The first issue you need to consider when buying a business is whether the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) will apply to your specific situation. Commonly, the Regulations apply when a business is bought (other than by share transfer) and where services are contracted in/out or there is a change of contractor.
Assuming the TUPE Regulations do apply, a mindful employer will be aware of his responsibilities. This article summarises some main issues arising under TUPE to ensure you stay on the right side of the law.
The TUPE regulations were introduced to maintain employees’ continuity of employment and enable them to enjoy the same terms and conditions under the new employer as under the old one when a business changes hands.
You will automatically inherit the employees of the ‘old’ employer as they transfer to your employment on the date of the transfer. You will also inherit outstanding employee liabilities incurred by the transferor (the old employer). It may therefore be wise to negotiate appropriate indemnities in the commercial contract between yourself and the transferor.
The Regulations make it automatically unfair for either you or the transferor to dismiss an employee, who has more than 12 months’ service, where the sole reason for the dismissal is the transfer itself, or for a reason connected with the transfer.
The transferring employees will retain their existing terms and conditions of employment which may well be different from your existing staff. Many employers wish to harmonise the terms and conditions across the board. However, you need to be aware that variations to terms and conditions where the sole or principal reason for the variation is the transfer itself, or a reason connected with the transfer, are likely to be deemed void if challenged. There are also special provisions which apply to pensions and insolvent business.
The Regulations do not, however, prohibit dismissals or a variation to terms and conditions in the circumstances of a transfer where there is an economic, technical or organisational reason for your actions which entails changes in numbers or job functions of the workforce, such as redundancies. Fair procedures must still be followed.
Amendments to the Regulations in 2006 imposed a duty on the ‘old’ employer to disclose to the ‘new’ employer basic ‘employee liability information’ regarding details of employees’ names and ages, terms and conditions of employment (e.g. job title, place of work, pay, annual leave, sick pay, etc), and information on any disciplinary and grievance procedures taken. However, this is often less than satisfactory and if you are buying a business, you will want more information than this. Again, this is something you may wish to address in your commercial contract negotiations.
There are also some notification obligations upon you as the new employer. You must inform the transferor if you envisage taking any measures in respect of employees that will transfer, such as potential redundancies. Where redundancies may occur after the transfer, the selection pool should include your current staff, and not just those that have transferred. Where any of your existing employees may be affected by the transfer you are obliged to provide specified information to appropriate representatives of these employers. In certain circumstances consultation may also be required.
Once the ‘new’ employees have transferred, you need to provide them with written notification of their new employer, their start date with you, and their date of continuous service.
Continuity of employment is preserved for employees who transfer over to you. This is important to remember because some employment rights are dependent upon the employee having accrued a prescribed amount of service e.g. unfair dismissal, statutory redundancy pay. Therefore, when you are calculating an employee’s length of service for these, or any other purposes, you should look back to the date their continuous service began with the transferor rather than the date that you took over.
On the practical side, you have a duty to check the immigration status of your ‘new’ employees and manage sponsorship of employees from outside the European Economic Area. You should also consider appropriate induction procedures for what are essentially new employees to your organisation.
Remember that taking over a business and the TUPE Regulations are very complex and you should always contact our 24 Hour Advice Service on 0844 892 2772 to obtain advice on your particular circumstances. We can give you tailored advice to guide you through the situation.