What does TUPE mean?
TUPE means the “Transfer of Undertakings (Protection of Employment) Regulations”. The Regulations protect employees’ rights when the business they work for “transfers” to a new employer. This may be as a result of a merger, or where the business is sold or bought. The identity of the employer must, however, change.
When does it apply?
TUPE applies when there is a “business transfer”. What this means is that your employer’s business or part of the business (e.g. a division) is being transferred to a new owner. However, it must be is keeping its ‘identity’ as a business – e.g. keeping its name, customers etc.
This does not include:
- A “share sale” – when all the shares in the company are sold to a new owner. TUPE does not apply because the company stays intact, and therefore your employer (the company) remains the same. The company just has a new owner.
- When assets are sold without the business – e.g. if the company sells some machinery without selling the whole ‘business’.
The TUPE Regulations also apply in outsourcing situations known as a “service provision change”. This happens when:
- a service provided in-house (eg cleaning, workplace catering) is awarded to a contractor;
- a contract ends and is given to a new contractor;
- a contract ends and the work is transferred in-house by the former customer.
For TUPE to apply, there must be a “relevant transfer”. There are complex rules which determine if there is such a transfer, but it is essentially where there has been a transfer of an economic entity which retains its identity.
The key issue is whether your employer would change, so if the business (or the division that you work in) is being sold, without TUPE you would remain employed by the company even after the sale. TUPE then automatically transfers your employment so that you are employed by the new owner of the business.
What happens when TUPE applies?
When TUPE applies:
- your job usually transfer over to the new company (although there could be exceptions in a redundancy situation or where the business is insolvent) ;
- your existing contractual terms and conditions transfer over (including holiday entitlement);
- your continuity of employment is maintained;
- you maintain your rights to bring a claim against your employer for redundancy, unfair dismissal, discrimination, bonuses, unpaid holiday etc.
- you are protected from dismissal in certain circumstances where the dismissal would be because you are being TUPE’d
- there is an obligation on your employer to ‘inform and consult’ with employee representatives about the proposed TUPE transfer.
What if TUPE doesn’t apply?
If your employer’s business transfers to a new employer, but TUPE doesn’t apply, then you need to consent to your employment being transferred to the new employer. If you do consent, then your continuity of employment will continue. For example if you have worked for the old employer for 3 years, then your ‘starting point’ with the new employer will be that you have 3 years’ service.
Can your contract terms ever be changed in a TUPE situation?
Before the transfer
Your existing terms and conditions cannot usually be changed by the transferring business to make them the same as those of the new business – even if you agree to the change.
After the transfer
Your new employer cannot change your terms and conditions by reason is the transfer itself. This would amount to automatic unfair dismissal if this were the sole or principal reason for the change.
A new employer can, however, change your terms and conditions if the reason is an ‘economic, technical or organisational reason’ (“ETO”) requiring a change in the workforce, although an ETO reason is often narrow in scope making it difficult for new employers to harmonise contract terms with the employees who have been transferred and their existing staff.
‘Economic’ reasons are to do with how the company is performing.
‘Technical’ reasons are to do with the equipment or processes the new company uses.
‘Organisational’ reasons are to do with the structure of the new company.
New employers can improve your terms and conditions if you agree, for example, harmonising the holiday entitlement.
However, if the current employees of your new employer have better terms than you, your new employer is not obliged to give you the same terms, only to keep you on the same terms as you were on before. That said, the new employers may offer improved terms so that you are on the same terms as the existing workforce.
You can be dismissed by your new employer for an ETO reason involving changes in the workforce, and this will often be in the form of a redundancy, but this will still need amount to a fair reason for dismissing and the normal unfair dismissal rules will apply.
What if you don’t want to work for the new employer?
You can refuse to do so, and this is the equivalent of resigning, but you won’t normally be entitled to redundancy unless this is agreed with your old (or the new) employer and you also won’t be able to claim unfair dismissal.
The obligation to inform and consult – what information needs to be provided to employee representatives?
Your current employer (the transferor) must give the following information:
- the fact that the transfer is taking place
- the date of the proposed transfer
- the reason for the proposed transfer
- the “legal, economic and social implications” of the transfer – this might include information about your employment automatically transferring to the new employer, your continuing employment rights, information about any major changes such as a new location or potential redundancies.
- any “envisaged measures” that the new employer (the transferee) envisages taking – this might include a change in the date you get paid, or a new holiday year.
This information should be provided to employee representatives. These might be trade union representatives or existing employee representatives. If there are no existing trade union or employee representatives then your current employer will need to arrange for elections to take place.
What happens if there is a failure to consult or inform adequately on a TUPE transfer?
Both your old employer (“the transferor”) and the new employer (“the transferee”) can be liable for a failure to inform or consult with the appropriate representatives.
A failure to inform or consult may lead to each affected employee being awarded a protective award of up to 13 weeks’ pay. Whilst it is possible for an employer to use a “special circumstances” defence, the circumstances have to be exceptional.
An employee representative, a trade union representative, or an affected employee can bring a complaint to an employment tribunal for a protective award. Any such claim must be commenced with the tribunal within three months of the date of the transfer.