The Transfer of Undertakings (Protection of Employment) Regulations 2006 (referred to below as TUPE) is now the main piece of legislation governing the sale or transfer of an undertaking (eg a business), or part of one, to another business. The regulations are designed to protect the rights of employees in a transfer situation, enabling them to enjoy the same terms and conditions, with continuity of employment, as they formerly had with their previous employer.
In what situations does TUPE apply?
By way of broad guidance TUPE has been found to apply to:
- Mergers and/or sales of a businesses by sale of assets
- A change of licensee or franchisee
- The gift of a business through the execution of a will
- Contracting (outsourcing) out of services
- Changing contractors
- Where all or part of a sole trader’s business or partnership is sold or otherwise transferred.
In what situations does TUPE not apply?
- Transfers by share take-over
- Transfers of assets only (for example, the sale of equipment alone wouldn’t be covered, but the sale of a going concern including equipment would be covered)
- Transfers of a contract to provide goods or services where this doesn’t involve the transfer of a business or part of a business
- The supply of goods for a clients use, for example, supplying food to a client to sell in its staff canteen, rather than a situation where the contractor runs the canteen for the client
- Transfers of undertakings situated outside the United Kingdom (although these may be covered by the regulations of other EEC member states)
- Regulation 3.1(b) of TUPE doesn’t apply in Northern Ireland – this is related to changes in service providers.
A transfer takes place at a single point in time on the date at which responsibility as an Employer for carrying on the business, moves from the transferor (seller of the business) to the transferee (buyer).
TUPE legislation changed on 31st January 2014 (in England, Scotland and Wales; not in Northern Ireland) – more details here. The changes are as follows:
- The collective redundancy consultation rules in a TUPE situation change, so that consultation by a transferee prior to a TUPE change can count towards the minimum consultation period if the transferor agrees and ‘meaningful’ consultation is completed by the transferee
- Currently, any dismissal for a reason connected with a TUPE transfer will not be automatically unfair if there are ETO (economic, technical or organisational) reasons entailing a change in the workforce. Case law currently confines this to changes to either the number of employees or the function those employees perform. This means that redundancies due to a change in location can’t be for an ETO reason and are automatically unfair dismissals. The change in the Regulations on 31st January 2014 provide that a change in a location will count as an ETO reason, so that redundancy dismissals due to changes in location of the workplace won’t be automatically unfair
- The re-negotiation of contract terms derived from collective agreements will be allowed one year after a transfer, provided the changes are no less favourable to the employee
- Employee liability information must be provided 28 days after a transfer, effective from 1st May 2014
- Micro businesses (10 or few employees) will be able to inform and consult directly with employees, from 31st July 2014 (meaning they do not need to elect an employee representative)
- Contract terms collectively agreed after a transfer date will not automatically transfer.
Practical suggestions
TUPE is a complex area so it’s essential to seek legal advice for individual circumstances. Where a business, or part of one, is being transferred, both parties (ie the transferor and the transferee) should seek such advice at the earliest possible stage. It may be possible for a legal representative to negotiate an indemnity which will provide a partial, or total, cushion against the financial impact of any tribunal claims resulting from the application of TUPE. Individuals should contact their Union representative if you have one, or ACAS, in the first instance for advice if this affects you.
In December 2019, a Tribunal, in Dewhurst and Others v Revisecatch Limited t/a Ecourier and City Sprint (UK) Ltd, found that workers also qualify as employees for the purpose of TUPE transfers (and so should be informed about and consulted on the transfer). Because this decision was made at a first stage Tribunal, this decision is not binding on other Tribunals. However, it is likely to be appealed by City Sprint to the Employment Appeal Tribunal.
Changes to TUPE because of the Agency Workers Regulations 2011
With the introduction of the Agency Workers Regulations the TUPE regulations were amended to change Employers’ information and consultation obligations under TUPE.
Previously, Employers were required to provide information about the fact, date, reason, legal, social and economic implications of the transfer. Since 2011, Employers also need to provide information on the number of agency workers working temporarily for, under the supervision/direction of the employer, the part of the organisation where the agency workers are working and the type of work the agency workers are carrying out. This includes information about all agency workers working for the employer, not just the part of the business that’s ‘transferring’ and is subject to TUPE.