Transfer of Undertakings – TUPE

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The Transfer of Undertaking (Protection of Employment) Regulations 1996- (TUPE) – creates rights for employees when the business they work in is bought or sold.

Generally, employment contracts will transfer over from the buyer to the seller on the same terms, by operation of law.

However:

• If contract terms are varied as a result of the transfer, the variation will be void
• If employees are dismissed because of the transfer, the dismissal will be automatically unfair

When does TUPE apply?

TUPE applies when there is a transfer of a business (an “undertaking”), and as a result of the transfer the business retains its identity.

Example: A beauty parlour is bought and continues as a beauty parlour. TUPE will apply.

TUPE also applies in contracting out situations.  This is where a business:

• Uses a contractor to provide some kind of service (e.g. an office canteen)
• Then reassigns this service to another provider, or takes control “in house”

When does TUPE not apply?

TUPE does not apply if a business loses its identity as a result of the transfer.

Example: A beauty parlour is bought and converted into a warehouse. TUPE will not apply.

TUPE does not apply to a share sale.  So if a new purchaser buys the shares of a business, TUPE does not apply because there has been no transfer of the business itself.

Obligations to inform and consult

The seller has an obligation to the buyer to inform them about the:

• Employees that will be transferred
• Employees that would have been transferred if they were not already unfairly dismissed

Information to be provided includes:

• Employee ages
• Employee disciplinary and grievance history (in the last two years)
• Any tribunal claims that have been raised

Failure to do so can result in the buyer claiming up to 13 weeks’ pay for each employee they were not informed about.

What the buyer must tell employees

The buyer must also inform employees in good time before the transfer that the transfer will be going ahead, and of:

• The transfer date
• The reasons for the transfer
• The economic implications for employees
• Any measures that they will make preparing for the transfer
• Any measures the buyer will make preparing for the transfer (it is up to the buyer to provide this information to the seller first)

There is also an obligation on the seller to consult with affected employees and their appropriate representatives up to the transfer.

Dealing with employees – the facts

Employees must have the opportunity to appoint appropriate representatives to receive this information.  If there are no appropriate representatives, the employer is required to invite the affected employees to elect appropriate representatives.

What is penalty for failing to inform and consult?

Failing to inform and consult can result in a “protective award” from an Employment Tribunal. Remember:

• The employee’s representative must apply for this award
• Awards can be for up to 13 weeks’ pay per affected employee
• Applications should be made within three months of the failure to inform and consult