In the modern business world, companies can often change hands. This is often a stressful and worrying period for the employees of the business in terms of job security.
Luckily, there are regulations in place to ensure employees are protected during the transfer of a business. The Transfer of Undertakings (TUPE) regulations are in place to ensure job protection and security for employees during a business transfer. As an employer it is important that you familiarise yourself with these rules.
In this guide, we'll discuss what TUPE is, how they protect employees, and how they work during a business transfer.
What is Transfer of Undertakings (TUPE)?
The Transfer of Undertakings regulations were created to protect the legal position of employees during a business transfer.
It's the process of transferring employees and any responsibilities linked with them from the old employer to the new employer by operation of law.
It's in place to ensure that employees can feel secure when the business they work for gets taken over or transferred to another one. As this can be a typically stressful time.
Examples of business transfers:
Business transfers can take many forms that you need to be aware of.
For example:
- Sales of a business by the sale of assets.
- A change of a franchisee.
- A sole trader's business or partnership is sold or transferred.
You must also be aware of which members of your company are covered by TUPE if you want to transfer your business.
Business transfers by way of the sale and purchase of shares in a company are not subject to the TUPE regulations as there is no change in employer.
Who is covered by TUPE regulations?
The following types of workers are covered by TUPE regulations:
- Agency workers.
- Civil servants or state employees.
As an employer, you need to know when TUPE regulations apply.
When does TUPE apply?
TUPE often applies when one business is transferred to another. But, you need to be aware that TUPE doesn't apply to all business transfers.
By understanding when it applies, you can be sure if they need to be followed if you want to sell your business.
Does TUPE apply to all types of business transfers?
No, TUPE doesn't apply to all business transfers:
The following factors must be considered for it to apply:
- Whether the tangible assets are transferred (for example the building).
- The value of the business's intangible assets (for example patents and trademarks).
- Whether or not customers are transferred.
However, TUPE applies for the following business transfers:
- A "business transfer": when the business' stable economic entity is transferred but it keeps its identity (for example branding).
- A "service provision change": when a client changes contractors or is bringing the work in-house.
What are the criteria for the Transfer of Undertakings to apply?
For TUPE regulations to apply to a business transfer, the following criteria must be met:
- There must be a legal transfer from one employer (either an individual or a company) to another.
- The new employer is carrying on the previous economic activity of the business.
- Employees and existing staff are part of the transfer.
When does TUPE not apply?
As an employer, you need to understand when TUPE doesn't apply to business transfers.
TUPE doesn't apply to the following:
- Where the reason for the transfer is to start insolvency proceedings.
- Where a business is transferred by the transfer of shares.
As a business owner, you need to understand how TUPE can protect your employees if you're looking to transfer your business.
How does TUPE protect employees?
Under the Transfer of Undertakings regulations, all existing employees transfer to the new business.
TUPE states "all the transferor's rights, owners, duties, and liabilities under or in connection with the transferring employee's contracts of employment are transferred to the transferee".
When a business transfer occurs, the new employer has a legal obligation to take on the existing staff of the business or the part of the business concerned.
The following employee rights are protected under TUPE:
- Prior length of service.
- Maintenance of share schemes or profit-sharing schemes.
- Golden parachute clauses.
- Any ex-gratia redundancy terms.
- All statutory employment rights and existing claims.
- PIAB liability.
- Disciplinary, grievance, and other internal procedures.
- Restrictive covenants.
Do employment contracts stay the same under TUPE?
Yes, under TUPE regulations the employment contract stays the same.
The new employer must take on the employees transferred on the same terms and conditions as before. This means the employer's obligations are automatically transferred to the new employer.
What happens to the existing occupational pension scheme under TUPE?
Occupational pension schemes don't move to the new employer post-transfer. This means the new employer has no legal obligation to continue making the same pension contributions on the employee's behalf.
During the negotiation process, the buyer will typically review all pension schemes to identify which pension benefits will survive post-transfer.
If employees don't feel their pensions aren't being managed correctly, a complaint is covered by the Pensions Acts to the Pensions Authority.
What happens to entitlements similar to pension schemes?
If the employee's previous employer provided them with similar entitlements to pensions, such as a lump sum on dismissal before retirement - the new employer must protect those.
Are employees protected against unfair dismissal under TUPE regulations?
Yes, employees are protected from unfair dismissal under TUPE. If they are terminated because a transfer involves a substantial change in working conditions, a claim can be raised for unfair dismissal.
Employees cannot be dismissed solely due to a business transfer. If this happens, the employer concerned is responsible for the dismissal and could be held liable.
When can an employee be dismissed under TUPE?
Under the Transfer of Undertakings, employees can be dismissed due to economic, technical, or organisational reasons involving changes to the workplace. For example, genuine redundancies.
What happens to a collective agreement under TUPE regulations?
Any terms of employment inserted by collective agreements are transferred over.
The new employer must keep the terms and conditions of the collective agreements until it's expired or been replaced.
Do you have to explain to your employees the effects of a business transfer?
One of the employer's legal obligations surrounding TUPE is that employees must be consulted before major decisions are made.
Under the TUPE regulations, both transferee and transferor must inform and consult with employees in relation to the transfer. The consultation and information process must be carried out no later than 30 days before the transfer is completed.
Under the Employees (Provision of Information and Consultation) Act 2006, a transferor company with more than fifty employees must provide the transferee with details of the rights and obligations arising under its contracts of employment. This obligation arises on the date of transfer.
What information must you give to employees during a business transfer?
Under TUPE, you must let employee representatives know the following information during a business transfer:
- The date or proposed date of the transfer.
- The reasons for the transfer.
- The legal implications of the transfer.
- The economic and social implications for the employee (if they are part of a trade union).
Can an employee complain to the Workplace Relations Commission (WRC) about TUPE?
Yes, if an employee feels like they haven't been protected fully during a business transfer they can make a complaint to the Workplace Relations Commission.
The complaint must be made within six months, and can be made for the following reasons:
- If they have been dismissed because of the transfer.
- If they weren't consulted about the transfer.
Employees may appeal the decision to the Labour Court.
Get expert advice on TUPE from Peninsula
In the modern business world, businesses can often change hands. This is often a stressful and worrying period for the employees of the business in terms of job security.
The Transfer of Undertakings (TUPE) regulations are in place to ensure job protection and security for employees during a business transfer. Peninsula can help guide you through the notification and consultation obligations.
Peninsula offers 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts. Want to find out more? Contact us on 1 800 079 222 and book a free consultation with one of our HR consultants.
