TUPE or not TUPE? That really is the question... TUPE is an expression that puts fear in the hearts of many employers and employees.
TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations. The Regulations generally apply to automatically transfer the contracts of employment of employees working in a business, ownership of which is changing hands from one employer to another.
The Regulations can often be complex and challenging to navigate. If you are going through or anticipate going through a TUPE process or are unsure as to whether the Regulations apply to your situation, it’s worth seeking detailed advice from our Employment and HR Team.
What is TUPE?
TUPE is legislation that aims to ensure that employees are not adversely affected by a change in ownership of the business in which they work. It applies, for example, if a company sells its business to another company.
However, TUPE does not apply when ownership of the shares in a company are simply sold by the existing shareholder to a new shareholder, as in that case there is no change in the ownership of the company’s business – it is ownership of the company which is changing hands in that scenario, not ownership of the business which is owned by the company and so TUPE does not apply
TUPE also can apply in outsourcing situations. For example, it can apply when a business outsources something, such as the cleaning of its premises, to an external contractor and also can apply if there is subsequently a change of cleaning contractor or if the cleaning services are later taken back in house.
TUPE applies to a “relevant transfer”, which means either that an employer:
- buys or sells all or part of a business;
- outsources a function or takes over an outsourced function or takes an outsourced function back in house.
Where there is a relevant transfer, the contracts of employment of those employees employed by the outgoing employer and working mainly in the business which is transferring, will automatically transfer to the new employer and will transfer on the employees’ existing terms of employment and with their length of service preserved. This basically means that the new employer will step into the previous employer’s shoes and it will be as if the new employer had always been the employees’ employer, from the date on which they became employees of the old employer.
It’s also important to bear in mind that this means that all of the outgoing employer’s rights, powers, duties and liabilities in connection with the employees’ contracts will pass to the new employer and any acts or omissions done before the transfer are treated as having been done by the new employer.
Obligations on the outgoing employer
Obligation to provide “employee liability information”
The outgoing employer is under a duty to provide the new employer with certain information regarding those employees whose employment will be transferring. This is known as “employee liability information”.
The following information must be provided:
- the identify and age of the employees who will transfer;
- the information which has to be contained by law in the written terms and conditions of employment of those employees;
- details of any disciplinary action taken against any of those employees in the last two years;
- details of any grievances raised by any of those employee in the last two years;
- details of any legal action taken by any of those employees against the outgoing employer in the last two years and details of any anticipated legal action by any of the transferring employees;
- information regarding any collective agreements;
- details of any agency workers working for the outgoing employer.
The information must be provided in writing and must be provided to the new employer at least 28 days before the date of transfer.
Obligation to inform and consult
The outgoing employer has an obligation to inform (and possibly consult) representatives of those of its employees who may be affected by the transfer.
The required information must be provided to employee representatives who represent the affected employees. If the employer recognises a trade union in respect of the employees, then the information must be provided to representatives from that union. Where there is no recognised union, then the outgoing employer must invite the affected employees to elect representatives.
The information must be given in writing and must include:
- the fact that the transfer is going to take place, including why and the date or proposed date of the transfer;
- any social, legal or economic implications for the affected employees;
- any measures that the outgoing or incoming employer envisage taking in respect of the affected employees;
- the number of agency workers employed and the type of work they are doing.
There is a duty to inform employees on every TUPE transfer. However, the duty to consult as well as inform only arises where an employer envisages taking measures in respect of affected employees.
Examples of measures include change of location, change of pay date, change of benefits etc. If all the outgoing employer envisages doing is transferring the business to the new employer, then generally this will not be viewed as a measure and so will not give rise to an obligation to consult as well as inform. The outgoing employer does not have an obligation to consult in respect of any measures which the new employer envisages taking after the transfer.
Failure to comply
If the employee liability information is not provided to the incoming employer at least 28 days before the relevant transfer, then the incoming employer can apply to the employment tribunal for compensation, payable by the outgoing employer. The compensation award to the incoming employer is calculated on the basis of a minimum award of £500 in respect of each employee whose information was incorrect or not provided at all.
If an employer fails to comply with the obligation to inform and consult, then the employment tribunal can award each affected employee compensation equivalent to up to 13 weeks’ uncapped pay for the employee.
This means that the financial implications for an outgoing employer who fails to comply with the TUPE regulations can be significant.
Stay tuned next month for TUPE or not TUPE – Act 2, the obligations on the incoming employer.
For more information on TUPE, contact the Employment Law and HR team here.