TUPE Guidance: Business Transfers and Employee Rights

TUPE Guidance Introduction: When a business is sold, or a new supplier takes over an existing contract, TUPE kicks in. TUPE is designed to protect employees’ rights during these changes. This guide goes into detail on TUPE, looking at business transfers, service provision changes, and employee rights.

What is TUPE?

What is a TUPE transfer? TUPE stands for Transfer of Undertakings (Protection of Employment) regulations. It means that employees’ employment contracts and terms transfer automatically to the new employer when a business transfer or service provision change occurs. This means employees keep their existing employment rights under the new management and can’t be changed unfairly.

When Does TUPE Apply?

TUPE applies in two scenarios:

• Business Transfers: This is when a business or part of a business is sold or transferred to another company. The economic entity of the business, and its employees, moves from the old employer to the new employer.
• Service Provision Changes: This is when a service previously provided by one company is transferred to a new supplier. It can include outsourcing, insourcing, or changing contractors for specific services.

In both cases, the employees transfer to the new company on the same contract terms they had with the previous employer. The employment transfers automatically, protecting their rights and continuity of service.

Rights of Affected Employees

Employees affected by a TUPE transfer retain their existing employment contracts and terms, which include:

• Continuous employment: All service years with the previous employer carry over to the new employer.
• Collective agreements: Any agreements negotiated by an independent trade union remain in place.
• Protection of employment: Employees keep their rights under the protection of employment regulations, so they can’t be dismissed simply because of the transfer, unless an ETO reason (economic, technical, or organisational reason) applies.

Employee Representatives

When a relevant transfer occurs, employee representatives or a trade union representative have a key role in informing and consulting with employees affected by the transfer. The new employer and the old employer must tell employees:

• About the business transfer.
• Any changes to employees’ roles.
• The date of the transfer.

Representatives should consult on behalf of the employees so they have a say in the transfer.

Risks: Unfair Dismissal and ETO Reasons

During a TUPE transfer, employees are protected from unfair dismissal related to the transfer itself. However, if a dismissal occurs due to an ETO reason (changes to the workforce, location, or economic conditions), it may be fair. In these cases, employees can bring a claim to an employment tribunal if they believe the dismissal was unfair. Claiming unfair dismissal can help protect their rights.

How TUPE Affects Different Industries

TUPE applies across all industries, private and public. So when public sector employees experience a service provision change, like a move to an in-house service, their employment rights are protected.

Agency workers are not covered by TUPE; however, the new employer must tell them about their role in the service provision. This transparency helps the transferring employees and the new contractor.

What Happens to Contracts of Employment?

During a TUPE transfer, contracts of employment don’t change. Employees keep their existing terms, and the new employer takes on the old employer’s obligations. This includes honouring any occupational pension schemes employees were entitled to under their previous employment.

Salary, holiday entitlement, and working hours stay the same. If the new employer wants to change these, they must have a valid ETO reason under the TUPE regulations. Changes without an ETO reason could lead to tribunal claims.

ETO Reasons in TUPE Transfers

In TUPE, ETO reasons (Economic, Technical, or Organisational reasons) are key. These are reasons related to the new employer’s needs, like cost-cutting or relocating the workforce. ETO reasons can sometimes justify dismissals or changes to employees’ terms post-transfer. But they must be communicated to affected employees to avoid legal challenges.

Service Provision Change and Organised Grouping

For a service provision change to be TUPE, an organised grouping of employees must exist whose main purpose is to carry out the activities that are transferring. This means the employees affected by the transfer move to the new contractor and keep their rights and roles.

Protecting Employees’ Rights and Communication

For a TUPE transfer to work, employers must protect employees’ rights and communicate openly. Here’s how:

• Inform employee reps: Early communication helps to address concerns.
• Consult on proposed changes: Discuss any changes that will affect employees due to the transfer.
• Honour existing employment rights: Continuity in pay, holidays, and service length.

TUPE Pitfalls and Misconceptions

Many businesses get TUPE wrong and end up in disputes or non-compliance. Common misconceptions are that TUPE doesn’t apply to short-term work or that employees can be dismissed because of a business transfer. But employment law protects workers and says TUPE applies whenever a relevant transfer occurs, regardless of the length of the service.

Summary: TUPE Protects Employees

TUPE is important for both employers and employees. It keeps contracts of employment safe during transitions, prevents unfair dismissal, and protects employee rights. As businesses change, TUPE provides a framework for stability for employees and clarity for employers, whether in the private sector, public sector, or service provision change.

TUPE is complicated, but by understanding the basics, businesses can be compliant and treat transferring employees fairly.