The purpose of the Transfer of Undertakings (Protection of Employment) Regulations are to protect the employment rights of employees when the place they work is taken over.
The transfer can take place as a result of a sale of a business or a “service provision change” which includes outsourcing a service, bringing an outsourced service “in house” or when there is a change in the contractor carrying out a particular contract.
It does not include a takeover of a company by new majority shareholders because the company remains the employer.
The Effects of a transfer
Anyone who buys a business or tenders for a contract must ensure they are fully advised of the effects of TUPE because it’s effect in many cases will result in them taking on the existing workforce on their existing terms and conditions.
It is not only the employees who transfer but also all liabilities which means that if there is any claim which an employee may have against the previous employer, after the transfer the employee can make the claim against the new employer.
In certain circumstances the new employer can claim from the old employer, but where a business is sold it is wise for the new employer to seek indemnities from the old employer.
Duties of the former employer
Before the transfer takes place the former employer has a duty to provide information about the employees to the new employer.
The former employer also has a duty to consult with employees representatives about the transfer. If this is not done, the employees may be able to claim compensation of up to 13 weeks pay from the new employer.
There is no obligation on an employee to agree to be transferred but if this happens then the employee’s employment is deemed to come to an end when the transfer takes place, but the employee does not normally have any right to claim either unfair dismissal nor a redundancy payment.
If an employee is dismissed because of the transfer, then the dismissal is automatically unfair.
If an employee is dismissed due to a reason connected with a transfer the dismissal can only be fair if it is for an “economic, technical or organisational reason requiring changes in the workforce.” This might be the case where the new employer does not require as large a workforce. However, it will be up to the new employer to make redundancies and carry out the redundancy consultation and selection process fairly.
Terms and conditions
For employees who do transfer, their terms and conditions must be preserved. Even if the employee signs to say they agree to a change in terms and conditions, any detrimental changes to their terms and conditions are void. There is no time limit on how much time must pass before changes can be made, if the changes are because of the transfer, they are void no matter how much time has gone by since the transfer took place.
Terms and conditions can be changed as a result of a transfer if the reason for the change is for an “economic, technical or organisational reason requiring changes in the workforce.” A change in the workforce usually requires a reduction in employees so this is not an exception which is widely available to employers.