TUPE Transfer

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protect employees’ rights when they transfer to a new employer.

There are two types of transfer protected under TUPE:

1. Business Transfers - 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 after the transfer.
   Note: TUPE does not apply to mere transfers of assets only or share sales. The employment tribunal will take into account a number of factors to determine whether there is a “transfer of an economic entity which retains its identity”.
2. Service Provision Changes – A client engaging a contractor to do work on its behalf (outsourcing), reassigning such a contract or bringing the work "in-house" (in-sourcing­).  The activities carried on after a change in service provider must be "fundamentally or essentially the same" as those carried on before it and must not consist of the supply of goods and services.

Some transfers will be both a business transfer and a service provision change.

Effect of a transfer

Employees will transfer to the new employer on the same employment terms and with the same rights as they had with the outgoing employer. This includes rights under their contracts, redundancy, discrimination, unpaid wages, bonuses, holiday and personal injury claims. Note there are special provisions dealing with pension.

The new employer is prohibited from changing a transferring employee’s employment terms where the sole or principal reason for the change is the transfer and any changes will be void. There are, however, circumstances where changes can be made. These include where there is a term that allows for change in the employee contract of employment e.g. mobility clauses, and where there is an Economical, Technical or Operational reason (ETO reason). The ETO reason is narrow in scope as it must entail changes in the workplace e.g. change in numbers or function.

Employees who object to the transfer can lose specific employment rights.

What does an employer need to do?

Both the Transferee and the transferor are subject to specific requirements under the TUPE regulations. A basic summary of these is set out below:

1. Identification of employees affected.
2. The outgoing employer has a duty to provide the incoming employer with details of transferring employees (Employee Liability Information / ELI) not less than 28 days prior to the transfer. This will include: the identity and age of employees, particulars of employment, disciplinary and grievance records and any rights and liabilities that will transfer. The information should be taken on a specific date not more than 14 days before the date on which it is notified to the incoming employee.  
3. The incoming employer must provide the outgoing employer with information on any changes or proposals for changes that are to take place following the transfer (measures).
4. In good time, the outgoing employer and the incoming employer must inform and (where there are measures) consult with the recognised trade union or elected employee representatives (if no union) as to the details and implications of the transfer, which employees are affected or, if relevant, any measures being taken in connection with the transfer.
5. Where there is no union or employee representatives, representatives must be elected. For businesses with fewer that 10 employees, the employees can be informed and consulted directly if there is no union or are no employee representatives.

Potential liability

Liability can arise out of a failure to comply with the requirements of TUPE and can give rise to liability to pay compensation against just one of the employers or both. For example:

• Failure to notify ELI
• Failure to elect employee representatives
• Failure to inform and consult

Unfair dismissal

Where an employee of either employer is dismissed before or after a relevant transfer, they will be treated as automatically unfairly dismissed if the sole or principal reason for the dismissal is the transfer. 

If, however, the sole or principal reason is an ETO reason entailing changes in the workforce, the dismissal will not automatically be unfair. 

If an employee’s working conditions are significantly worse because of the transfer, they can object to the transfer or resign and claim unfair dismissal.