Transfer of Undertakings (Protection of Employment) Regulations

The Transfer of Undertakings (Protection of Employment) Regulations (‘TUPE’) provides protection to existing contracted employees where there is a transfer to another legal entity of:

1. A business or undertaking,

2. A part of a business or undertaking, or

3. A service provider.

Both 1 and 2 above will constitute a ‘business transfer’ and will be protected by TUPE. An example of such a business transfer could be where two companies merge to form a new entity, or where one company acquires another. The element of a business transfer that triggers TUPE is a change in the identity of the employer company – because the identity of the company must change, a simple share transfer will not usually count, as the identity remains the same (unless there is a real change in the day to day running of the business, rather than just the corporate ownership).

In terms of 3 above, a situation such as this will usually arise when an internal function is outsourced to an external service provider, there is a re-tendering and a service contract goes to a new provider, or such a contract ends with in-house service provision. Service contracts to which TUPE applies must not be a one off – for example for an event – but could include those for cleaning, IT etc. To be protected in this situation an employee would need to be assigned to the part of the business or contract that transfers. Where an employee is assigned to one project on an ad-hoc basis but is also required to work on other projects, that employee would not be likely to transfer with the service.

In some situations, two or all of points 1,2 and 3 above may apply.

TUPE protection

Under TUPE, despite the transfer to a new employer, an employee will retain their continuous service and all contractual and statutory rights (which transfer to a new employer). Other than in the area of occupational pensions, where TUPE does not protect the full transfer of rights (it is wise to seek specialist advice on this subject as it is extremely complex), this means that rights to claim for redundancy, unfair dismissal and discrimination are not affected by the transfer (which they normally would be by a change in employer).

Where there has been a transfer, after which an employer tries to dismiss employee(s), this may open up an automatic unfair dismissal claim. In order to establish such a claim an employee would need to show that it was the TUPE transfer that was the only or main reason for the employee being dismissed. An employer can counter this by establishing that the dismissal was due to an economic, technological or organisational reason that necessitated a change in the workforce, i.e. a change in the number of workers who make up the workforce.

In the same way, TUPE prevents the new employer from altering the employees’ terms and conditions after the transfer. Again this would have to be as a result of the transfer, and if the employer can show it was for an economic, technological or organisational reason, this is not likely to fall foul of TUPE. Employers who simply wait for a period of time after a transfer before making such changes could find themselves in trouble with TUPE as the focus is on whether or not the changes are the result of the transfer and whether any changes are justifiable as an economic, technological or organisational reason, rather than how much time has passed. If changes are as a result of the transfer they will be void.

In the event that a TUPE transfer is about to take place, there is a requirement for an employer to consult employees (via trade unions or elected employee representatives) and inform them of the proposed steps that are to be taken that will affect the workforce. Where this information is held by the employer about to take over the workforce, it should be passed on to the employer transferring out of responsibility for the workforce, so that the soon to be ex employer can provide proper information to the employee representatives. Where there is no consultation and provision of information, an employer may find that an Employment Tribunal awards up to 13 weeks pay for each employee affected.

Making a claim

Claims can be made by employees whose terms have been changed, who have been dismissed, or who have not been consulted, within three months from the date of the change, dismissal or lack of consultation.

Special employees

1. Where a business is insolvent, employees transferring out of that business are covered by a different set of rules;

2. TUPE does not cover inter-governmental department transfers of administrative functions;

3. An employee based outside of the UK who is employed by a UK employer may still have TUPE protection if the transfer involves a UK business and (where it is a business transfer) the company has an ‘undertaking’ in the UK.