With many retail and leisure businesses closing, particularly food related, some landlords are considering using their recently vacated premises to start up the same type of business, considering it an “easy win” and gaining a new business and an occupied property in one go. Alternatively, they are looking to get new tenants in to operate the same business, reducing fit out times. However, landlords or tenants taking over or operating the same business from their predecessors may also need to consider ‘TUPE’ obligations under employment law.
It is not possible to contract out of TUPE obligations, which are set out in the Transfer of Undertakings (Protection of Employment) Regulations 2006. Therefore, if you intend to take over a property or lease which holds an existing business, you need to consider whether the property could be part of a ‘transfer of a business’ i.e. whether you are buying or taking over the lease of a property and the business within it.
If you are taking over the business as well, then you also need to know who the seller currently employs or who they engage to carry out their services. This will allow you to assess whether TUPE applies to your circumstances.
There are two types of transfer that are protected under the TUPE regulations. These are:
- Business transfers where the business retains its economic entity following the transfer, this also applies in business mergers.
- Service provision changes where a service provided in-house is awarded to another contractor (or vice versa) but the work itself remains fundamentally the same.
Therefore, it is important to remember that when landlords or new tenants or “transferee” decide to operate the same business after the departing tenant (also known as the “transferor”) then they will also be automatically inheriting the existing employees of that business. In particular, the following transfer:
- Employees (including their terms and conditions and their continuity of service);
- Liabilities for employees including any who may have been dismissed as a result of the transfer i.e. if they can prove the sole or principal reason for the dismissal was the transfer (and not an ‘economic, technical or organisational reason);
- Any trade union recognition within their workplace including any agreement (known as collective agreements) they may already have in place.
Transferees need to bear in mind that the automatic transfer applies equally to those who were employed immediately before the transfer (or would have otherwise been employed if not for the dismissal as a result of the transfer/connected to it).
Employee Liability Information (ELI)
If TUPE applies, then it is important to note that the seller of the business must provide the buyer with certain information about the transferring employees no less than 28 days before the transfer takes place. If this information is not given, the transferor may be subject to pay the buyer compensation of a minimum of £500 for each employee whose information was not provided.
The Obligation to Consult and Inform
Once you have established TUPE applies you also need be aware that before a transfer takes place, employers have an obligation to inform and, in some cases, commence consultation (of any proposed measures or changes in connection to the transfer) with representatives of the affected workforce. This includes details of when the transfer is due to take place, why and the effects of the transfer.
Please note employees can bring claims for a failure to inform or consult, for which either the transferor or transferee may be liable, so it very important that you are aware of your obligations before the transfer takes place.
Please also note any variations in existing contracts may be void even if the employee consents to it.
For your specific queries and further, tailored advice in relation to TUPE including proposed variations and risk of dismissal claims, please contact Rabika Basran in our Employment Team.
ACAS provides guidance on handling TUPE transfers and this can be found on the following site: https://www.acas.org.uk/tupe