TUPE for Business

What is TUPE? TUPE is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations 2006. The TUPE rules aim to safeguard the rights of employees on a TUPE transfer.

A TUPE transfer occurs where a business (or part of a business) changes hands or where a service provision change takes place. When a UK business moves to a new owner, TUPE protects the rights of its employees to the same terms and conditions as they had before the transfer, with continuity of employment intact. Similarly, if there is an outsourcing or insourcing of a service or a change of service provider, TUPE protects the rights of the employees working on that contract. 

The effect of TUPE is to move employees and any liabilities associated with them from the old employer (transferor) to the new employer (transferee) automatically by operation of law.

We are experienced in advising businesses about how to deal with TUPE issues, including working on complex and high value Employment Tribunal claims.  We offer employers specialist advice to ensure that outcomes are favourable and that businesses are protected from TUPE related legal claims.

When does TUPE apply?  

 TUPE can apply when an employer:

  • Sells or buys all or part of a business. 
  • Outsources or makes a ‘service provision change’ (a service provision change can involve outsourcing a service, transferring a service from one external contractor to another or bringing a service back in house).
  • Grants or takes over a lease or licence of premises and operate the same business from those premises as operated previously.

If you think a transaction your business is involved in might be covered by TUPE, you should take specialist legal advice from an Employment Lawyer without delay.

For TUPE to apply when a business or part of a business is sold, there needs to be a transfer of an economic entity which retains its identity after the transfer. This will be the case if the transferee is carrying on the same or a similar business after the transfer. TUPE will be relevant in most outsourcings and insourcings and when a change of service provider occurs. However, TUPE will not apply in all cases, because it will depend on a number of issues, including whether: 

  • The activities undertaken before and after the transfer remain fundamentally the same. 
  • Employees providing the activities are organised appropriately into groupings which provide the activities to the client. 

It is best practice for any TUPE issues to be regulated by written agreements between the transferee and transferor so that the TUPE risks can be negotiated and agreed. 

What happens if TUPE applies? 

  • Employees who are employed in the undertaking which is being transferred under TUPE will have their employment transferred to the new employer, unless they object to the transfer.
  • TUPE states that all the transferor’s rights, powers, duties and liabilities under or in connection with the transferring employees’ contracts of employment are transferred to the transferee.
  • This covers rights under the contract of employment, statutory rights and continuity of employment. It also includes employees’ rights to bring a claim against their employer including, for example, unfair dismissal, redundancy, discrimination, unpaid wages, bonuses, holidays and personal injury.
  • Employees therefore have the legal right to transfer to the new employer on their existing terms and conditions of employment and with all their existing employment rights intact, although there are separate rules which deal with old age pensions under occupational pension schemes.
  • On a TUPE transfer, the new employer steps into the shoes of the old employer. The effect is as though the employee’s contract of employment was always made with the new employer.
  • The old employer is required to provide the new employer with written details of all employee rights and liabilities that will transfer.

For this reason, it is essential that employers who are planning to take over a contract or buy a business know all about the employees they might inherit and that they make sure that the contract protects them from any employment liabilities which arose before they became the employer.

TUPE and dismissals

Any dismissals will be automatically unfair where the sole or principal reason for the dismissal is the transfer. Dismissals will not be automatically unfair where the dismissal is for an economical, technical or organisational reason (an “ETO” reason) requiring a change in the workforce, such as redundancy. This ETO defence is narrow in scope and must entail changes in the workforce, e.g. workforce numbers, workforce location or job functions.

ETO reasons can be difficult to establish. For example, dismissals resulting from a transferee employer’s attempt to harmonise terms and conditions with existing staff will not be for an ETO reason as it does not entail a change in the workforce. Even if the employer can rely upon an ETO defence and the dismissal is not automatically unfair, it may still be unfair for other reasons, such as a failure to consult properly in a redundancy situation.

For more information or for help with a TUPE matter, please contact us.