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:

    1. outsources part of its services; or
    3. brings back 'in house' a previously outsourced service; or
    5. 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:




    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            out 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:

  1. A reduction of headcount
  3. A change of function of employees
  5. 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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