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TUPE, business transfers and service provision changes

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AS businesses struggle with the financial implications of the current pandemic, many have had to consider the purchase or transfer of their current workforce, and some staff have dealt with their employment, moving to alternative employers.

When circumstances like this arise, it is helpful to understand the TUPE (transfer of undertakings) obligations under employment law.

Rabika Basran
Rabika Basran

When does TUPE apply?

There are two types of transfer that are protected under the TUPE regulations; business transfers and service provision changes.

A business transfer is where the business retains its economic entity following the transfer. This also applies in business mergers.

A service provision change is where a service provided in-house is awarded to another contractor (or vice versa) but the work itself remains fundamentally the same.

What transfers to the new employer?

The new employer will inherit all employees (including their terms and conditions and their continuity of service), liabilities for employees including any who may have been dismissed as a result of the transfer, ie if they can prove the sole or principal reason for the dismissal was the transfer (and not for an ‘economic, technical or organisational’ reason) and any trade union recognition within their workplace including any agreement (known as collective agreements) they may already have in place.

Is it possible for parties to contract out of TUPE?

It is not possible for employers to contract out of TUPE obligations, which are set out in the Transfer of Undertakings (Protection of Employment) Regulations 2006.

Therefore, as an employer, if you intend to take over a business, you will need to know who the seller currently employs or whom they engage to carry out their services.

You will also need to bear in mind that the automatic transfer applies equally to those who were employed immediately before the transfer (or would have otherwise been employed if not for the dismissal as a result of the transfer/connected to it).

Employee rights and the obligation to consult and inform

As mentioned above, an employee’s current contractual terms and conditions will automatically transfer to the new employer on the transfer date, therefore, before a transfer takes place, employers have an obligation to inform and, in some cases, commence consultation (of any proposed measures or changes in connection to the transfer) with representatives of the affected workforce.

This includes details of when the transfer is due to take place, why and the effects of the transfer.

Employees can bring claims for a failure to inform or consult, for which either the previous or the incoming employer may be liable.

An employee can also object to a TUPE transfer, however this can potentially affect the right to claim for redundancy pay or unfair dismissal.

After the transfer has taken place, the new employer may attempt to agree contractual changes with employees, however please note any variations in existing contracts may be void even if the employee consents to it.

If you would like to discuss any of the matters raised in this article further or require any adiditonal advice or information, please contact us at www.gardner-leader.co.uk

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