TUPE is shorthand for the Transfer of Undertakings (Protection of Employment) Regulations 2006. What this act does is protect employee’s rights when the business they work for is sold or transferred to a new owner. Employees of the business, when the firm changes hands, automatically become employees of the new employer on the same terms and conditions. Their employment contract will be deemed as made with the new employer and their continuity of service and other rights are preserved.
TUPE applies when an undertaking or part of it is transferred from one employer to another, such as:
- where all or part of a sole trader’s business or partnership is sold or otherwise transferred;
- where a company or part of it is bought or acquired by another (if the second company buys or acquires the assets and then runs the business rather than acquiring the shares only);
- where two companies cease to exist and combine to form a third;
- where a contract to provide goods or services is transferred in circumstances which amount to the transfer of a business or undertaking to a new employer.
The TUPE regulations will apply regardless of the size of the transferred business. It will apply from large organisations employing thousands of employees to a small business such as a village shop with one assistant.
There will, however, be some situations where TUPE does not apply. These are largely limited to:
- Transfers by shares in the company. When a company’s shares are sold to new shareholders, there is no transfer as such of the business: the same company continues to be the employer and therefore the TUPE requirements are irrelevant.
- Transfers of business assets only. This would be in a situation where there is for example a sale of the businesses equipment. Providing that the business continues as a going concern there will be no changes in the employment contract.
- Transfers of a contract to provide goods or services where this doesn’t involve the transfer of a business or part of a business.
- Transfers of businesses situated outside the UK.
Written details of the employees who are to be transferred must be provided by the outgoing employer a minimum of 14 days before the transfer. The details provided must include the employees’:
- particulars of employment,
- disciplinary and grievance records,
- employees’ claims and collective agreements.
Details of all associated rights and liabilities concerning the employee must also be provided.
Employees may object to a transfer, although if they refuse the transfer they will effectively terminate their contract of employment. In most cases they would not be able to claim unfair dismissal before an employment tribunal because they have effectively resigned and have not been dismissed. However, should it be possible to show that the transfer would result in a substantial change for the worse in the employment terms, it might be possible to bring a claim for constructive dismissal.
The TUPE regulations make special provision for insolvent businesses. One of these is that the new business will not be liable for money owed to an employee by the old insolvent business if the money owed relates to redundancy, holiday pay or a compensation which has been ordered. These will be paid by the government. Another special provision is that the restriction on varying the terms and conditions of employment are relaxed and the employer taking over the insolvent business will be allowed to vary the employment terms.