In these tough economic times, periods of recession and changes in government, we are seeing more and more businesses being bought out and merging. In those circumstances, whether it is the whole of the business affected or only part, certain procedures have to be followed or each employee could claim compensation from the old employer and the new employer they are transferred to, of up to 13 weeks’ wages (amongst other things).
When does TUPE apply?
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) is wide ranging and can apply in many circumstances. The regulations refer to TUPE applying where a ‘relevant transfer’ has taken place, which can include:
- business transfers: such as transfer of a business/undertaking, whole or part, to another person or entity where there is a transfer of an economic entity which retains its identity;
- a service provision change: such as a change in the provider of a service, for example ‘outsourcing’ work to a contractor, bringing a service back in-house, or re-assigning work from one contractor to another, provided certain conditions are satisfied;
- potentially, an asset transfer prior to a share sale;
- possibly, an intra-group asset transfer;
- a share sale from subsidiary to parent company, where the parent company takes over control of the day-to-day running of the business.
However, TUPE does not apply to sale of a company’s shares, where the employees would continue to be employed by the company, albeit the shareholders would be different.
Effects of TUPE
So why are the effects of TUPE important, and why should employees and employers obtain advice when a TUPE situation arises?
If the TUPE Regulations are triggered, a number of implications arise automatically which will affect employees, the outgoing employer and the new employer:
- all employees working in the undertaking are automatically transferred to the new employer, together with their contracts of employment (although employees may object to the transfer and certain rights in relation to occupational pension schemes are excluded in the transfer);
- liability for employees dismissed in advance of the transfer for a reason connected with the transfer, is transferred to the new employer;
- any dismissal which is as a result of the transfer is automatically unfair (unless the dismissal is for an ‘economic, technical or organisational reason’);
- any trade union recognition for the transferred employees is transferred to the new employer;
- any collective agreements (e.g. with trade unions) applicable to the transferred employees are transferred to the new employer;
- information is required to be passed to employees effected, and consultation is to be entered into, where changes are proposed in connection with the transfer;
- certain information is to be given to the new employer by the current employer, regarding the employees to be transferred;
- changes can be made to transferring employees’ contracts in certain situations.
It is extremely important to note that employers cannot contract out of their obligations under TUPE and therefore it is imperative that advice is sought early, before claims are triggered inadvertently, as it is possible the risks and liabilities can be managed commercially in other ways.
Employees should be consulted and provided with certain information about how any transfer could affect them, so they can decide whether or not to object to the transfer. Objections will trigger other outcomes and could severely affect what the employee is entitled to, so the decision should not be made rashly.
In some circumstances, employees are dismissed around the time of the transfer of business, in an attempt to prevent transfer being triggered, possibly as the new employer does not wish to acquire the employee. If it can be shown that the dismissal is as a result of the transfer, this could mean the employee has a claim for unfair dismissal. Such claims can be expensive to defend and costs are generally not awarded to the winning party. Our dedicated team can discuss the options available to you and help you make an informed decision when it matters most.
If you want to know your rights, duties or obligations under TUPE, contact Oxley & Coward today.