TUPE or not TUPE? When does TUPE not apply?

… that really is the question (!) that many organisations struggle with in today’s fast changing and complex world. Experience has shown us at Jaluch that it’s all too easy to say ‘let’s just assume it’s not TUPE’! How often have we heard that?

In this article, we’ll explore what TUPE is, when it applies, and what the implications are for employers and employees. By understanding the ins and outs of TUPE, you can ensure that you’re complying with the law and protecting the rights of your staff during any transfer process.

For those of you who have more than 2 minutes, there is an extra section at the end that delves into the multitude of considerations you need to make when a potential TUPE situation rears its ugly head so that you can ensure any process is as effective, smooth and stress-free as possible!

If you have stumbled across this page looking for TUPE training or support, we have a couple of options:

👉 TUPE training for business owners, HR teams, managers or supervisors

👉 TUPE training for employee representatives

👉 TUPE advice

What is TUPE?

TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006, amended in 2014, to make them less burdensome and easier for businesses to follow. The regulations are intended to protect employees’ rights during the transfer of a business or in some cases, the transfer of a service provision.

It applies to all types and sizes of employers, from private businesses to charities, and from schools to public bodies. No-one is exempt!

When does TUPE apply?

If a business or part of a business is sold and moves to a new owner or merges with another business to create a new employer (and will keep trading, whether under it’s original name or another).
If a business’s activities are brought in-house, outsourced or transferred elsewhere.
If a contract for services is moved from one (service) provider to another – this is also known as re-tendering. It does NOT apply to the supply of goods; a service must be supplied for TUPE to apply. It also doesn’t apply to single-event activities, or for activities of short-term duration i.e. a conference held over the course of one week.

What does this mean in practice?

Employees from the newly-acquired business, service or contract, transfer automatically to the new employer on a date to be agreed by both parties – that is, between the outgoing (old) employer aka the ‘Transferor’ and the incoming (new) employer, aka the ‘Transferee.’

The employees’ existing terms and conditions of employment and continuity of service transfer with them, including rights to salary, job title, sick pay and accrued entitlements such as bonuses or holiday. They also receive certain protections around dismissal and redundancy. The only area not protected is occupational pensions, which will not transfer with employees. However new pension scheme arrangements must be put in place by the new employer, and due to the newer pension regulations, people must be auto-enrolled and given the choice to opt-out if they wish to.

Employees are not regarded as dismissed under TUPE, so a transfer does not trigger an entitlement to redundancy pay or pay in lieu of notice unless there is an actual dismissal.

Common errors/misconceptions

Disagreement between parties as to whether TUPE applies or not

Test whether a business has transferred by asking whether the core assets of the business will transfer to the incoming employer? Will they be used in essentially the same kind of business activity as they were before?
Assets can be premises, equipment, work in progress, goodwill (such as the value of a brand name or a customer base), intellectual property, employees (a business transfer may occur just by reason of the transfer of the majority of the staff).
In the case of a service transfer, ask yourself how the service will be carried out and organised by the incoming employer; will groups and activities be organised in broadly the same way?
If you’re unsure about the above, seek advice…we’re here and ready to support you 😊

Failing to plan

Make sure you are fully aware of every step you have to take, and how much time will be required for this, before you start any process!
Work with the other party to agree a timescale and action plan for i.e. information and consultation, who will attend which meetings, who will generate written correspondence, when/how employee information will transfer etc. so that you are both clear from the outset and each ‘doing your bit.’

Not taking legal or HR advice before starting the process, and therefore not being aware of statutory obligations

It goes without saying, get hold of the right information and take the relevant advice! Jaluch is not in the habit of overselling, selling through fear or taking advantage, but we are here to support in a cost effective, plain English and timely way so please do call us to avoid unnecessary hold ups or legal action.
Ensure any actions are legally compliant and to help manage the risks and potential liabilities of TUPE within the commercial context.

Failure to transfer people who should be included

All employees assigned to the business (or part of the business) or service/contract that is transferring will transfer with it.
Make sure you liaise with the other party about who is affected, and consider people who have split job functions (within and outside of, the transferring business/service). Amount of time spent on each activity can be a useful guide but it may be necessary to look at the nature of the job and identify core tasks, as these situations are almost always based on individual facts and can be an interesting one to defend in court!

Failure to appropriately consult

The penalty for non-compliance is up to 13 weeks’ (uncapped) pay per affected employee.
Make sure you understand the difference between Informing and Consulting, and with the latter, make the process meaningful and ensure you respond to each and every representation made, with a reason for any rejected ideas.

As we have said above, if you have a potential TUPE situation then please do get in touch with us for pragmatic, no-nonsense support. No onerous or long-term contract is required as we have a pay-as-you-go option which can be very quickly set up so there is no delay in us giving you the support you need.

It’s never too late to manage a difficult employee or situation, so read on for more in-depth information or call us for advice!

Other support from Jaluch:

Election and training of staff/employee representatives for the purposes of TUPE
Chairing consultation meetings
Hearing and investigating grievances
Tribunal Claim responses and settlement negotiations
TUPE training for managers, HR or supervisors.

Have two more minutes and need some greater depth on this topic? Read on…

What are the key things I need to consider?

Liability and key requirements

Liability for the outgoing employers’ acts and omissions with regards to the transferring employees is passed across under TUPE to the incoming employer, so make sure both parties are clear on what this means…
The incoming employer (transferee) is required to give the outgoing employer details of any measures they envisage in relation to the transferring employees, to enable the outgoing employer to comply with their information and consultation obligations (see below).

Collective agreements/union recognition

The incoming employer (transferee) takes over any collective agreements for transferring employees and which were in force at the point of transfer, otherwise known as the ‘static approach.’ This means the terms and conditions of employment negotiated through collective bargaining as well as wider employment relations arrangements such as information and consultation frameworks, agreed before the transfer. If you’re not a party to any negotiated changes after the transfer, you’re not bound by them.
Union recognition transfers ONLY where the business keeps its identity and isn’t merged into the incoming employers’ organisation BUT to maintain good employee relations, before the transfer, the incoming employer should consider discussing the ongoing collective representation arrangements for transferring employees with the relevant Trade Union reps.

Staff representatives/consultation

The relevant employer must inform employee representatives/TU Reps of the employees affected by the transfer of the fact and proposed date of the transfer; the reasons for it; the legal, economic and social implications of the transfer for the affected employees; whether there will be any ‘measures’ made in connection to the transfer or not, and if so what they are. Details with regards to agency workers must also be given i.e. numbers, function they are in, the type of work they are undertaking. Informing is different to consultation as there is no need to debate or agree any points.
Formal consultation is required if the incoming or outgoing employer envisages ‘measures’ in relation to their respective employees. These aren’t defined in TUPE regulations however normally include actions, arrangements or steps that will have an effect on transferring employees e.g. moving from weekly to monthly pay or vice versa, redundancies, workplace relocation, different working patterns etc.
Meaningful consultation must be carried out with the intention of seeking the agreement of the employee representatives to the intended measures, and the relevant employer should consider and reply to any representations made, and if rejecting any, must state the reason why this is the case.
If you are a micro-business (with fewer than 10 employees) and have no existing appropriate representatives, no recognised unions and have not already invited the employees to elect representatives, you can inform and consult with the employees directly.

Dismissals and ETO reasons for dismissal

If an employee is dismissed because of the transfer itself, the dismissal is ‘automatically unfair’. However, dismissals can be fair if the reason for the dismissal is an ETO ‘Economic, Technical or Organisational reason entailing changes in the workplace,’ are evidenced as genuine redundancy situation and the employer follows a fair dismissal procedure.
To bring an unfair dismissal claim based on the transfer the employee must still meet the qualifying service requirement i.e. 2 years continuous service

Redundancies

If you are the incoming employer and want to implement redundancies after the transfer i.e. because you have your own employees carrying out functions involved in the transferring business or service, and are proposing to make 20 or more redundancies at one establishment within a period of 90 days or less, collective redundancy consultation obligations arise alongside TUPE obligations.
You can (start to) consult with the transferring employees about potential redundancies where there is or is likely to be a relevant transfer, provided the outgoing employer agrees but you cannot confirm any redundancies prior to the transfer.

Contractual changes

Contrary to popular belief, changes to terms and conditions can be made during TUPE. However, they’ll only be valid if there is an ETO reason and provided the employer and employee agree the change.
An ETO reason (see above) can’t be used just to cut costs or harmonise terms and conditions between existing and new employees. This is a complex area – seek legal advice before action is taken, because ultimately the courts may end up deciding if the change was fair or not, which could prove expensive!
Changes can be made after the transfer occurs if it is not connected to the TUPE, and the terms of the contract would have allowed the employer to make the change anyway, and/or if a new development arises i.e. the new employer wins an order from a new client and has to bring in change to meet their needs. Full consultation will be required.
Terms and conditions agreed in a collective agreement can be renegotiated one year after the transfer as long as the overall change is no less favourable to the employees involved.

Information provision

The outgoing employer must provide ‘Employee liability Information’ (ELI) about transferring employees to the incoming employer (normally in writing or in computer data files) not less than 28 days before the relevant transfer. This must include the identities of the transferring employees; their ages; their employment particulars i.e. terms and conditions; any active/live disciplinary and grievance records from the last 2 years; any collective agreements in force and finally, any outstanding claims they may have against the outgoing employer i.e. tribunal, personal injury claim etc.
As well as ELI, incoming employers often want additional information when considering a transfer. This is known as ‘Due Diligence.’ It only applies where there is a commercial contract between the two parties, because it forms the basis of warranties and indemnities in the commercial agreement concerning the TUPE transfer.
ELI and Due Diligence should be considered as part of the same process, where it’s agreed they both apply, and run together.

Refusal to transfer

You may have an employee tell you (as their outgoing employer) that they refuse to transfer to the new employer. If they wish to resign before the transfer they should submit this in writing along with their objection to the transfer of their employment.
This will mean they don’t transfer and their employment will cease at the point of TUPE transfer. They would normally need to work and be paid for their notice period; will lose any continuity of employment under their current contract and any associated accrued rights; won’t be entitled to any additional payments such as a redundancy payment where ETO redundancies are being made; but will be entitled to any outstanding wages owed and payment for any accrued but untaken annual leave at employment end date.
In these situations, where the resignation is not a valid constructive dismissal, the employee will not be entitled to claim unfair dismissal.

It’s never too late to manage a difficult employee or situation, call us for advice!

The information contained within this article is for general guidance only and represents our understanding of employment and associated law and employee relations issues as at the date of publication. Jaluch Limited, or any of its directors or employees, cannot be held responsible for any action or inaction taken in reliance upon the contents. Specific advice should be sought on all individual matters.