance on this page accordingly.

  • Where there is a change of service provider the activities carried out by the new provider must be fundamentally the same as were carried out by the previous provider for there to be a relevant transfer
  • Dismissing an employee or varying their contractual terms for reasons connected to the transfer will be permissible if he sole or principal reason are economic, technical or organisational reasons entailing changes in the workforce
  • The definition of 'changes in the workforce' is extended to include changes to the place of work
  • Employers may make changes to terms and conditions where the contract of employment permits them to
  • Employers may vary terms incorporated from collective agreements when more than one year has passed since the transfer and providing the new terms are no less favourable to the employee
  • Terms and conditions negotiated through collective bargaining after the transfer are not binding if the new employer is not party to the bargaining
  • Micro businesses (less than 10 employees) may inform and consult employees directly where there are no elected employee representatives
  • The new employer may start consulting with affected employees about proposed redundancies before the transfer occurs, subject to the agreements of the transferor

What is a TUPE transfer?

TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006, a piece of legislation stemming from a European directive on the rights of employees when businesses or contracts are transferred from one owner to another.

There are two types of transfer covered by the TUPE Regulations, Transfers of Undertakings and Service Provision Changes:

  • Transfer of Undertakings

    A transfer of an undertaking is where a business (or part of a business) is sold to a new owner who then continues to operate that business in the same or similar manner. If that business employs people then it should be assumed that the TUPE Regulations will apply.

  • Service Provision Changes

    A service provision change takes place when a contract for services is transferred. This can happen when a company:

    • outsources part of its services; or
    • brings back 'in house' a previously outsourced service; or
    • transfers an outsourced service from one provider to another.
    A common example is where a retailer who contracts out the cleaning of their stores to an outside company decides not to renew that contract and give it to another cleaning company.

What effect does TUPE have on a transfer?

There are four main considerations for businesses who are involved in a TUPE transfer:

  • Consultation

    Once a transfer has been agreed the person selling the business or losing the contract (the transferor) must consult with any affected employees about the transfer before it actually takes place.

    The process of consultation is less involved than is required during redundancy processes but the employees must be given all relevant information about the legal impact of the transfer on their employment rights and also any changes the person buying the business or gaining the contract (the transferee) proposes to make after the transfer has been completed.

    It is therefore important that the transferor obtains the relevant information from the transferee, or allows them to speak directly to the employees before the transfer takes place.

    If consultation is not carried out then the affected employees can make a claim to the Employment Tribunal, the penalty for which is a maximum of 13 weeks' pay, which can be awarded against the transferee or against both the transferee and transferor.

    From 31st January 2014 transferees can also commence consultation about proposed redundancies affecting the transferring staff before the transfer takes place, subject to the agreement of the transferor. If the consultation is done properly then this can count towards the minimum consultation period of 45 days required by law where 20 or more staff are proposed to be made redundant.

    Our free TUPE management bundle includes a useful checklist to use when carrying but the consultation process, helping to ensure compliance with your legal obligations.

  • Transfer of employment and protection of continuity of employment

    Any employee assigned to the business or contract which is transferring will have their employment automatically transferred to the transferee and their continuity of employment is protected.

    The transferee or transferor cannot choose which employees transfer. Only the employee can object to transferring, in which case he/she will be deemed to have resigned.

    This means that if the employee had 10 years' continuous service for the transferee then that will be maintained after the transfer. This means that any employee rights that increase with service will be protected such as to notice of dismissal or a redundancy payment.

    It also means that if the employee has more than two years continuous service (one year if their employment began on or before 5th April 2012) then they will be able to make a claim of unfair dismissal in the Employment Tribunal if they are dismissed.

  • Protection of terms and conditions of employment

    When an employee transfers under the TUPE Regulations then his/her conditions of employment are protected. Many transferees would like to harmonise the terms and conditions of the new employees with those of existing staff.

    The regulations do not permit this as a transferring employee's terms and conditions can only be varied for an economic, technical or organisational reason or if the reason for the variation is not connected to the transfer. In any event the employee must consent to the variation.

    The regulations also provide that if a transferring employee's terms and conditions are varied to his/her detriment then they can consider themselves dismissed and, if they have sufficient continuity of employment, claim unfair dismissal.

  • Transfer of liability

    On transfer of the business or contract all rights, obligations and liability the transferor has in respect of the transferring employees passes to the transferee.

    This means that if the employee has any potential claim in the Employment Tribunal or other court against the transferor then the transferee becomes liable for that claim.

    The transferor is therefore required to provide the transferee with certain information for each employee who is transferring. This is:

    • The identity and age of each employee
    • The particulars of employment that must be given to each employee by law
    • Details of any disciplinary or grievance procedures undertaken against or by the employee in the previous two years
    • Details of any court or tribunal case brought by the employee against the transferor in the previous two years, or which the transferor has reasonable grounds to believe that the employee may bring arising out of his/her employment with the transferor
    • Details of any collective agreement which applies to the employee and which is likely to apply after the transfer.

    This information must not be provided to the transferee at least 28 days before the date of transfer.

    If the transferor does not provide the transferee with the information described above then the transferee may bring a claim against the transferor for any losses suffered by the transferor as a result of that failure. The compensation which should be awarded per employee should normally be no less than £500.

    Our free TUPE management pack includes a template form to use to ensure that the correct information is passed on to the transferee.

Can I dismiss an employee who is transferring?

If an employee, whose employment will, or has, transferred under the TUPE Regulations, is dismissed then that dismissal will be automatically unfair if the reason for the dismissal was related to the transfer and was not for an economic, technical or organisational reason entailing changes in the workforce, although the employee must have sufficient continuity of employment to be able to claim.

Transferors and transferees must therefore tread very carefully when considering dismissal of an employee who will or has transferred.

Therefore it is very important to be clear what the reason for the dismissal is, to determine whether or not the reason for dismissal is related to the transfer and, if it is, whether or not it is for a economic, technical or organisational reason. Further, you must be able to show that the reason entailed changes in the workforce. Valid changes in the workforce are:

  • A reduction of headcount
  • A change of function of employees
  • A change of place of work

As, with any dismissal, you must also ensure that you follow a fair and proper procedure and that dismissal is a reasonable course of action given the facts of the situation.

I don't want to lose good staff when the business / contract transfers, what can I do?

This is a common problem for many companies who have lost a contract to which specific staff are assigned. As mentioned above, only the employee can object to his/her employment transferring under the regulations.

However, many employees may prefer to remain in employment with a business they know and trust. Therefore, if you have alternative work available there is nothing stopping you offering this to those employees who are to transfer. If they accept the work then they will be in effect objecting to the transfer and on the date it takes place their employment in that role would end and they would commence their new role with you.

Their continuity of employment would also be protected as they would not cease employment with your company. You should ensure you update their contracts of employment accordingly.

Further advice and support

The above serves as an overview of the TUPE Regulations and how they impact businesses.

There are various exceptions to the Regulations but it is always wise to assume that the rules apply until you have had professional advice.

EL Direct

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