What is TUPE?

In the event of company takeovers or mergers, the law protects employees under a set of regulations known as TUPE.

The term TUPE is an acronym that comes from the Transfer of Undertakings (Protection of Employment) Regulations 2006. The regulations apply when the whole or part of an employer’s business or undertaking is transferred as a going concern to another employer. The regulations also apply to a “service provision change” where a contract for the performance of a function is outsourced, brought back in-house or transferred to a new contractor.

The effect of TUPE is to transfer employees, and specifically any rights, responsibilities and liabilities associated with them, from the old employer to the new employer.

TUPE 2006 was amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014

What does TUPE mean legally?

TUPE is a legal process that transfers employees and all other employee liabilities to the new owner/employer. As an employee this means legally that your length of service is continued into the new business and your terms and conditions of employment must remain the same.

Your new or your existing employer cannot dismiss you because of a TUPE transfer. If they do, that would be automatic unfair dismissal. But there are some reasons why they could legally make you redundant after a TUPE transfer.

They can use any of the following reasons:

• Economic reasons – These are to do with how the organisation is performing.
• Technical reasons – These are to do with the equipment or processes the organisation uses.
• Organisational reasons – These are to do with the structure of the organisation.

Examples of these ETO reasons might include:

• A change in the location of work, for example relocating a call centre function to another country to merge with the new employer’s existing call centre.
• A reduction in the number of employees, for example the demand for a product or service has fallen so fewer staff are required to supply the product or service to be profitable.
• Too many employees transferred in for the same role, for example duplicating a function such as HR or Finance.
• Transferred staff do not have the requisite skills, for example the new employer uses new technology not used by the transferring staff.

It is common for an employee’s place of work to change following a TUPE transfer. Where the change in location is significant an employee can argue that this is a substantial change in their working conditions to their material detriment and can bring a claim for constructive dismissal.

However, an employer can submit that the change of location is an ETO. If offered the option to relocate, employees can refuse to transfer, but this is dependent on the circumstances of the case and this may also lose them valuable legal rights.

Redundancies could legally happen before or after the TUPE transfer because of these three ETO reasons, so although TUPE regulations are there to protect you, you could still be made redundant. An employer must follow the consultation process correctly and select employees fairly if they are making redundancies to get their business ready for sale or merger.

TUPE is not optional for employers. If an employer fails to meet any aspect of TUPE law, then they risk staff taking them to an employment tribunal.

What is protected under TUPE?

The TUPE regulations protect you from being dismissed because of a business transfer and give you the right to be informed and consulted before the transfer goes ahead.

TUPE preserves an employee’s or group of employees’ terms and conditions of employment when a business or undertaking is transferred to a new employer. Employees who are employed in the undertaking which is being transferred have their employment transferred to the new employer. TUPE protects employees by entitling them to the same terms and conditions, with continuity of employment, as they had before the transfer.

Under the TUPE regulations, employees should not suffer detriment in respect of their existing employment rights. Instead, the new employer will take over their employment contracts, based on their existing terms and conditions, including the terms of any collective agreement incorporated into that contract.

TUPE also preserves rights under the contract of employment, statutory rights and continuity of employment and includes employees’ rights to bring a claim against their employer for unfair dismissal, redundancy or discrimination, unpaid wages, bonuses or holidays.

What this means to you is, if you are being transferred under TUPE to a new employer and you have any issues about them changing your terms, the claims you have would be against the new employer, not the previous one.

In short, under the TUPE regulations, when a new employer takes over a business, they have to:

• Keep your terms and conditions of employment the same as before.
• Keep your length of service the same, so you have continuous employment.
• Keep your holiday entitlement the same.
• Honour any union recognition collective agreements which may be relevant to your terms and conditions of employment.

If your employment is transferred and you are kept on, the new employer may also want to change certain terms and conditions of your employment to match those of existing employees. This is known as harmonising terms and conditions.

Harmonising the terms and conditions of transferring employees with those of the transferee’s existing workforce is not a permissible reason for varying the employees’ contracts.

Apart from in certain limited circumstances, any attempt by the transferee employer to vary the contracts of employment of the transferred employees will be void.

Changes can be made to a transferring employee’s contract of employment if the changes are an improvement on the original terms of employment and the employee or the relevant trade union representatives of the affected employee consent to the change. Written records should document the discussion with the employee and any consent should be given in writing and kept on file.

The period of protection afforded by TUPE is indefinite; if the change to a transferring employee’s terms and conditions of employment is because of the transfer, it will be prohibited, even if it occurs some years after the transfer took place.

The automatic transfer principle of TUPE is not all encompassing.

What may not be protected in the transfer includes:

• Many of the non-contractual policies in, for example, a staff handbook of the outgoing employer.
• Non-contractual profit and share schemes.
• Rights that relate to old age, invalidity and survivors’ benefits under an occupational pension scheme.

When does TUPE apply?

A TUPE transfer takes place when the whole or part of an employer’s business or undertaking is sold or transferred as a going concern to another employer. The TUPE regulations also apply to transfers resulting from a “service provision change” where the performance of a function is outsourced or insourced; for example, if an organisation is outsourcing a function such as their catering facilities, but the same staff continue to provide the service under the management of an external provider.

Or vice versa, the organisation brings the function into the organisation under the organisation’s management (insourcing) and retains the same staff.

The transfer may be achieved by a series of transactions and may or may not include the transfer of property and other tangible or intangible assets. The regulations apply only to the transfer of UK-based undertakings. A company transfer by the sale of shares is not covered by TUPE as, in this case, the identity of the employer does not change.

What is the TUPE process?

If you are going to be affected by TUPE, your employer and the incoming employer have to follow certain procedures and one of these processes is about how they consult with you. This is known as TUPE consultation, and it is an important step in the TUPE process during which an employer and incoming employer must consult with the employees or their union representatives.

At the consultation, an employer and incoming employer will inform staff of the transfer and pass on any relevant information they will need to be aware of.

An employer and the incoming employer are required to conduct a collective consultation for TUPE with staff representatives, which may be a union representative if a union or unions are recognised by the employer. Where there is no union representation, the employees should elect someone as a representative.

The consultation meeting is where the employer and incoming employer speak to the representatives on behalf of all affected employees. If, however, the organisation has fewer than 10 employees, the employer and incoming employer can inform and consult with employees about the transfer directly and individually.

The TUPE consultation period is the point at which an employer and incoming employer must inform and consult with staff or the appropriate employee representatives.

There is no TUPE consultation timeline in which an employer and incoming employer must inform and consult staff.

TUPE regulations do not highlight a minimum TUPE consultation period, however, they do require outgoing employers and incoming employers to inform and consult with employees or representatives before the transfer, to allow them to raise any concerns with their appointed representative. Under section 13(2) of the TUPE regulations, the TUPE consultation period length should be as long as necessary before the transfer.

During this period, employees through their representatives will be looking for answers and assurances about such things as:

• What if I don’t want to transfer?
• What happens to my pension?
• Can I be dismissed because of a transfer?
• How much notice am I entitled to?
• What happens to my terms and conditions?
• Can the incoming employer change my terms and conditions?
• Can an incoming employer start a redundancy procedure before the business transfers?
• When transfer is going to happen and why.
• How the transfer is likely to affect employees, for example could employees have to use new systems, or integrate with new colleagues?
• Whether the new employer might consider restructuring.

It is important that this information is provided to employees with enough time to allow for “meaningful consultation” on the issue. An employer has to consult employee representatives about any part of the transfer that is likely to affect employees and then seek to reach an agreement. If either or both current and future employers don’t do this, they can be penalised.

An outgoing employer will need to identify which employees will transfer to the incoming employer as soon as possible. All employees will transfer if the employer is selling the whole business. If they are only selling part of the business, however, they need to carefully consider which employees are employed and allocated to the division of the business that is being transferred.

The decision will depend on their roles before the transfer. They should consider staff on short-term absences as well as those on fixed contracts; any agency workers are not transferable in this process.

Then, an incoming employer will need to obtain essential information from the outgoing employer such as how many transferring employees there are and whether any of their own current employees might be affected by the transfer.

They will also need to obtain employee liability information. Employee liability information (ELI) must be provided to the incoming employer by the outgoing employer a minimum of 28 days before the transfer.

Employee liability information included at this stage is:

• The identity and ages of the employees who will transfer.
• Terms and conditions in their employment contracts including pay, hours of work, holiday entitlements, length of service etc.
• Any relevant collective agreements.
• Details of any disciplinary action taken against an employee in the last two years.
• Details of any employee grievances raised in the last two years.
• Details of any legal action, before the court or employment tribunal, brought against the employer by an employee in the last two years and information about any potential legal action.

The incoming employer must provide any “measures” information to the outgoing employer. “Measures” is the term used for the changes to employment arrangements which an incoming employer may wish to make after the transfer.

They might include any potential redundancies and changes to contractual terms such as pay dates or pension arrangements, workplace relocation or different working patterns.

The outgoing employer will need this information so that they can consult on these proposed measures with their employee representatives and/or unions. An incoming employer can only make changes to the terms and conditions of employees that transfer in for ETO reasons.

The incoming employer will also need to identify any contractual benefits that must be provided to employees following the transfer such as death in service or private medical insurance. They must make arrangements to continue to provide those benefits in good time before the transfer. This information must be provided by the outgoing employer.

The next stage is for the outgoing employer to inform affected employees via their representative to give them the required information about the transfer and any information about proposed measures received from the incoming employer.

The information must be shared concerning:

• When and why the transfer is taking place.
• The implications for affected employees.
• The measures that will be taken by the incoming employer.

Employers that fail to inform and consult during the TUPE process, risk damaging employee relations and face significant legal consequences with financial penalties. Each employee not informed and/or consulted about the transfer could claim up to 13 weeks uncapped pay.

Claims can be brought by employees for automatic unfair dismissal, constructive dismissal and wrongful dismissal, so the cost of getting it wrong could be significant, both to the incoming and outgoing employer.

The final stage is for the incoming employer to write to transferring employees to formally confirm the details of their new employment.

Throughout the TUPE process both the outgoing and incoming employers need to carefully consider GDPR when providing personal data. Whilst there is a lawful purpose for processing the data, an incoming employer should ensure that the outgoing employer has taken appropriate steps to ensure that they are GDPR compliant. This includes checking that the outgoing employer has relevant data protection policies in place in relation to employee data.

Following a transfer, the incoming employers will need to continue to manage the two sets of employees’ terms and conditions: those of their existing staff and those of the transferring workforce.

Who would use TUPE?

TUPE applies to all organisations, regardless of the size of their workforce, turnover, profits and so on, if the part of the business that is being transferred is UK-based. However, an international business which has its Head Office in, for example, the USA, will have to comply with TUPE in respect of its employees who work at one of its UK-based plants if it transfers that plant to a new owner.

TUPE regulations can apply to both the public and private sectors. If someone works in the public sector and they are transferred to the private sector, they are covered by TUPE. Also, if someone works for a public sector organisation such as a government department and the service is transferred to another public sector organisation such as a local authority, TUPE regulations will apply as the employer is changing.

However, TUPE does not apply to transfers within the public sector where the employer does not change, such as within the NHS, for example from one hospital to another – the NHS remains the employer.

TUPE also covers service provision changes where an organisation ceases to carry out activities on their own behalf and instead the activities are carried out by another organisation on their behalf or in reverse.

Under changes to TUPE introduced in early 2014, activities carried out after the change in service provider must be fundamentally the same as those that were carried out by the organisation who ceased to carry them out.

This service provision change is sometimes known as contracting out or outsourcing. It also covers situations where outsourcing has already occurred but there is a change in the contractor carrying out those services. An example of this would be where an organisation has contracted out its office cleaning on, for example, a two-year contract.

When the contract is coming towards the end, the organisation may decide to put the contract out to tender and may select a more competitive supplier for that service. Staff employed by the outgoing contractor would be transferred using TUPE to the incoming contractor.

In conclusion

When TUPE applies it will provide employees a significant amount of protection where they are transferring to a new employer, both in terms of job security and the terms and conditions under which they will be required to work under their new employer.

Failing to understand TUPE-related rights, and acting upon a misconceived basis, could have serious consequences for employees. In particular, if someone tenders their resignation or refuses to work for their new employer without good reason, or without first and formally raising objections, they would not normally be able to claim unfair dismissal or redundancy pay.

Anyone facing a TUPE transfer should seek advice from either a trade union or legal adviser to ensure that their rights are protected and that they themselves are not acting in any way that might disadvantage themselves, such as if objecting to the transfer, negotiating new terms or negotiating an exit on terms favourable to themselves.