The law in the UK protects employees’ rights when the part of the business they work in is sold or transfers to another business.
It also protects employees when there is a “service provision change”, when the service their employment is attached to transfers from one business to another or the services are brought in-house, outsourced or reassigned.
Such transfers are often referred to under the term “TUPE” transfer, which comes from the legislation governing it: The Transfer of Undertakings (Protection of Employment) Regulations 2006.
This is a very complex area of law and you should take legal advice if you believe it applies. We cannot advise on whether TUPE or not TUPE applies as this will be a matter of law, 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.
What is TUPE?
In broad terms, TUPE protects an employee’s terms and conditions of employment when a business or service, or part of one, transfers to a new employer.
When does TUPE apply?
TUPE applies when there is a relevant transfer:
- A transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity (a business transfer) e.g. a theatre sells its separate box office to another ticket provider; or
- A service provision change happens where (a) client ceases to do activities on its own behalf and are carried out by another (a contractor) to do work on the client’s behalf (outsourcing or contracting out); (b) reassigning such a contract 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 (bringing the work “in-house”, contracting in or in sourcing (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, if you work for a cleaning and security company – the cleaning department and assets are bought by 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, if you work for a cleaning agency that provides cleaning services to a number of clients but you work only for one client. If the client you clean for decides to end its contract with the agency and move to another cleaning agency, your employment should transfer to the new agency.
The technical wording in TUPE talks about transferor and transferee. TUPE applies to a transfer from A – the transferor (usually the seller of a business or client seeking to outsource a service) to B the transferee (usually the buyer or contractor seeking to provide the outsourced service).
What happens if TUPE applies?
If TUPE applies, all employees who are employed by A (the transferor) in the “organised grouping of resources or employees” immediately before the transfer automatically become B’s (the transferee’s) employees. Critically, these employees transfer on the same terms of employment (including pay) they previously had with A and without a break in their period of employment. This includes employees who are dismissed before the transfer, but by reason of the transfer where there is not an “economic, technical or organisational reason entailing changes in the workforce” (often called an ETO reason).
All rights, powers, duties and liabilities under the employment contracts with A pass to B (the transferee). This can include trade union recognition. Any changes made to an employees’ terms by A or B will be void if the sole or principal reason for the change is the transfer itself and is not an ETO reason.
Any dismissal by A or B will be automatically unfair dismissal where the sole or principal reason for the dismissal is the transfer itself and is not an ETO reason.
If the dismissal is for an ETO reason it will also be necessary to show that the dismissal was procedurally fair. 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.
Employees may object or refuse to be transferred from A to B if for example they object to the identity of the new employer, but the effect is to terminate the employment without any right to compensation (on the basis that all people should be able to choose who they work for).
The employer must provide information to its affected employees. If they propose any “measures”, which is defined pretty widely they must consult representatives of their own affected employees in relation to the transfer. If they fail to do so, an employment tribunal can award up to 13 weeks’ actual pay for each affected employee. Employers with fewer than 10 employees can inform and consult directly with affected employees in certain circumstances.
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.
What are my rights in a TUPE transfer?
After a TUPE transfer an employee should be treated as having always been employed by the new employer, with the same continuity of employment (e.g. the same start date) and same terms and conditions (e.g. pay and holiday). If for example, the business you work for is transferred to a new company, that new company should not change your salary, your holiday or your other terms and conditions without your agreement and any changes may be void (unless they are for an ETO reason).
If your employment has transferred under TUPE your rights to statutory family leave and pay 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 maternity leave, SMP and other rights. Your new employer will be responsible for the payment of any maternity pay.
Essentially, you should be no worse off due to your employer having changed. There are limited exceptions to this, for example, redundancies and the insolvency rules are different too.
If you TUPE transfer to a new employer, you should not be dismissed because of the transfer. If you are dismissed because of the transfer this will be automatically unfair dismissal, unless there is an ETO reason. The new employer has to continue to employ you on the same terms and conditions unless the new employer can demonstrate there is an Economic, Technical or Organisation (ETO) reason for the dismissal, to make staff changes, or changes to terms and conditions, following a TUPE transfer.
If your previous employer recognised your union, then the new employer has to recognise them too.
If your old or new employer tries to change your terms and conditions or dismisses you, and you think it is because of the transfer, you should seek legal advice.
What must my employer do?
Identify appropriate representatives
TUPE requires your old employer and new employer to inform and possibly consult with appropriate representatives. Appropriate representatives will be the representatives of an independent trade union recognised by your employer. If there is no union then it will be employee representatives elected by employees. Where there are no union reps or elected representatives, your employer should invite affected employees to elect representatives. There is an exception if your employer has less than 10 employees, it may inform and consult directly with all affected employees directly and does not need to hold elections.
What information should be provided and when to appropriate representatives?
The transferor (A) must give specific information to appropriate representatives of employees affected by the transfer, which should then be provided to you. This includes:
- 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;
- When the transfer is to take place;
- The reasons for the transfer;
- The ways in which the transfer will affect employees and which employees will be affected
- 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.
- The economic implications e.g. any potential effect on the employees’ pay or benefits;
- The social implications e.g. changes in working hours or place of work,
- Any measures which the employer A (transferor) envisage might be taken;
- Any measures which employer B (transferee) envisages might by taken;
- Whether the old or new employer envisages changing working practices, and if so, what measures, in relation to its affected employees in connection with the transfer.
- The number of agency workers temporarily working for and under the supervision and of the old or new employer.
- 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”
Should my employer consult with me?
There will always be a duty to inform appropriate representatives of employees that their employment is transferring.
The duty to consult only arises if employer A or B envisages “measures” as a result of the transfer. Measures are any action, step or arrangement by either employer A or employer B and must be definite plans or proposals for change. The requirement to consult does not just involve those who are transferring but also those who may be affected by the TUPE transfer. Your employer should consult with your appropriate representatives (see above) about the measures with a view to seeking agreement to measures proposed to be taken.
“Consultation” is essentially a series of meetings between appropriate representatives, your current employer and possibly your future employer. A consultation should normally take at least two weeks from start to finish, often 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 over all areas of the proposed redundancies or the changes/measures it intends to take over the TUPE transfer.
If redundancies are proposed and the number of employees who may be made redundant will exceed 20, the collective consultation obligations in relation to redundancies may also arise. 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.
What potential claims do I have if I am dismissed because of the transfer or if my employer failed to inform and consult?
If you are dismissed as a result of the transfer it is automatically unfair if there is not an ETO reason.
If your employer fails to inform or adequately consult with your employee representatives (i.e. by not giving enough information or not allowing enough time or not engaging in consultation), your employee representatives need to bring a claim in the Employment Tribunal for a protective award.
A claim for a failure to inform and consult employee representatives on a transfer of an undertaking is covered by the requirement for ACAS early conciliation and should be brought within three months less a day of the date of the transfer.
If sucessful, a tribunal has the discretion to make a a financial award of up to 13 weeks’ full pay per affected employee for failure to inform and consult. The amount awarded will depend on the seriousness of the breach.
You can “object” to transfer to the new employer, but should be aware that this results in your employment ending immediately on transfer and losing your employment rights.
The role of employee representatives
Depending on the number of employees transferring, this might involve your trade union, or by you electing colleagues to represent you in discussions with both your current and future employer.
If you are an elected representative, your role is to:
- Receive information from management about the TUPE transfer and any measures being proposed, whether in writing or at meetings.
- Ensure that the employees that you represent know who you are and how to contact you during the information and consultation period.
- Share information from management with the employees that you represent, and explain the process and any proposed measures to them.
- Talk to your fellow representatives about the process and any proposed measures.
- Act as a point of contact on relevant issues.
- Attend meetings to consult on the TUPE transfer and any measures being proposed.
- Make representations in writing or at meetings (or both).
- Gather questions and views from the employees that you represent and feed them back to us in writing or at meetings (or both).
- Keep the employees informed of progress and any developments during the consultation.
- Share the information provided by management with the employees that you represent and obtain their views.
- Be aware of the obligation of confidentiality for certain information.
When TUPE does not apply
TUPE does not apply in certain situations, such as when your entire company is sold (where the shares are bought out rather than a part of the company is sold), as your employer remains the same.
TUPE is relaxed when your old employer is closing down due to financial or commercial reasons. This means that your old terms and conditions are not protected in the same way.
The reason for this is that a new company will be more likely to buy a failing company if they do not have to worry about matching all the employees’ old contract terms.
This advice applies in England, Wales and Scotland. If you live in another part of the UK, the law may differ.
If you have further questions and would like to contact our advice team please use our advice contact form below or call us.