The Transfer of Undertakings (Protection of Employment) Regulations [TUPE] preserves employees’ working terms and conditions when a business or part of a business is transferred to a new employer. Under the provisions of TUPE the incoming business steps in and assumes the rights, responsibilities, liabilities and duties of the outgoing business. The employees of the outgoing business become employed by the incoming business on the same or similar employment terms and conditions. Any dismissal of an employee as a result of the transfer of undertaking is automatically unfair unless the dismissal was due to economic, technical or organisational reasons that required changes in the workforce.
TUPE provides important protection for employees because without TUPE protection employees could easily be dismissed whenever a business or undertaking is transferred to another employer. The TUPE regulations apply to businesses the UK. The head office of a business or its country of origin is irrelevant provided the part of the business transferring ownership (the outgoing business) is in the UK. Although public sector employees have similar protections under a code of practice, TUPE does not generally apply to transfer of undertakings from public sector to private sector.
TUPE applies to two main types of transfers:-
- Business transfers — Whether or not a business transfer has occurred is not always apparent. There is a transfer where the ownership or control of a business or part of a business moves from one enterprise to another. A relevant transfer under TUPE can take various forms, including a merger or an acquisition.
- Service provision transfers — These relate to transfers where services are being outsourced, in sourced or assigned by a current employer to a contractor, but only with regards to employees that can be clearly identified as providing the service being transferred. Services that could be protected by TUPE include such services as office cleaning, security guards and workplace catering.
In determining whether there is a relevant transfer, the following criteria may be considered:
- The type of business
- Whether there is a transfer of tangible assets
- Whether there is a transfer of customers
- Whether the majority of staff were transferred
- Whether there are similarities between the business activities of the incoming and outgoing businesses
- The degree of any interruption to the business
Not every worker is protected by TUPE. Only employees are protected — this includes employees employed immediately before the transfer or those who would have been employed if they had not been unfairly dismissed due to the transfer. Employees working abroad are also protected by TUPE if the business they work for has assets or employees in the UK. Any employee who objects to employment under the incoming employer will not be transferred and the transfer will serve as a termination of their contract.
Duty to inform and consult
TUPE requires employers to inform the trade union or the employee representatives of the impending transfer. The employer must provide information about the transfer and explain why the transfer is happening. The employer must also inform the representatives of the legal, economic and social implications of the transfer for the employees affected and the steps that both the incoming and outgoing employers will take in relation to the affected employees.
Employers with less than 10 employees may inform and consult directly with employees if there are no representatives in place. Employers with more than 10 employees must consult with the employee representatives. If there are no representatives then new ones must be elected through a fair and transparent process.
The role of an incoming employer
The new employer that steps into the shoes of the outgoing employer takes over the employment contracts of the employees, including the rights, duties and liabilities under those contracts. The incoming employer will also assume the rights and duties of any collective agreement in place prior to the transfer. The new employer becomes liable for any failures of the outgoing employer, including any breach of employment contract that occurred prior to the transfer of undertaking.
Although the incoming employer cannot change the terms and conditions of an employee’s contract simply due to the transfer of undertaking, the incoming employer has the power to change those terms and conditions for economic, technical or organisational reasons that required changes in the workforce or workplace. Employers also have the power to dismiss employees for economic, technical or organisational reasons — the normal rules of dismissal still apply.