TUPE transfer – what it means, when does it apply, what happens and what are your rights?

TUPE is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246). In broad terms, where it applies, TUPE seeks to preserve employees’ employment and provide enhanced protection from changes to terms and conditions of employment and against dismissals which are connected to a TUPE transfer (‘the transfer’) (subject to certain exceptions some of which are summarised below). TUPE also creates obligations to inform and, where “measures” are envisaged, consult with appropriate representatives of affected employees (or, in certain cases, the employees directly).

This is a very complex area of law and you should take legal advice if you believe it applies. We cannot advise on whether or not TUPE applies in any particular situation, as this will be a fact-specific matter of law, and ultimately only a tribunal can decide this. The guide below has been created to give you a basic understanding of the position and what your rights might be if you are affected by a TUPE transfer.

When does TUPE apply?

TUPE applies when there is a “relevant transfer” which is:

• A transfer of a business or undertaking, or part of a business or undertaking, where there is a transfer of an economic entity that retains its identity (a business transfer); or
• A service provision change, where (a) a client ceases to do activities on its own behalf and those activities are instead carried out by another (a contractor) on the client’s behalf (outsourcing or contracting out); (b) such a contract is reassigned to a subsequent contractor (reassigning); or (c) activities cease to be carried out by a contractor and are carried out by the client on its own behalf e.g. bringing the work “in-house” (contracting in or insourcing) (a service provision change).

An example of a business transfer is if your employer sells part of its business to a new company. For instance, a cleaning and security company sells its cleaning department and associated assets to another company, which continues to provide services to its clients. In order for TUPE to apply, the business entity must transfer and retain its identity after the transfer.

A good example of a service provision change would be an insourcing or outsourcing arrangement. For instance, a cleaning agency provides cleaning services to a number of clients, one of whom decides to end its contract with the agency and move to another cleaning agency. In order for TUPE to apply, the activities before and afterwards must be fundamentally the same and the person on whose behalf the services are being provided must remain the same.

TUPE does not normally apply if the shares in a company are being sold to another company (in which cases typically employees will remain employed by the same employer before and after the sale).
The technical wording in TUPE talks about the transferor and the transferee . The transferor is usually the seller of a business or client seeking to outsource a service. The transferee is usually the buyer of the business or contractor seeking to provide the outsourced service.

What happens and what are your rights, if TUPE applies?

Automatic transfer of employment

If TUPE applies, all employees who are employed by the transferor in the relevant “organised grouping of resources or employees” immediately before the transfer automatically become employed by the transferee with effect from the transfer date. Critically, these employees transfer on the same terms of employment (including pay and contractual benefits) they previously had with the transferor and without a break in their period of employment. This includes employees who are dismissed by the transferor before the transfer, where the sole principal reason for the dismissal is the transfer and the transferor does not have an “economic, technical or organisational reason entailing changes in the workforce” (often called an ETO reason).

All rights, powers, duties and liabilities under the employees’ employment contracts with the transferor pass to the transferee. This can include trade union recognition.

If your employment has transferred under TUPE your rights to statutory family leave and pay and any enhanced contractual parental payment terms are unaffected. So, for instance, your right to take maternity leave and to receive Statutory Maternity Pay (SMP) is unaffected. The date that you started working for your original employer will be used to calculate your right to SMP, statutory redundancy and other rights. Your new employer will be responsible for the payment of any SMP or contractual enhanced maternity pay and for responsibilities towards you while pregnant or on maternity leave.

Protection against changes to terms and conditions

In broad terms, any changes made to a transferring employees’ contractual terms and conditions by the transferor or transferee will be void if the sole or principal reason for the change is the transfer itself. An important exception is where the transferor or transferee has a valid ETO reason and you agree to the change. There are other limited exceptions.

This means that you are likely to have different terms and conditions of employment compared to any employees who already work for the transferee. Sometimes, a transferee will try to ‘harmonise’ all terms and conditions (which means change your terms so you have the same as their other employees). However, they can only do this if it improves your terms, not if it makes you worse off. You are indefinitely protected from changes to your contractual terms where the sole or principal reason for which is the transfer.

If a proposed contract change is unrelated to the transfer, TUPE does not prevent you and your employer from making changes to your terms and conditions. Although do check our page on your rights where your employer is seeking to change your terms and conditions where it is not related to the transfer.

Protection against dismissal

Any dismissal by the transferor or transferee will be automatically unfair dismissal where the sole or principal reason for the dismissal is the transfer itself and is not an ETO reason.

Any dismissal by the transferor or transferee, where the sole or principal reason for the dismissal is the transfer itself, but the employer has an ETO reason must still be procedurally fair or it will be an unfair dismissal. See our pages on Unfair dismissal.

This will include any resignations in response to a serious (repudiatory) breach of contract or to substantial changes in working conditions to the employee’s material detriment resulting in a potential claim for constructive unfair dismissal.

Objecting to the transfer

Employees are entitled to object to the transfer (i.e., refuse to be transferred from the transferor to the transferee). They might do this if, for example, they object to the identity of the new employer. You should be aware, however, that the effect of an objection is to terminate the employee’s employment automatically by operation of law on the date that it would otherwise have transferred under TUPE without the need for any further notice of termination, or payment in lieu of notice, and without any right to compensation.

Information and consultation

Appropriate representatives of employees affected by the transfer or, in certain circumstances, the affected employees themselves, should be given information about the transfer and there should be consultation about any “measures” envisaged in connection with the transfer. The obligations to inform and consult can arise for both the transferor and transferee.

TUPE information and consultation: What must my employer do?

Appropriate representatives of affected employees or, in certain circumstances, the affected employees themselves, should be given information about the transfer and there should be consultation about any measures envisaged in connection with the transfer. Obligations arise on both the transferor and transferee in this regard.

Identify appropriate representatives

Appropriate representatives of the affected employees will be: (i) the representatives of an independent trade union recognised by your employer; or (ii) if there is no such union, any existing employee representatives elected by employees who have appropriate authority to act as employee representatives for the purposes of the TUPE information and consultation process. Where there are no union reps or appropriate existing elected representatives, the transferor (and transferee, if it has any “affected” employees) should invite affected employees to elect representatives.

There is an exception if: (a) your employer has less than 50 employees; or (b) for employers of any size, fewer than 10 employees are transferring. In either case there must be no existing appropriate representatives and the employer must not have invited any of the affected employees to elect employer representatives. Where the exception applies, your employer may inform and consult directly with all affected employees and does not need to hold elections

What information should be provided and when?

The transferor must give specific information to the appropriate representatives, (or to affected employees directly where one of the exceptions summarized above applies and the employer has elected to inform and consult with the affected employees directly). This includes:

1. The fact that the old employer is proposing to transfer the business to the new employer i.e. that a transfer is to take place;
2. When the transfer is proposed to take place;
3. The reasons for the transfer;
4. The ways in which the transfer will affect employees and which employees will be affected;
5. The legal implications e.g. the impact of TUPE on your legal rights, whether contractual or statutory and any proposed changes to terms or potential redundancies;
6. The economic implications e.g. any potential effect on the employees’ pay or benefits;
7. The social implications e.g. changes in working hours or place of work,
8. Any measures which the transferor envisages might be taken;
9. Any measures which the transferee envisages might be taken;
10. The number of agency workers temporarily working for and under the supervision and of the old or new employer; and
11. The parts of the undertaking in which those agency workers are working, and the types of work they are carrying out.

The information must be given to appropriate representatives “long enough before the relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees” (or the information must be given to affected employees directly where one of the exceptions summarised above applies and the employer has elected to inform and consult with the affected employees directly).

Is consultation required?

The duty to consult only arises if the transferor or transferee envisages “measures” as a result of the transfer. Measures are any action, step or arrangement by either the transferor or transferee and must be definite plans or proposals for change. This applies to minor changes, such as changing the date on which employees are paid, as well as more substantial changes, such as making redundancies, changing the terms and conditions of any of the employees’ employment contracts and/or non-contractual benefits and policies, and any proposed secondments. The requirement to consult does not just involve those who are transferring but also any employees who are not transferring but who may be affected by the TUPE transfer.

“Consultation” is usually a series of meetings between appropriate representatives (or affected employees where the exception applies and the employer has elected to inform and consult directly), the transferor and possibly the transferee. A consultation should normally take at least two weeks from start to finish, it often will take much longer. Consultation under TUPE means more than simply giving an opportunity to air views. It must be with a view to seeking agreement to the changes envisaged. In practice, this means that the employer must negotiate in good faith with your representatives regarding the measures it intends to take in connection with the TUPE transfer.

Overlap with collective redundancy consultation

If redundancies are proposed in connection with the transfer and the number of employees who may be made redundant will exceed 20 in a period of 90 days or less, the collective consultation obligations in relation to redundancies will also arise (TULRCA). The rules which deal with collective redundancies set out specific minimum time for consultation periods depending on the number of people being made redundant in a period of time. There may be overlapping duties to inform and consult under TUPE and TULRCA. If there has been a failure to consult under TULRCA employees can be awarded a protective award of up to 90 days pay for affected employees. See our pages on Collective Consultation for more information in this regard.

Key potential claims if rights are infringed

If you are an employee and are dismissed where the sole or principal reason is the transfer and the dismissing employer does not have an ETO reason, the dismissal will be automatically unfair dismissal (which does not have a qualifying period).

For employees who have sufficient qualifying service (currently, two years), if you are dismissed where the sole or principal reason is the transfer and the dismissing employer does have an ETO reason, the dismissal may still be unfair dismissal if it is not procedurally fair.

These employees can bring a claim in the Employment Tribunal, having first undertaken early conciliation via. ACAS. See our unfair dismissal page for more information regarding unfair dismissal and automatically unfair dismissal and starting a claim. Also see our pages on Early Conciliation and Time Limits for Employment Tribunal claims.

Changes to terms and conditions

If you transfer under TUPE and either the transferor or transferee has sought to change your terms and conditions and you consider that the sole or principal reason for the change is the transfer and none of the exceptions apply, you can bring a claim in the Employment Tribunal. This could be for a declaration that the relevant changes are void and/or unlawful deduction from wages or breach of contract. Compensation may be awarded where you have been deprived of a term and that has caused financial loss.

Further:

• TUPE preserves transferring employees’ right to resign and claim constructive dismissal and unfair dismissal where the transferee commits a repudiatory breach of your employment contract by seeking to impose changes in terms of employment; and
• Under TUPE there is an additional protection for transferring employees who may resign if the transfer involves a substantial change in their working conditions to their material detriment. Such a resignation is deemed to be a dismissal under the TUPE regulations.

This dismissal may be automatically unfair (irrespective of the employees length of service) or unfair under the normal unfair dismissal principles for those employees with sufficient service (currently, two years) (see above).

The employee would bring their claim in the employment tribunal.

Failure to inform and consult

If there is a failure to comply with obligations to elect employee representatives, to inform and, where measures are envisaged, consult employee representatives under TUPE, the remedy is a claim for compensation in the Employment Tribunal. A successful claim can result in the Employment Tribunal making a protective award of up to 13 weeks’ gross pay (which is not subject to a statutory limit) per affected employee. This claim is subject to the requirement for Early Conciliation to take place via ACAS and must be brought within three months of the transfer date (unless the Employment Tribunal extends the period where it agrees that it was not reasonably practicable for the claim to be lodged within that period). The claim should include both the transferor and the transferee.

As mentioned above, if there has been a failure to inform and consult about redundancies under TULRCA (which sets out collective consultation requirements for redundancies), the employees or their representatives may also be able to bring a claim for a protective award for this failure.

Who can bring a claim?

Where an employer has failed to comply with a requirement to inform or consult (or to elect employee representatives), the following persons can present a claim to an Employment Tribunal:

(a) in the case of a failure to elect employee representatives, any affected employees;
(b) in the case of any other failure relating to employee representatives, any employee representatives to whom the failure related;
(c) in the case of a failure relating to representatives of trade unions, the trade union; and
(d) in any other case, any affected employees.

Insolvency situations

Where the transferor is the subject of insolvency proceedings which are not terminal, relevant employees will still automatically transfer to the transferee and will receive enhanced unfair dismissal protection, however the transferee will have greater scope than normal to change transferring employees’ terms and conditions.

Where the transferor is subject to bankruptcy proceedings or similar which are with a view to liquidation, the normal TUPE rules do not apply in that employees will not automatically transfer to the transferee, and dismissals by reason of the transfer will not be automatically unfair.

TUPE is a complex area of employment law. We are unable to advise if it applies to your personal situation and cannot give bespoke advice on the full details which are beyond the remit of our service and so we recommend that you seek independent advice. Please do contact us to seek advice if your question is around general rights.

ACAS have lots of information on TUPE on their website here.

This advice applies in England, Wales and Scotland. If you live in another part of the UK, the law may differ. Please call our helpline for more details. If you are in Northern Ireland you can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.

If you have further questions and would like to contact our advice team please use our advice contact form below or call us.

We would love your feedback

• 

  Would your employer benefit from support from Working Families?

  Would your employer benefit from some support & guidance from Working Families? If you would like to make your employer aware of how Working Families can help them, we have an introduction letter template available that you can give to the relevant person in your organisation.