When one business or part of a business transfers to another person, the law provides protection to employees’ contracts of employment under the Transfer of Undertakings (Protection of Employment) Regulations 2006. A TUPE transfer can affect any business, whether it is a small or large, public or private employer.
A TUPE transfer can constitute of a business buying another business, merging two businesses to create a new one, or a service provision change. For example, TUPE is likely to apply if the same work is carried out by the same workers, on the same premises with the same equipment, but under a new employer with a different identity. Service provision changes occur when a function of the business is contracted out, a new contractor takes over or it is brought in-house from a contractor. TUPE does not apply if the service provision change only affects the provision of goods and no services, such as food suppliers for a restaurant. Further to that, TUPE does not apply if a qualifying service provision change will only last during a single event or a short-term period.
When deciding which employees transfer over, the business must identify an organised grouping of employees. If an employee has a split role between a function which transfers and one which remains with the previous employer, then an assessment will need to be made on where he is assigned.
TUPE protection means that the employees’ employment is protected and so the employee cannot be dismissed purely because the transfer has happened. An employee’s terms and conditions of employment also transfer over to the new employer and are protected from change if the only reason behind the change is the transfer itself. This includes taking terms out, as well as, putting new terms in the contract. An employee cannot sign away his TUPE protection rights, meaning that even if the employer and employee agree on a change it will not be enforceable if challenged at tribunal unless there is an economic, technical or organisational (ETO) reason entailing changes in the workforce. When employees transfer, their length of continuous employment and accrued annual leave remains unaltered, as employment is not broken up. Along with these, any other contractual provisions transfer over to the new employer, for example – pensions, overtime pay, sick leave and pay, disciplinary and grievance procedures and records. If any collective agreements have been made between the old employer and the transferring employees, then the new employer is also bound by them.
A TUPE process contains many complicated aspects and clients should always seek advice when either selling or buying a company, or winning/losing a contract.