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Transfer of Undertakings (Protection of Employment) - TUPE

Transfer of Undertakings (Protection of Employment)

If you're acquiring a new business, selling your own, or undergoing a significant restructuring, the Transfer of Undertakings (Protection of Employment) regulations, commonly known as TUPE, play a significant role in safeguarding employment terms.

Businesses can face several challenges in this regard as TUPE regulations are intricate and can be difficult to interpret. Not to mention that non-compliance with TUPE can lead to legal disputes and financial penalties.

• What is TUPE?

• Key aspects of TUPE

• When does TUPE apply?

• How to determine TUPE applicability

• Why is TUPE important?

• Who is protected under TUPE?

• Employee rights under TUPE

• How does TUPE affect employment contracts?

• What responsibilities do employers have under TUPE?

• What happens during the TUPE transfer process?

• What changes can employers make after a TUPE transfer?

• What are the risks of non-compliance with TUPE?

• How can employers prepare for a TUPE transfer?

• How does TUPE affect redundancies?

• What role do trade unions play in TUPE transfers?

• How does TUPE impact pensions?

At Lawhive, our network of experienced employment lawyers is well-versed in TUPE regulations and can provide clear, practical advice tailored to your specific situation.

From initial consultation and employee consultation processes to handling disputes and ensuring compliance, we offer a full range of services to ensure a smooth and legally sound transfer.

Contact us today to speak with our Legal Assessment Team and receive a free, no-obligation quote for the services of a specialist TUPE lawyer.

What is TUPE?

The Transfer of Undertakings (Protection of Employment) Regulations, commonly referred to as TUPE, are UK regulations designed to protect employees when a business or part of a business is transferred to a new owner.

TUPE is in place to make sure that employees' terms and conditions of employment are preserved, and they are not unfairly dismissed as a result of the transfer.

It applies to a wide range of business transfers, including mergers, acquisitions, and outsourcing arrangements.

Key aspects of TUPE

Employees' jobs are protected under TUPE, meaning they transfer to the new employer with their existing terms and conditions of employment intact. Further, continuity of service is preserved, which is important for rights related to redundancy pay and other service-based entitlements.

This means the new employer must honour the terms and conditions of employment as set out in the employees' existing contracts. This includes salary, working hours, and any other contractual benefits.

TUPE also requires both the old and new employers to inform and consult with affected employees or representatives about the transfer.

The regulations also offer redundancy protection, meaning employees can't be dismissed solely because of the transfer.

As such, any dismissal related to the transfer is automatically deemed unfair unless there is an 'economic, technical, or organisational' reason that involves changes in the workforce.

When does TUPE apply?

TUPE applies to business transfers and service provision changes that meet specific criteria, including the transfer of an economic entity that retains its identity and involves an organised grouping of employees.

Business transfers

• Sale of a Business: TUPE applies when a business or part of a business is sold to a new owner. This includes situations where the entire business is sold or when only a part of the business, such as a department or a division, is transferred.

• Mergers: When two companies merge, TUPE applies to the employees of the merging entities. The employment contracts of the affected employees are transferred to the new merged entity.

Service provision changes

• Outsourcing: TUPE applies when an organisation outsources a function or service to an external contractor. For example, if a company outsources its IT support or cleaning services, the employees performing these functions may be transferred to the new service provider.

• Insourcing: When a company decides to bring a previously outsourced function in-house, TUPE applies to the employees of the external contractor who were providing the service. These employees may be transferred to the company taking the service back in-house.

• Changing contractors: TUPE also applies when there is a change in the service provider. If a company switches from one external contractor to another for a particular service, the employees performing that service may be transferred to the new contractor.

• Takeovers: In the case of a takeover, where one company acquires another, TUPE ensures that the employees of the acquired company are transferred to the new owner under their existing terms and conditions.

While TUPE has broad applicability, there are certain exceptions where it may not apply.

For example, TUPE does not apply to share sales where only the ownership of the company's shares changes, but the company itself remains the same legal entity. The employees' contracts remain with the same employer.

TUPE also does not apply to transfers involving a single-specific event or task of short-term duration, such as a one-off project or a short-term contract.

How to detemine TUPE applicability

If you're unsure as to whether TUPE applies in your situation you should:

1. Determine whether the transfer involves a business transfer or a service provision change.

2. Evaluate whether the entity being transferred is an economic entity that retains its identity post-transfer.

3. Identify if there is an organised grouping of employees dedicated to the activities being transferred.

4. Ensure that the activities carried out before and after the transfer are fundamentally the same.

If in doubt, seek advice from a solicitor to thoroughly assess the specifics of the transfer and ensure compliance with TUPE regulations.

Why is TUPE important?

TUPE is important because the regulations make sure that employees’ jobs are protected when a business is transferred to a new owner. This protection helps prevent sudden job losses and provides employees with stability during times of change.

Compliance with TUPE is a legal obligation in the UK. By following TUPE regulations, businesses can mitigate risks associated with employment disputes and be sure that the transfer process is legally sound.

If you are involved in a business transfer and need expert guidance on TUPE, Lawhive can help.

Our experienced network of solicitors provides clear, practical advice and support to ensure compliance and protect your interests.

Contact us today for assistance.

Who is protected under TUPE?

The primary individuals protected under TUPE are employees, including:

• Permanent and fixed-term employees

• Employees on leave, including those on maternity leave, paternity leave, sick leave, or other types of leave.

• Part-time workers and zero-hour contract workers.

• Apprentices working under an apprenticeship agreement.

• Agency workers (if the contract between the agency and the business is transferred).

For employees to be protected under TUPE, they must:

1. Be assigned to the business or part of the business that is being transferred. This typically means that the employee works for the specific part of the business that is being sold or outsourced. Employees who work in a shared service capacity or across multiple parts of the business may have their situation assessed on a case-by-case basis.

2. Have continuous employment with the transferring business up to the point of transfer.

Those not protected under TUPE include self-employed and individual contractors and workers on short-term, temporary assignments that do not constitute a permanent or fixed-term employment relationship.

Employee rights under TUPE

Under TUPE employees have the right to:

Automatic transfer

Employees are automatically transferred to the new employer with their existing terms and conditions of employment intact.

All contractual terms, including salary, working hours, holiday entitlement, and other benefits, are preserved and must be honoured by the new employer.

Continuity of employment

Employees retain their continuity of service, which is important for calculating entitlements such as redundancy pay, annual leave, and other service-based benefits.

The length of service is considered to be continuous from the start date with the original employer.

Protection against unfair dismissal

Employees can't be dismissed just because of the transfer.

Any dismissal that occurs because of the transfer is automatically considered unfair dismissal unless there is an "economic, technical, or organisational" reason.

Information and consultation

Both the outgoing (old) and incoming (new) employers are required to inform and consult with employees or their representatives about the transfer, including any changes they intend to make concerning employees post-transfer.

The information must include the fact that the transfer is happening, the date of the transfer, the reasons for the transfer, and the implications for employees.

Protection of terms and conditions

All contractual terms and conditions are protected and must be maintained by the new employer. This includes salary, working hours, holiday entitlement, pensions (in some cases), and other contractual benefits.

Any changes to terms and conditions that are solely because of the transfer are generally void unless there is a valid reason and changes are agreed both parties.

Protection of collective agreements

Collective agreements negotiated by unions or other employee representatives that were in place before the transfer continue to apply after the transfer.

New employers must recognise and engage with the same trade unions or employee representatives recognised by the old employer.

Transfer of liabilities

The new employer inherits all liabilities and obligations related to the transferring employees.

This includes any ongoing employment claims, such as for unpaid wages or workplace discrimination, as well as future liabilities related to past employment.

Refuse transfer

Employees have the right to refuse to transfer to a new employer.

However, this is effectively a resignation, and employees who refuse transfer are not entitled to redundancy pay or other benefits.

How does TUPE affect employment contracts?

Under TUPE, employees' contracts of employment are automatically transferred from the old employer (the transferor) to the new employer (the transferee). This means that the employees continue their employment with the new employer without any interruption in their service.

New employers can't make changes to the terms and conditions of employment that are solely related to the transfer.

Any proposed changes must be for economic, technical, or organisational reasons relating to changes in the workforce (such as a restructuring or relocation) and agreed upon by the employees or their representatives.

What responsibilities do employers have under TUPE?

The Transfer of Undertakings (Protection of Employment) regulations place specific responsibilities on both the outgoing employer and the incoming employer.

Responsibilities of the outgoing employer

Inform and consult employees

The outgoing employer must inform affected employees or their representatives (e.g., trade unions) about the transfer. This includes providing details about:

• The fact that the transfer is happening.

• The date of the transfer.

• The reasons for the transfer.

• The legal, economic, and social implications of the transfer for the employees.

• Any measures the new employer intends to take concerning employees.

If the outgoing employer or the new employer intends to make changes concerning employees, they must consult with them to seek their views on these measures.

Provide information

The outgoing employer must provide the incoming employer with written details of all employee liability information at least 28 days before the transfer. This includes information about:

• The identities of the transferring employees.

• Employment terms and conditions.

• Details of any grievances, disciplinary actions, or legal claims within the past two years.

• Information on collective agreements.

Responsibilities of the incoming employer

Continue employment contracts

The incoming employer must take on the transferring employees with their existing terms and conditions of employment intact. This includes honouring all contractual obligations and recognising the employee's continuity of service.

Protect employee rights

The incoming employer can't make changes to the terms or conditions of employment just because of the transfer and they must continue to honour any collective agreements that were in place before the transfer.

Consult and inform employees

The incoming employer must inform and consult with employees or their representatives about any measures they intend to take that will affect employees, like changes to working conditions or organisational structure.

The consultation process must be meaningful, allowing employees to discuss and influence the proposed measures.

Handle employee liabilities

The incoming employer inherits all liabilities and obligations related to the transferring employees, including outstanding claims or ongoing disputes.

If redundancies or dismissals are necessary, they must be for genuine business reasons unrelated to the transfer itself.

Joint responsibilities

Both the outgoing and incoming employers should ensure compliance with all TUPE regulations and maintain clear and open communication with employees.

What happens during the TUPE transfer process?

The TUPE transfer process involves several key stages and responsibilities for both the outgoing employer and the incoming employer.

Initial planning and preparation

Initially, it's important to determine if TUPE applies to the transfer and conduct thorough due diligence to understand the implications of the transfer.

Both the outgoing and incoming employers should plan the transfer process, including timelines, responsibilities, and key milestones.

Provision of employee liability information

At least 28 days before the transfer, the outgoing employer must provide the incoming employer with detailed employee liability information. 

This includes:

• The identity and age of the employees who will transfer.

• Information contained in the employees’ written statements of employment particulars.

• Details of any disciplinary action taken against an employee in the last two years.

• Information on any grievances raised by an employee in the last two years.

• Details of any legal actions brought by employees against the employer in the last two years.

• Information on any collective agreements affecting the employees.

Informing and consulting employees

Both the outgoing and incoming employer are legally required to inform affected employees or their representatives about the transfer.

Consultation should be meaningful and conducted in good time before the transfer. It should allow employees or their representatives to have their say and influence the proposed measures.

Transfer of employment contracts

On the date of the transfer, all employment contracts of the affected employees are automatically transferred from the transferor to the transferee. This includes all terms and conditions of employment, such as salary, working hours, holiday entitlements, and other benefits.

The transfer does not break the continuity of employment. Employees’ length of service and any accrued rights, such as redundancy entitlements and pension rights, are maintained.

What changes can employers make after a TUPE transfer?

Under the Transfer of Undertakings (Protection of Employment) regulations, the new employer inherits the employees with their existing terms and conditions of employment.

However, employers can make changes to employment terms and conditions if there is an economic, technical, or organisational (ETO) reason, if changes are mutually agreed upon with employees, or if changes are unrelated to the transfer.

ETO reasons include:

• Economic reasons relating to market performance or the profitability of the company

• Technical reasons relating to the equipment or production processes.

• Organisational reasons relating to the management or organisational structure of the business.

Examples of ETO reasons

Economic

A company might need to reduce costs due to a downturn in business. This could lead to restructuring that results in redundancies or changes in job roles.

For example, a retail chain acquired by a larger competitor may decide to close underperforming stores to consolidate operations, leading to some redundancies.

Technical

The new employer may introduce new technology that changes the way work is performed.

For example, a manufacturing company implementing automated machinery may need to change job roles, requiring employees to undergo retraining or shifting to different positions.

Organisational

Changes in the management structure or business operations may necessitate alterations in job roles or working hours.

For example, a company merging with another may need to streamline its management structure, resulting in changes to reporting lines and job responsibilities.

What are the risks of non-compliance with TUPE?

Non-compliance with TUPE can lead to tribunal claims for unfair dismissal, breach of contract, or failure to inform and consult.

These kinds of claims can result in substantial compensation payments, hefty legal fees, and significant disruption to business operations.

To mitigate these risks, employers should understand their TUPE obligations, plan and communicate early, conduct meaningful consultations, seek legal advice, and document all processes.

If you need expert guidance on TUPE compliance, Lawhive can help. Our network of experienced employment law solicitors provides clear, practical advice and support to ensure compliance and protect your interests.

Contact us today for a free case evaluation and quote.

How can employers prepare for a TUPE transfer?

Preparing for a TUPE transfer requires careful planning and clear communication.

Employers should:

1. Conduct early planning and due diligence

2. Develop a detailed transfer plan

3. Establish a communication strategy

4. Inform and consult employees

5. Provide employee liability information in the required timescales

6. Review and manage employment contracts

7. Offer training and support if applicable

8. Ensure a smooth post-transfer integration.

How does TUPE affect redundancies?

Outgoing and incoming employers can make redundancies if they are for genuine business reasons unrelated to the transfer.

However, they must inform and consult employees, follow a fair redundancy process, and provide appropriate notice and redundancy pay.

Any dismissals made solely because of the transfer are automatically deemed unfair unless there is a valid reason.

What role do trade unions play in TUPE transfers?

Trade unions act as representatives of employees and should be involved in various stages of the transfer process to ensure employee rights are protected.

By engaging with employers, negotiating on behalf of employees, and monitoring compliance, trade unions help to secure the best possible outcomes for employees during TUPE transfers.

How does TUPE impact pensions?

While TUPE protects employees' terms and conditions during a transfer, it excludes occupational pension schemes that provide old-age, invalidity, or survivors' benefits from automatic transfer.

However, the new employer must provide a minimum level of pension provision, typically through a defined contribution scheme, and protect accrued benefits up to the transfer date.

If the previous employer offered enhanced pension rights (beyond statutory requirements), the new employer is not obligated to match these enhancements but must provide a comparable scheme.

Employers often aim to offer pension schemes that are broadly comparable to those provided by the previous employer to maintain employee morale and retention.

In any case, employers must inform and consult with employees about changes to pension arrangements and provide key information such as the type of pension scheme to be offered, contribution levels, and any changes to benefits.

Get expert legal help with TUPE from Lawhive

TUPE transfers are rarely straightforward and can pose significant risks to incoming employers. At Lawhive, we understand the complexities involved with Transfer of Undertakings and are here to support you every step of the way.

Our experienced network of employment lawyers provides clear, practical advice tailored to your specific situation. Whether you need help with initial consultations, handling disputes, or ensuring full compliance with TUPE regulations, we offer a comprehensive range of services designed to make the transfer process smooth and legally sound.

Why choose Lawhive?

• Expertise: Our network of specialist lawyers is well-versed in TUPE regulations and can help you navigate them with confidence.

• Affordable solutions: We offer transparent, competitive fixed fees, giving you access to quality legal advice and services at a fraction of the cost of traditional law firms.

• Convenience: Manage your case through our user-friendly online platform.

At Lawhive, we are committed to making legal services accessible, affordable, and effective.

Contact us today and experience the difference of working with a modern, client-focused legal service provider.