For your business

Business Transfers, Outsourcing and TUPE

TUPE applies as a matter of law to transactions as wide ranging as business sales, franchising, commercial leases and outsourcing. Despite efforts to simplify it, TUPE is complex. In short, TUPE protects employees by automatically transferring their employment in two situations:
  • Where there is a transfer of part or all of an “undertaking” (i.e. business or other organisation)
  • Where there is a “service provision change” – 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 an economic, technical or organisational reason entailing changes in the workforce (such as a redundancy situation brought about by changes to work practices)
  • 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

Failing to follow TUPE legislation can lead to claims for for protective awards for failing to inform and consult, Unfair Dismissal and unlawful deductions/breach of contract. 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. Outgoing contractors might find themselves liable for Unfair Dismissal claims where they believe employees should transfer but an Employment Tribunal finds TUPE did not apply.

We can advise on the risk of TUPE applying to your transaction so you can make an informed choice with regard to its value and how you will proceed. If proceeding on the basis that TUPE does apply, we can help you prepare the necessary Employee Liability Information or carry out due diligence so that you know what will be inherited as well as ensuring that warranties and indemnities in the transaction documentation properly protect you. We can also help where TUPE is asserted by the other party to the transaction or by employees post transaction, setting out your position to the relevant parties and advising on the merits of defending or settling anticipated claims.

It is may be possible to agree fixed fees for unbundled advice on TUPE. Where fixed fees are not possible (such as when dealing with an open ended negotiation), we will provide the best estimate we can and keep you fully informed about the costs you are likely to incur.

Contact us on 020 7935 3522, lt@freemanssolicitors.net or using the contact form

FAQs about TUPE

What are TUPE measures?

Employees must be consulted before a TUPE transfer about the “measures” the incoming employer intends to make. Measures is widely defined to include matters as simple as a change in payment date or more significant such as changes to place of work or staffing levels.

Who consults on TUPE measures?

Consultation should take place before the TUPE transfer, by the outgoing employer (known as the transferor). However, in order for effective consultation to take place, the incoming employer (known as the transferee) must confirm whether they intend any measures post-transfer. The incoming employer must also consult with their own staff who may be affected by the transfer.

How much notice should be given of TUPE?

There is no prescribed amount of notice to give before a TUPE transfer but the employer must inform the appropriate employee representatives long enough before the relevant transfer to enable them to consult about any proposed measures. The amount of notice will depend on the particular circumstances and extent of consultation required.

When does TUPE not apply?

TUPE does not apply to all business transfers and service provision changes. A key exemption is transfers that take place by way of share sale. TUPE only applies to a service provision change where the service to be provided by the new contractor is to be fundamentally the same. Only those employees who form an “organised grouping” whose principal purpose is to work on the “activities” moving to the new contractor will transfer.

Who transfers under TUPE?

Employees that are assigned to the relevant undertaking will transfer. Employee is defined widely and can include atypical workers. TUPE only applies to service provision changes where work is organised in such a way that a group of employees principally work on that contract.

Can an employee refuse to TUPE?

Employees can object to a TUPE transfer, in which case their employment will terminate. They would not be entitled to notice or a redundancy payment.

Can I make TUPE staff redundant?

Staff transferred by TUPE can be made redundant but only if there is an economic, technical or organisational change entailing changes in the workforce, or if the redundancy is not related to the TUPE transfer. Staff from both businesses may need to be included in the pool for selection.

Can Contracts of Employment be changed after TUPE?

Changes to contractual terms because of a TUPE transfer are void unless there is an economic, technical or organisational (ETO) reason for the change entailing changes in the workforce, the contract itself allows for that particular variation, certain changes made because of collective agreements and in insolvency situations. Simply harmonising terms with existing employees after a TUPE transfer is generally considered void.

Can hours be changed after TUPE?

A change in hours would be a change to a contractual term. If the reason for the change in hours was the TUPE transfer, this change would be void unless it fell within one of the exceptions detailed above.

Can salary be reduced after TUPE?

A reduction in salary would be a change to a contractual term. If the reason for the reduction in salary was the TUPE transfer, this change would be void unless it fell within one of the exceptions detailed above.

How long are TUPE rights protected?

There is no time limit to the bar on changing contractual terms because of a TUPE transfer, though in reality, the longer the period of time since the transfer, the less likely it is that the reason for the change is the transfer itself.