Understanding the TUPE transfer meaning and how it works is essential for all employers involved in acquisitions, outsourcing, and mergers. Firstly, TUPE stands for the Transfer Of Undertakings Protection Of Employment Regulations.
The TUPE employment law was first passed in 1981, overhauled in 2006, and amended in 2014. TUPE is a significant and complex piece of legislation adopted by the UK to implement the European Acquired Rights Directive. The TUPE regulations for the transfer of undertakings govern the employment aspects of acquisitions, outsourcing, and mergers. Its purpose is to protect EMPLOYEES (employment rights on the transfer of an undertaking) when the business (or part of the business) for which they work for changes hands.
When Do TUPE Transfer Regulations Apply?
- Acquisition of a business/organization (or part of) that retains its identity, or
- A service provision change.
The TUPE transfer regulations do not apply to a share purchase or if the change is in the provider of goods rather than services.
When there is a relative transfer or service provision change covered by the TUPE law protection, their effect is to transfer employees and any liabilities associated with them, from the old employer to the new employer by operation of law.
It is vital if you are planning any changes to your business that could be covered by the TUPE law regulations to seek professional assistance at the earliest stage possible to ensure you are fully aware of the liabilities you may have inherited from transferring employees, what requirements the regulations will place on you as the employer and any risks of claims from affected employees.
What is a relevant TUPE transfer covered by the TUPE regulations;
The transfer of undertaking meaning is the acquisition of a business/organisation (or part of) which retains its identity.
From regulation 3:
‘A TUPE transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity
Let us break this down a little; ‘a transfer of an economic entity which retains its identity
In determining whether there is a relevant transfer, we will break this into two parts:
- Is there an identifiable economic entity that is capable of being transferred?
- Will the economic entity retain its identity after the transfer in question?
As is often the case with TUPE law, the regulations themselves do not clearly define what each phrase means so case law is left to establish definitions.
You will need to establish; is someone acquiring the business (it does not have to be a profit-making business it could be for example a charitable non-profit organization) or part of the business? If so, will it be identifiable after the acquisition (there is no need for money to change hands for there to be an acquisition)?
The Advice team at Avensure will assist you to identify the entity to transfer-what does it consist of? What does it look like? What does it do? Then ascertain if it will transfer, and will its identity be retained post-transfer (it does not need to be identical but fundamentally similar).
Now let us consider a TUPE transfer service provision change.
From the regulations – A service provision change is a situation in which:
(i) Activities cease to be carried out by a person (“a client”) on his own behalf and are carried out instead by another person on the client’s behalf (“a contractor”);
(ii) Activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf; or
(iii) Activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf.
The TUPE employment law Advice Team at Avensure will help you confirm if one of the three TUPE labour law service provision change criteria has been met and if it has, will look to confirm if there is an organized grouping of employees which has the principal purpose is carrying out the activities concerned on behalf of the same client, as all this is required for the TUPE transfer regulations to apply.
There are many establishing case laws to consider when ascertaining if TUPE labour law is likely to apply so expert advice is strongly recommended during the planning stage of any TUPE transfers.
The Employer Obligations of TUPE
If you are an employer involved in a TUPE employment law situation you will be either the transferor the outgoing, old employer or the transferee of the incoming new employer. The TUPE law protection regulations will in a relevant transfer situation, ensure that the affected employees transfer from transferor to transferee with their length of service, status and contractual terms and conditions along with any liabilities associated with the employees and TUPE transfers.
To ensure that all parties are aware of what is happening, the TUPE regulations place certain employer obligations on both the transfer and the transferee.
Both transferors and transferees have a duty to inform and consult representatives of their employees affected by the transfer.
- The transferor has an obligation to provide the transferee with certain TUPE transfer information about employees that are to transfer and any associated liabilities.
- The transferee has an obligation to provide TUPE transfer information to the transferor to allow them to properly fulfil their obligation to inform and consult.
TUPE Employment Law & Employee Representatives
The TUPE employment law regulations bring large employer obligations to inform and consult ‘appropriate representatives of their employees affected by the transfer. If there is no recognised Trade Union the employer (if there are 10 or more employees in the company/organisation), must offer the employees the right to elect representatives and facilitate such an election. Such representatives cannot be selected by employers. There are many rules relating to employee representatives so expert advice should be sort, as failure to consult with the correct representatives can lead to tribunal awards of up to 13 gross weeks’ pay to each employee, even if the rest of the employer obligations are correctly carried out.
If the affected employees fail to elect representatives, transfer of undertakings protection of employment information is provided directly to the affected employees.
The employer must provide the following TUPE transfer information, in writing, to appropriate representatives if there are any of the employees if not;
- That the transfer will take place
- When the transfer will take place
- Why the transfer will take place
- Implications of the transfer for the affected employees
- Any measures it is envisaged will be taken connected with the transfer in relation to the affected employees
So a transferor can consult on envisaged measures, the transferee is required to provide the transferor with the information necessary to do this. To allow the transferee to assess if there are envisaged measures, the transferor is required by the TUPE law regulations to provide them with certain information on the transferring employees;
No later than 28 days before the transfer (where reasonably practicable), the transferor will need to provide certain information to the transferee, about transferring employees and associated liabilities, this information is often referred to as NELI (from Notification Of Employee Liability Information). This TUPE employment law information will need to be updated if there are changes.
The TUPE contract protection information that must be provided is on;
- The identity of transferring employees
- Their main contractual terms
- Any collective agreements
- Disciplinary action/grievances issued in the last two years
- Any legal proceedings brought by the employees in the last two years
- Any such claims that they (the transferor), have reasonable grounds to believe an employee may bring
The sanction for failure to comply is that the Employment Tribunal may order the transferor to pay the transferee compensation of a minimum of £500 per employee and may increase this amount by taking into account any loss sustained by the transferee due to the TUPE labour law failure.
Failings in the interactions between transferor and transferee and the exchange of TUPE employment law information between them can be very costly if not done correctly as can failures to properly inform and consult with affected employees or their reps and the time scales involved can be tight.
If you think your future plans are covered by the TUPE employment law regulations seek expert advice.
