We recently hosted the fourth session in Clarion’s 2019 HR Breakfast Club events programme for Rising Stars. These networking and learning opportunities are designed for up and coming HR professionals who want to get the most out of their learning journey. This particular event focused on what is viewed as one of the more complicated areas of the HR profession: TUPE transfers.
TUPE is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations 2006. And while the details of these regulations can seem overly complex and technical, handling TUPE transfers really doesn’t have to be scary. The concepts underlying the regulations are, at their heart, simple and their purpose is straightforward: they exist to protect employees if the business they work for changes hands.
In this blog, we’ll be answering some of the more common questions HR professionals have about handling TUPE transfers, cutting through the legal jargon to provide you with a clear-cut and uncomplicated guide to what is viewed by many as a potentially daunting part of HR work.
What is TUPE?
TUPE regulations, as we’ve stated, are designed to protect employees if the business they are employed by is sold or the service they provide is transferred. The effect is to move both employees, and the rights and liabilities associated with them, from the old employer to the new one by operation of the law.
When does TUPE apply?
This is often the question that can be the most daunting for HR professionals, as it can prove to be a complicated one to answer.
TUPE applies in two situations:
- in the transfer of an undertaking – when a business (or part of one) is transferred to a new employer;
- when a service provision change takes place – for example, an outsourcing of a service from the employer to a contractor.
However, sometimes transfers are not that obvious or there can be a number of transfers in quick succession. For example, if a business is transferred, and then some of its services are immediately outsourced.
If you think a transaction you’re involved with might be covered by TUPE, please get in touch and have a chat with us about it. We’re always here to help.
What are the effects of TUPE?
When TUPE applies, the employees of the outgoing employer, or seller, automatically become employees of the incoming employer, or buyer, at the point of transfer. The new employer steps into the shoes of the incumbent, taking on all the rights, responsibilities and liabilities towards the employees.
This means that, following a business transfer or service provision change:
- all employees employed immediately before the transfer are automatically transferred to the buyer (unless they opt out of the transfer);
- the outgoing employer must also provide employee liability information to the new employer, which details the rights of and obligations to the transferring employees, in writing. This must take place at least 28 days before the transfer.
- the new employer must notify the incumbent employer of any ‘measures’ that it proposes taking in connection with the employees who will transfer. This must take place long enough before the transfer to allow proper information and consultation to take place;
- the outgoing and new employer have a joint obligation to inform and consult with appropriate elected representatives of the affected employees. This might be trade union representatives or a works council, or it might be representatives specifically elected for the purposes of the TUPE transfer.
- this information and consultation process must take place ‘in good time’ before the transfer happens. The aim of consultation is to reach agreement on any ‘measures’ that are proposed in connection with the employment of affected employees;
- employees are protected from having the terms and conditions of their employment changed in connection with a TUPE transfer; and
- employees dismissed because of the transfer may be entitled to claim automatic unfair dismissal.
What are measures?
There is no clear definition of what constitutes a measure, but it is basically any change in relation to the employment or work arrangements of an employee who is affected by the transfer. This might include things like a change in uniform, different break times, or a different pay date.
Can amendments be made to the terms and conditions of transferred staff?
While it is a very common for a business receiving employees under TUPE to want to harmonise the terms and conditions of their contracts with those of their existing employees, any attempt to impose new terms and conditions will be void if the changes are made for no other reason than the transfer itself.
Any variation made to the employment contracts of transferring staff is only allowed if it’s entirely unconnected with the transfer, or if there is an economic, technical or organisational (ETO) reason that entails changes in the workforce - and the aim is to have both the buyer, seller and employees’ representatives agree to the change during consultation before the transfer.
TUPE doesn’t provide an exhaustive definition of what an ETO reason is, but some examples are:
- economic – essential cost-saving requirements, for example if the transferring business can’t continue trading without losing employees;
- technical – a change to the mechanisation of the organisation’s activities or increased computerisation;
- organisational – if its not possible for the employees to transfer to the new business because of its location.
The overarching requirement of ‘entailing changes in the workforce’ generally means that the ETO reason has to also include a change in job function or reduction in headcount.
Why should I care about TUPE?
If an employer doesn’t comply with the information and consultation requirements under TUPE, as described above, then they can be ordered to pay compensation to each affected employee of up to a maximum of 13 weeks’ gross pay. A breach could therefore be a potentially very expensive error.
The old and new employer will be jointly liable to pay this compensation, so it’s important to make sure any ‘behind the scenes’ commercial documents relating to any business transfer or service provision change dictate how the liability is to be shared.
There is also the risk of compensation for automatic unfair dismissal claims, which could in general terms be worth up to a year’s pay per employee (subject to the relevant statutory cap).
As we’ve said though, working out if TUPE applies and plotting your way through the process can be complex and the cost of getting it wrong can be significant. If you have any concerns that a transaction you’re involved with might be covered, please get in touch to talk to us.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.