If you ever find yourself in a situation where you’re looking to buy or sell a business (that’s the company’s assets, not shares) or you’re outsourcing or transferring your services out of your business to a freelancer or contractor, you may find yourself in a TUPE situation.
TUPE is an acronym for Transfer of Undertaking and Protection of Employment Regulations, and it exists to protect employees where their employment transfers from one employer to another. In short, TUPE exists so that the liability of the old employer can be transferred to the new employer, with continuity of employment maintained for affected employees. TUPE legislation derives from an EU Directive and as far as we know, it looks like the rules are staying put.
Employees can also rely on TUPE to protect them from being dismissed. If employees are dismissed before or after a TUPE transfer, they may have been unfairly dismissed. This doesn’t apply to all dismissals, but TUPE does make it hard for employers to follow a ‘fair’ procedure if there is any kind of business transfer. Dismissal could also be unfair if the reason for the dismissal is the transfer itself, unless there is an economic, technical or organisational reason entailing changes in the workforce.
Things that need to be done
First things first, decide which employees will transfer to the new employer. This is usually the moment you start thinking about their roles and the kind of duties carried on by them.
Before a transfer takes place, the purchaser of the business needs to be provided with details about the employees that are being taken on, though wherever possible, personal information should be anonymised to comply with the Data Protection Act:
- Name of employee
- Employee age
- Employment particulars i.e., salary, hours, holidays etc
- Details of any disciplinary action taken against the employee in the last 2 years
- Any grievance action raised by the employee in the last 2 years
- Details of any legal action (in court or an employment tribunal) bought against the employer by an employee in the last 2 years and information about any potential legal action
An employer must also let the purchaser know what they plan to do with the employees i.e., transferring them etc. This disclosure of information must happen. If it doesn’t, employers could face penalties.
Next, you’ll need to ensure you follow a fair consultation process with employees who are affected by the TUPE transfer, so everyone is in the loop about what’s going on and employees can share their concerns with you. The consultation requirements will depend on the number of employees involved in the potential transfer.
What happens if you don’t follow the process?
Technically, as liabilities pass from the old employer to the new employer, employees would take up any issues with the new employer. However, you can agree to divvy up the liabilities contractually so that the old employer is liable for any failure on their part that has been pre-agreed in advance.
As with all things, planning is the key to getting things right. If you’re selling up or outsourcing work away from employees, it’s always recommended that you think about how the TUPE rules might apply and get legal advice early on in the process.
Tend Legal, London
Written by Neelam Narshi