TUPE stands for the opaquely named Transfer of Undertakings (Protection of Employment) Regulations. Whilst the original Regulations were a virtual literal translation of EU law, in 2006 the Regulations were expanded to better fit outsourcing situations that were by then more popular and being caught by the original EU legislation. At present there is no plan to repeal or amend TUPE whether or not we leave the EU.
In short, TUPE protects employees by automatically transferring their employment in two situations:
- Where part or all of an “undertaking” (i.e. business or other organisation) is transferred to another
- In outsourcing situations – when services are outsourced, when outsourced contracts move to another provider, and when they are brought back in house (or “insourced”)
There are four key protections
- The right to be informed and consulted about the transfer
- The right not to be dismissed for a reason related to the transfer unless it is for a reason entailing changes in the workforce (such as a redundancy situation brought about by changes to work practices or location)
- The right to the same terms and conditions after the transfer (though changes can be made if they are not related to the transfer)
- Liabilities and obligations of the outgoing employer transfer with the employee
Wouldn’t it be great if it were that simple? Unfortunately not, and the various complexities are beyond the scope of this blog, but suffice to say that we recommend you obtain TUPE advice in the following situations
- Selling all or part of a business (whether or not you intend this to affect employees)
- Buying all or part of a business
- Buying, selling or leasing commercial premises where a similar business will succeed the outgoing owner or tenant or where services such as cleaning, maintenance or security are provided
- Outsourcing services such as cleaning, security or accounting/payroll
- Insourcing services
- Taking on a contract to provide outsourced services
- Losing a contract to provide outsourced services
- Changing the contractual terms of employees inherited by way of TUPE
Failing to follow TUPE legislation in circumstances where it applies can lead to liabilities for protective awards for failing to inform and consult, unfair dismissal awards and unlawful deductions/breach of contract claims. Both transferee and transferor can be dragged into costly and lengthy litigation. Engaging with TUPE at an early stage in a transaction allows parties to factor liabilities into the costs of the transaction and agree indemnities.
Conversely, where TUPE doesn’t apply but contracting parties assume it does, you could find yourself taking responsibility for employee liabilities that you need not. You might find yourself liable for unfair dismissal claims or redundancy payments where you believe employees should transfer but a Tribunal finds TUPE did not apply.