Transfer of Undertakings (Protection of Employment)

If there is one subject likely to make most employment lawyers wince it is TUPE. It is an extremely complicated area and not one for the faint hearted. If you think TUPE might apply then it probably does and you should seek specialist advice.

The main problem with TUPE is that it seems counter-intuitive and illogical. This is not necessarily an unfair assessment. If you think it doesn’t make any sense then you probably do understand the basics.

The important starting point with TUPE is to remember that it is there for the employees. The clue is in the name, Transfer of Undertakings (Protection of Employment), showing that its purpose is to protect employment not to assist companies. One company can end up responsible for the actions, or inactions, of the other even though they weren’t involved. Generally most liabilities transfer across to the new company despite the fact that it was most frequently the poor practices of the first company that has led to the transfer situation in the first place.

There are a very broad range of circumstances in which TUPE can apply. If you are buying something which has employees, or taking on a contract to do work that someone else’s employees were doing previously then there is a good chance that this will be a TUPE situation. In those cases you can realistically expect that any people who are currently employed to carry out that work as the principle part of their work will transfer across to your employment. While each case is different the starting approach is “if it looks like a duck and walks like a duck…” and most situations will have some quack-like potential.

It is important to understand that in a TUPE situation the contractual rights of the affected employees are preserved. The biggest mistake that most companies make is in bidding for a contract with the intention of making the savings on staffing costs. Salaries cannot simply be reduced following a transfer or the employees dismissed just because their salary is too high. Similarly you cannot remove terms because you don’t want to retain them or because they are more favourable than those your existing staff have. Harmonisation is not an acceptable ground for making changes and any detrimental changes can be deemed void.

There are obligations on all those involved in a transfer situation in respect of consultation. The original employer, known as the transferor, has an obligation to consult with all their affected employees, or their elected representatives or trade union as appropriate, about the fact of the transfer and any measures the new employer, known as the transferee, is intending to introduce. The transferor also has to send to the transferee Notification of Employer Liability Information (NELI) which provides all the relevant information about the transferring employees.

The transferee has to notify the transferor of any measures that they are planning to introduce, including any economic, technical or organisational changes that will affect the workforce, including the likelihood of redundancies or changes to the working pattern. The employees have to notify the transferor if they have any objections to the transfer.

A failure to consult can result in a penalty of up to 13 weeks’ pay per affected individual for which the transferor and transferee could find themselves jointly and severally liable. The question of fault will not change this.

Anything that results in a detriment to employees as a result of the transfer, from changing terms and conditions up to and including dismissal, could result in tribunal proceedings and should not be attempted without taking careful advice.

For any further information regarding TUPE, please call our 24 Hour Advice Service on 0844 892 2772.