What is TUPE and how is it relevant?
Transfer Of Undertakings (Protection Of Employment) Regulations (TUPE)
TUPE applies to organizations of all sizes and protects employees’ rights when the organization or service they work for transfers to a new employer. The TUPE regulations can apply when a company is sold, activities are outsourced, brought in-house, transferred or a contract for services is moved from one provider to another. An employee must have two years of continuous service to bring a claim for unfair dismissal due to TUPE. During stressful times like these many businesses that have not thrived are being sold and thus TUPE compliance is more important than ever.
TUPE applies to employees of businesses in the UK. There is unlikely to be a change after we Brexit. The business could have its head office in another country, but the part of the business that’s transferring ownership must be in the UK.
When TUPE applies:
• the employees’ jobs usually transfer over to the new company – exceptions could be if they’re made redundant or in some cases where the business is insolvent or the new entity provides different services.
• their employment terms and conditions transfer
• continuity of employment is maintained
When does TUPE apply:
• Business transfers: The TUPE regulations apply if a business or part of a business moves to a new owner or merges with another business to make a brand-new employer. TUPE business transfers may occur even where the transfer is within the same group of companies. It is possible for a transferring business (or part of it) to have just one employee. If this is a labor-intensive business, there can be a TUPE business transfer. However, TUPE will not apply if there are just shares, limited assets, and/or equipment transferring to a different owner.
• Service Provision changes: The TUPE regulations apply in the following situations:
(i) activities carried out by a contractor on behalf of the client (known as outsourcing).
(ii) activities carried out by a new contractor from another contractor (known as retendering).
(iii) activities carried out when the client takes over from the contractor (known as in-sourcing).
These types of transfers are called service provision changes and can involve organizations, charities, the public sector, and academics as well as the public to private outsourcing of public services.
The TUPE regulation also sets other conditions for the recognition of the transfer of a business to the operations of change of service providers:
• the activity must not concern a single or a short-term event (for example, the organization of a conference or a one-off security service around a sporting or artistic event).
• the activity should not primarily concern the supply of goods (eg a restaurant changing food suppliers).
• it may not apply to those working temporarily in the group.
Only the employees who can be clearly identified as providing the service being transferred are protected.
A courier collects and delivers for a business, but the packages are picked up or delivered by a number of different couriers on an ad hoc basis. The courier isn’t protected under TUPE.
A cleaner is employed by a company that decides to use an outside cleaning company instead. They’re likely to be protected under TUPE.
The precise steps involved in a TUPE transfer will vary according to whether there is a normal business transfer or a service provision change and depending upon whether the employer is the incoming or outgoing employer. However, the key elements are:
(a) Identifying: determine which employees are affected.
(b) Information: in good time prior to the transfer, the outgoing employer informs and consults with all affected employees, communicating the fact that the transfer is happening and how they can object.
(c) Consultation with staff: the outgoing employer will consult with all affected employees well in advance of the transfer. This may involve a trade union, or the election of employee representatives’, who may then need to be trained before the consultation requirements can start. Businesses with fewer than ten employees must inform and consult directly with affected employees. The incoming employer must remember to inform existing employees as well.
(d) Employee liability (due diligence) information: at least 28 days before the sale or transfer of contract, the outgoing employer must make the incoming employer aware of key employee or due diligence information.
(e) Measures: the incoming employer will inform and consult on any planned measures after the transfer considering any implications of the employees’ terms and conditions of employment, including pensions.
Consulting and informing in larger organizations
Before a transfer of ownership happens, employers must tell the trade union or employee representatives:
• that the transfer is happening, when it’s happening, and why
• how the transfer will affect them
• whether there’ll be any reorganization
• how many agency workers they’re using and what types of work they are doing
Employers can be penalized if they don’t do this.
Employers must consult employee representatives about anything to do with the transfer that would affect the employees (eg reorganization). They should try to gain agreement about these changes.
Trade union representatives
If there’s a trade union in the workplace, the employer must inform and consult with the representatives from the union.
If there’s no trade union the employer must inform and consult other employee representatives. There might already be representatives, or new ones can be specially elected.
If an election is needed
The employer should:
• make sure the election is fair
• decide how many people are needed to represent the interests of everyone affected
• decide if affected employees should be represented as one workforce or in groups
• decide how long the representatives need to be in place
They should also make sure that:
• the employee representatives are people who are affected by the transfer
• no affected employee is unreasonably excluded from standing for election
• all affected employees at the time of the election are entitled to vote
• employees can vote for as many candidates as there are positions to be filled
• if possible, voting is done in secret
• votes are accurately counted
If you’re an employee representative you have the same rights as a trade union representative to help you carry out your role.
Employers with less than 10 employees can inform and consult directly with employees if there aren’t any appropriate representatives.
The TUPE Regulations ensure that an employee’s contract of employment does not terminate because of the transfer. Instead, the contract will be transferred from the old employer to the new one on the same terms and conditions of employment that they enjoyed previously with the transferor. Where there is a transfer to which TUPE applies, the transferee and transferor have obligations to consult with all affected staff. Transferors are obliged to give transferees written information about any person employed by the transferor who is assigned to the organized grouping of employees that is the subject of a relevant transfer’ and all the associated rights and obligations towards them. This is referred to as employee liability information.
Under the TUPE regulations, any change to contractual terms that are put into practice following the transfer can in some instances be automatically void, despite whether the employee has agreed to this variation or not.
Information about employees during transfers
An employer must provide a new employer with information about employees. This normally includes:
• main details of employment
• disciplinary action taken against employees in the last 2 years
• grievances raised by employees in the last 2 years
• legal action taken by employees against the employer in the last 2 years
• potential legal action the employer thinks employees might raise
This information has to be provided at least 4 weeks before the transfer and should help the new employer understand employees’ rights and their duties.
If an employee doesn’t want to work for the new employer
Employees can refuse to work for a new employer. This is the same as resigning – they won’t normally be able to claim unfair dismissal or redundancy pay.
Notice isn’t required. The employee simply tells the employer, or the new employer, before the transfer happens. Employment then ends at the time of transfer.
If an employee’s working conditions are significantly worse because of the transfer, they can object to the transfer, or resign and claim unfair dismissal.
Changing an employment contract
TUPE regulations mean employees shouldn’t lose their existing employment rights.
Before the transfer
If the employer knows an employee is transferring to another company, they can’t normally change the employee’s terms and conditions to make them the same as those of the new company – even if the employee agrees to the change.
After the transfer
The new employer can’t change an employee’s terms and conditions if the reason is the transfer itself.
The new employer can change an employee’s terms and conditions if the reason is an ‘economic, technical or organizational reason’ (ETO) involving changes in the workforce or workplace, such as a result of redundancies or a move from a managerial to a non-managerial position. The employee needs to agree to this change.
‘Economic’ reasons are to do with how the company is performing.
‘Technical’ reasons are to do with the equipment or processes the company uses.
‘Organisational’ reasons are to do with the structure of the company.
Employers can make changes if the employee’s existing contract allows for those changes. But the transfer itself can’t be the reason for the change.
Employers can improve employees’ terms and conditions if they agree. For example, they might want to increase the amount of holiday so that it’s the same for everyone.
An employer can’t normally impose changes – they have to be agreed upon by the employees or their representatives.
Employers can dismiss employees for an ETO reason involving changes in the workforce, eg redundancies. The normal rules around fair dismissals will still apply.
Collective agreements in place before the date of the transfer will apply.
Collective agreements from the date of transfer won’t apply if the new employer hasn’t taken part in the process.
Employers can renegotiate terms and conditions in collective agreements after 1 year if the change isn’t less favorable to the employee.
Employees’ company pension rights earned up to the time of a transfer are protected, but the new employer doesn’t have to continue an identical pension.
If the employer is insolvent and the business is being transferred or taken over by another company, the protection employees get is different from in a normal transfer.
The employees are unlikely to be protected under TUPE if the business is closing down. However, TUPE regulations will normally apply if it’s being rescued and taken over or transferred.
If employees are owed money
Employees have rights if their employer is insolvent and owes them money. Employees can claim for this whether they’re protected under TUPE or not.
In a TUPE-protected transfer, the new employer must pay any amount left over after employees have been paid from the government’s National Insurance Fund.
Employees working abroad
Employees of a UK business who are based outside the UK could still be protected by TUPE.
In business transfers, if a business has an ‘undertaking’ in the UK (eg. building, assets, fixtures, and fittings, employees) but an employee spends most of the working week outside the UK, it’s likely they’re protected.
In-service provision changes, there must be an organized group of employees in England, Scotland, or Wales to qualify for TUPE protection.
A team is doing website maintenance under a contract that’s coming to an end and someone else is taking it over:
If the contract is performed in the UK, but one team member works from home in a country other than England, Scotland, and Wales, it’s likely they’re protected.
If the whole team works from home in a country other than England, Scotland, or Wales, the members wouldn’t be protected as there’s no organized group of employees in one of those countries.
Changes to employees’ terms and conditions
Employees’ pay can be reduced or their other terms and conditions changed after the transfer. This is allowed if it will prevent job losses.
Any changes must be agreed upon with employee or trade union representatives.
Any agreement can’t break statutory employment rights. For example, employees can’t be paid below the National Minimum Wage.
After the transfer
When the transfer is complete, employees should make sure they get an up-to-date written statement of employment, giving the name of the new employer and saying that their terms and conditions haven’t changed.
Employees might get a P45 if their tax records are being updated.
Any business planning to undertake a TUPE transfer process needs to give serious thought as to the TUPE process in order to minimize the risk of liability on their business. Please leave us a 5 star rating if you have found this information useful. For expert assistance with this process, contact firstname.lastname@example.org or WhatsApp us on 07583452230. Visit www.bizlawuk.co.uk to find out more about how we can help you with our other services.