Business transfers are frequently occurring events in the corporate world. Whether it involves a merger, an acquisition, or a change of service providers, such transactions can have a significant impact on the employees.
Where there is a business transfer the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are likely to apply. TUPE is specifically designed to safeguard the rights of employees when a business is transferred to new ownership and hence why businesses need to be aware of their obligations to employees.
What is TUPE?
The TUPE regulations, known as the “Transfer of Undertakings (Protection of Employment) Regulations 2006,” as amended by the “Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014,” aim to protect employees’ rights during business transfers and service provision transfers.
The regulations ensure that employees maintain their terms and conditions of employment, including their pay, hours, holiday entitlement, and pension rights. Additionally, any existing collective agreements must be honoured by the new employer.
Key Principles of TUPE:
- Automatic Transfer of Employees: When a business transfer occurs, employees’ contracts are automatically transferred to the new employer, maintaining their existing terms and conditions.
- Protection against Unfair Dismissal: TUPE prohibits dismissing employees solely because of the transfer, ensuring job security.
- Employee Consultation: Employers are required to inform and consult with employee representatives regarding the transfer, providing relevant information in a timely manner.
- Continuity of Employment: Employees’ continuous service is preserved during the transfer, impacting entitlements such as redundancy pay and holiday entitlements.
- Contractual Changes: Any changes to employees’ terms and conditions must be agreed upon by both parties and should not be solely due to the transfer.
When does TUPE apply?
TUPE applies in two primary scenarios:
1. Business Transfers:
- Sale of a Business: This occurs when you sell your entire business or a distinct operating unit that functions independently, such as a specific branch or department.
- Merger: When two companies join forces to form a new entity, TUPE will likely apply if the new company carries on the activities of the former companies with the same workforce.
- Acquisition: If you acquire another business, either wholly or in part, and continue its core operations, TUPE may apply.
- Transfer of Assets: Even if you don’t sell the entire business, transferring assets like equipment, machinery, or customer contracts might trigger TUPE if those assets are crucial for the continuation of the transferred business activity.
2. Service Provision Changes:
- Changing Contractors: When you switch the company responsible for providing a specific service, such as security, catering, or IT support, TUPE may apply if the transferred employees are essential for the continued delivery of that service.
- Outsourcing: When you outsource a function previously performed by your own employees to an external provider, TUPE may apply if the outsourced service is considered an “organised undertaking” and the employees involved are transferred to the new provider.
- Bringing Services Back In-House: If you decide to bring an outsourced service back under your own control, and the transferred employees are still essential for the delivery of that service, TUPE might apply.
What are the Employer’s Obligations under TUPE?
Both the outgoing employer (seller or transferor) and the incoming employer (buyer or transferee) have responsibilities under TUPE:
- Information and Consultation: Employers have a duty to inform and consult with recognised trade unions or elected employee representatives about the planned transfer. This must occur well in advance of the transfer date. Information should cover the reasons for the transfer, likely implications for employees, and the proposed measures for those employees.
- Transfer of Employees: Unless there is an ‘economic, technical, or organisational’ (ETO) reason that necessitates a change, all employees assigned to the transferring business automatically become employees of the new employer. These employees retain their existing terms and conditions of employment.
- Protection Against Dismissal: Employees cannot be dismissed simply because of the TUPE transfer. However, dismissals may be permitted if there is a genuine ETO reason related to the transfer.
- Changes to Terms and Conditions: The new employer cannot generally make changes to employment contracts that were in place at the time of the transfer, unless there is an ETO reason for doing so.
- Due Diligence: Conduct thorough due diligence to understand the implications of the transfer and identify potential risks and liabilities.
- Post-Transfer Integration: Plan for the integration of transferred employees into the new business structure, providing necessary support and training where required.
Conclusion
TUPE regulations serve to balance the interests of both employers and employees during business transfers, ensuring continuity of employment and protecting individuals’ rights. Employers must understand their obligations under TUPE to navigate business transfers successfully and avoid potential legal pitfalls.
For expert guidance and assistance with TUPE compliance and business transfers, you contact Davenport Solicitors by giving us a call on +44 020 7903 6888 or visiting www.davenportsolicitors.com
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