TUPE: A Short Overview for Small Businesses
What is TUPE?
The immediate answer that springs to mind is ‘a nightmare’, but in fact ‘TUPE’ stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. The regulations are intended to safeguard employees’ rights on the transfer of a business.
TUPE introduced three basic concepts into UK employment law:
- The automatic transfer principle whereby employees transfer to the ‘new’ business who inherits all rights, liabilities and obligations in relation to them.
- Protection against dismissal in connection with a TUPE transfer.
- The obligation to inform and consult with representatives of affected employees
When does TUPE apply?
TUPE applies to organisations of all sizes where a business or part of a business (e.g. a particular function) moves to a new owner or merges with another business to make a brand new employer.
TUPE also applies where there is a service provision change, for example:
- a contractor takes over activities from a business (known as outsourcing);
- a new contractor takes over activities from another contractor (known as re-tendering);
- a business takes over activities from a contractor bringing the work back in-house (known as in-sourcing).
Obligation to inform and consult
Both the transferor (outgoing employer) and the transferee (incoming employer) must inform and if appropriate consult with recognised trade unions or elected employee representatives (if there is no recognised union) in relation to any of their own employees who may be affected by the transfer or any measures taken in connection with it. Employers with fewer than 10 employees may consult with the employees directly. Certain information must be provided under the regulations. Although there will be a duty to inform on every TUPE transfer, the duty to consult only arises where an employer envisages taking measures in respect of affected employees.
What happens to the employees?
The contracts of employment of those employees employed by the transferor and “assigned to the organised grouping of resources or employees that is subject to the relevant transfer” automatically transfer to the transferee on their existing terms. Employees who object to the transfer do not become employees of the transferee, their contracts of employment terminate by operation of law and there is no dismissal.
What happens to the employees’ terms and conditions of employment?
The transferee takes on the transferring employees on their existing terms of employment, and can only make changes to their terms in limited circumstances.
Changes to terms of employment will be void if the sole or principal reason for the change is the transfer itself, unless either:
- The reason for the variation is an economic, technical or organisational reason entailing changes in the workforce (“ETO reason”).
- The reason for the variation is the transfer, but the terms of the contract permit the employer to make such a variation.
Terminating employment
TUPE provides enhanced protection against dismissal over and above general unfair dismissal law for employees with 2 years’ service. Dismissals will be automatically unfair if the sole or principal reason for the dismissal is the transfer itself, unless there is an ETO reason whereby the dismissal would be subject to the usual principles of fairness. Resignations in response to a repudiatory breach of contract or to substantial changes in working conditions to the employee’s material detriment are treated as deemed dismissals to which the enhanced protection against dismissal applies.
Penalties
A failure to comply with the obligation to inform and consult exposes the parties liable to pay compensation equivalent to up to 13 weeks’ uncapped pay per affected employee. This is in addition to any potential compensation where an employee is found to have been unfairly dismissed or has other employment related claims.
For more detailed guidance on TUPE and your obligations, please contact Lianne Payne, Head of Employment Law
E: Lianne@askewslegal.co
T: 024 76 231000
