Transfer Of Undertakings

“Transfer of Undertakings Protection of Employment”, or “TUPE” for short, is essential for all employers to understand if you are involved in acquisitions, outsourcing, and mergers. Employment rights on the transfer of an undertaking is a complex piece of legislation but one that Avensure’s outsourced HR services team has plenty of experience dealing with.

  • The TUPE Meaning

    The TUPE employment law was first passed in 1981, overhauled in 2006, and amended in 2014. TUPE is significant 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 undertakings) when the business (or part of the business) for which they work changes hands.

  • When Does TUPE Regulations Apply?

    • Acquisition of a business/organisation (or part of) that retains its identity or
    • A service provision change.

    The TUPE (Transfer of Undertakings Protection of Employment rights) does 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, they 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 TUPE regulation 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 undertakings means acquiring a business/organisation (or part of it) that retains its identity.

    From regulation 3:

    ‘A TUPE transfer of 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 for employers, the regulations themselves do not clearly define each phrase, so case law is left to establish definitions.

    You will need to establish whether someone is acquiring the business (it does not have to be a profit-making business. It could be, for example, a charitable non-profit organisation) 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 via a TUPE consultation 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 its identity will 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 โ€“ 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. If so, we will verify if there is an organised grouping of employees with the principal purpose of carrying out the activities concerned on behalf of the same client; 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 transfer.

  • The Employer Obligations of TUPE Law Protection

    If you are an employer involved in a TUPE employment law situation, you will be either the transferor of the outgoing, old employer or the transferee of the incoming new employer. TUPE 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 transfer of undertakings.

    To ensure that all parties know what is happening, the TUPE regulations place certain employer obligations on the transferer and the transferee.

    Both transferors and transferees have to inform and consult representatives of their employees affected by the transfer.

    The transferor should provide the transferee with certain TUPE transfer information about employees to transfer and any associated liabilities.

    The transferee should provide TUPE transfer information to the transferor to allow them to fulfil their obligation to inform and consult properly.

  • TUPE Employment Law & Employee Representatives

    The TUPE law regulations bring significant obligations to employers 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. Employers cannot select such representatives. Many rules relate to employee representatives, so expert TUPE consultation should be sought. Failing 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.

  • Transfer Of Undertakings Protection Of Employment Information

    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 will the transfer take place?
    • Why the transfer will take place?
    • Implications of the transfer for the affected employees.
    • Any measures envisaged will be connected to the transfer to the affected employees.

    Under TUPE law, a transferor can consult on envisaged measures; the transferee must provide the transferor with the information necessary to do this. To allow the transferee to assess if there are envisaged measures, the TUPE law regulations require the transferor to provide them with specific information on the transferring employees.

    No later than 28 days before the transfer (where reasonably practicable), the transferor must provide certain information about transferring employees and associated liabilities to the transferee. This information is often called NELI (Notification Of Employee Liability Information). This TUPE law information will need to be updated if there are changes.

  • TUPE Contract Protection

    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 previous two years.
    • Any 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 ยฃ500 per employee and may increase this amount by considering any loss sustained by the transferee due to the TUPE law failure.

    Failings in the interactions between transferor and transferee and the exchange of TUPE information between them can be very costly if not done correctly, as failures to properly inform and consult with affected employees or their reps and the time scales involved can be tight.

    If you’re unsure whether your plans are covered by the TUPE contract regulations, seek expert advice.

Transfer Of Undertakings FAQs

  • What is covered by TUPE transfer regulations?

    TUPE regulations cover the sale of part or all of a business, including sole trader, partnership or a Ltd company. Also included is the sale of company assets (not including shares). Finally, contracts for goods or services are transferred from one business to another.

  • What is the TUPE meaning?

    The TUPE meaning is “Transfer of Undertakings Protection of Employment Rights.” The law aims to protect workers and their benefits in the event of their place of work changing owners (for example, in the case of a merger). Tupe employment law is complex but vital for employers to understand because failure to comply with the transfer of undertakings law can result in hefty fines for your business.

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