TUPE in a nutshell – When does it apply and what does it mean?
When does TUPE apply?
TUPE [the abbreviation commonly used for the Transfer of Undertakings (Protection of Employment) Regulations 2006)] applies to a relevant transfer from a ‘transferor’ to a ‘transferee’. A relevant transfer may be a business transfer or a service provision change.
What is a business transfer?
A business transfer is a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity.
As to whether there is an economic entity and that economic entity has been transferred are questions of fact.
- Matters to be considered include whether or not tangible assets are transferred, the value of the intangible assets, whether or not employees are taken over by the new company, whether or not customers are transferred, and the degree of similarity between the activities carried on before and after the transfer.
- Even if no staff are taken over, it does not necessarily mean that no undertaking has been transferred. If it were otherwise it would allow transferees to circumvent TUPE by refusing to take on staff. Hence, if no staff transfer, the reasons why will be relevant. Whilst share sales or transfers are not usually a ‘relevant transfer’, even then, in Jackson Lloyd Ltd v Smith EAT/0127/13 it was made clear that the fact that the ‘day to day’ control of the business was taken over following a 100% share transfer led to there being a relevant transfer.
What is a service provision change?
There are three routes by which a service provision change may involve a transfer: outsourcing, re-tendering, and insourcing.
The facts must also meet the following three conditions:
- Immediately before the service provision change, there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client; the “activities” before and after the transfer need to be fundamentally or essentially the same.
- Immediately before the service provision change the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration;
- The activities concerned do not consist wholly or mainly of the supply of goods for the client’s use.
If TUPE applies, what are the consequences for the employees?
- As a matter of law, employees transfer on the same terms and conditions they had with the transferor prior to transfer and their continuity of employment is maintained.
- Any terms found in collective agreements that are incorporated into the individual’s employment contract will transfer to the transferee and bind it.
- Any purported contract variations because of the transfer itself where there are no economic, technical or organisation changes entailing changes in the workforce are void. ‘Changes in the workforce’ must be a change in overall numbers of workforce or a change in the functions of the workforce. Since 2014, changes in the location of the workforce expressly come within the scope of economic, technical or organisation changes.
- If the relevant transfer involves or would involve substantial change in working conditions to the material detriment of the employee there will be a dismissal.
- Dismissal of an employee will be automatically unfair if an employee has the relevant qualifying period, dismissal occurs either before or after a relevant transfer, the sole or principal reason for this dismissal was the relevant transfer and it was not ‘an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee’.
- Unfair dismissal claims can be settled by a properly drafted settlement agreement.
Who is liable to the employee for these claims?
Generally the transferee, because any act or omission of the employer before the transfer is completed, or in relation to the transferor in respect of that contract are deemed to have been an act or omission of or in relation to the transferee.
Other potential claims
Failure to inform and consult
A claim may be made for a failure to inform and consult the ‘appropriate representatives’ of any of employees who may be affected by the transfer. Micro-businesses (those with 10 or fewer employees) can consult directly with employees when there is no recognised trade union or existing appropriate representatives; there is no prescribed time frame for consultation but the requirement under TUPE is to provide information ‘long enough before a relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees’. The further duty to consult arises if the ‘employer envisages that he will take measures’ in relation to the affected employee’. The remedy for failure to inform and consult is compensation of up to 13 weeks’ pay (uncapped). It is intended to be punitive rather than compensatory and, in this case, both the transferor and transferee are liable.
Failure to provide employee liability information
This refers to the obligation on the transferor to provide certain information (e.g. the identity and age of the employees and the particulars of employment that an employer is obliged to give to an employee under Employment Rights Act 1996), at least 28 days before the transfer (or if not reasonably practicable, because of special circumstances, as soon as reasonably practicable). This would be a claim brought by the transferee against the transferor and, if successful, an award of compensation may be made (the minimum award will be £500 unless the tribunal considers it just and equitable to award less)
If you would like advice on how any of the above applies to your business, please contact one of the ELiAction team on 01494 817193 or info@ELiAction.com
In giving comment and advice in the article, we do not assume legal responsibility for the accuracy of any particular statement. If you have specific views which you wish to discuss, we would be pleased to assist you.