TUPE applies to employees of businesses in the United Kingdom irrespective of size, turnover or amount of employees. As long as you employ someone – it affects you. Our employment law team can support you throughout the process of your business restructure and ensure you are protected from potential disputes. The TUPE regulations apply to business transfers and service provision changes.
Business transfers are where part of a business is moved from one employer to another. This includes merger situations where two or more companies come together to create a new standalone company. As part of the business transfer the identity of the employer will, and must, change.
A service provision change can occur in a number of different instances, such as when a service provided in-house is awarded to a contractor (and vice versa) or when a contact ends and is subsequently given to a new provider. TUPE only applies here to people who can clearly be identified as providing the service being transferred. It does not protect those where a contract is related to the supply of good’s for a company’s use or for a single or short-term event.
By way of example, a team of IT technicians employed by IT Limited whom work predominately under contract for E Limited but then Tech Limited obtains the contract with E Limited then the team of IT technicians would automatically transfer from IT Limited to Tech Limited in accordance with the provisions of TUPE.
The question of whether TUPE does apply is not always clear cut or obvious. TUPE brings with it an element of uncertainty and therefore, on the transfer of any business or change of service provision, legal advice should be sought. Our team have extensive experience advising clients to ensure their legal obligations are met in relation to TUPE.
In almost all cases TUPE does not apply to share sales as there is no change in the employer; that said it is always best to obtain legal advice to check. In these scenarios the ownership of the business changes but employment contracts and employees of the business itself remain unaffected.
The objective of TUPE is to protect the continuity of employment of employees on the transfer of ownership of a business. It does so by transferring employees, and their employment particulars, from the old business to the new business.
Employment contracts are automatically transferred to the company taking over the business or service provision. The employees are entitled to retain their existing terms of employment, save for some limited exceptions including invalidity and old age.
This automatic transfer applies equally to those who were employed immediately before the transfer or would have otherwise been employed if it were not for dismissal as a result of the transfer or connected to it.
In the event that an employee opposes an exercisable transfer which would ordinarily take effect by virtue of TUPE then the employee’s contract of employment will not automatically transfer. Instead, through operation of law, the contract will terminate when the transfer of the business takes effect. A termination in this manner would not be classed as a dismissal.
Before a transfer of ownership takes place, employers have an obligation to consult and inform trade unions or employee representatives when, why and the effects of the transfer as well as information regarding the use of agency workers.
If employers fail to consult and inform then they run the risk of having to provide the employees with 13 week’s uncapped pay. In the event of a penalty of this kind, the transferor and transferee can be jointly and severally liable.
Smaller companies (less than 10 employees) are able to consult and inform directly with their employees if there are no appropriate representatives available with which to consult.
It is important to understand when TUPE may apply to your business. We can help you stay compliant and advise you on best practice. Please download our TUPE checklist here for helpful guidance. If you would like to discuss how we can support you and your business please contact one of our employment specialists here.