TUPE Transfers: Employer's Guide

TUPE transfers are complex and high-risk. Getting them wrong exposes both transferring and receiving employers to significant liability.

What Is TUPE?

The Regulations

Transfer of Undertakings (Protection of Employment) Regulations 2006:

• Protect employees when businesses transfer
• Automatic transfer of employment
• Continuity of service preserved
• Terms and conditions protected
• Dismissal for transfer is automatically unfair

Purpose

TUPE ensures:

• Employees don't lose their jobs just because business changes hands
• Terms and conditions are preserved
• Dismissals connected to transfer are restricted
• New employer inherits workforce obligations

When TUPE Applies

Business Transfers

Transfer of an economic entity that retains its identity.

Factors considered:

• Type of undertaking
• Whether tangible assets transfer
• Whether majority of employees taken on
• Whether customers transfer
• Degree of similarity before/after
• Duration of any suspension

Examples:

• Sale of a business as going concern
• Transfer of a shop to new operator
• Franchise changes

Service Provision Changes

When services transfer:

• Outsourcing: Activities done in-house go to contractor
• Insourcing: Contracted services brought in-house
• Re-tendering: Contract moves between contractors

Requirements:

• Organised grouping of employees
• Principal purpose is to carry out activities
• Activities don't consist solely of supply of goods

What's NOT Covered

• Share sales (no change of employer)
• Asset sales without transfer of activity
• One-off contracts
• Supply of goods only
• Transfer of undertaking by share transfer

Who Transfers

Assigned Employees

Employees who are "assigned" to the transferring entity:

• Their work is mainly for that part of business
• They spend most time on those activities
• Look at facts, not contract labels

Factors for Assignment

Consider:

• Where they physically work
• Whose budget pays them
• Who manages them
• What proportion of time on transferring activities
• How long they've worked on those activities
• Their contract terms

Disputes About Assignment

If disputed, consider:

• Documentary evidence
• Actual working pattern
• Management structure
• Business purpose

What Transfers

Automatic Transfer

On transfer day:

• Employment transfers to new employer
• Continuity of service preserved
• Same terms and conditions
• Accrued rights transfer

Terms That Transfer

• Pay and benefits
• Working hours
• Holiday entitlement
• Notice periods
• Contractual sick pay
• Commission and bonus schemes
• Job title and duties

What Doesn't Transfer

• Occupational pension rights (except specified)
• Criminal liability
• Terms that breach law after transfer

Pension Exception

Old age, invalidity, survivors' pension benefits don't transfer.

But new employer must:

• Provide a pension scheme
• Match contributions up to 6% (if employee contributes)
• Or equivalent value

Information and Consultation

Duty to Inform

Both old and new employer must inform employee representatives about:

• The transfer and when
• Reasons for transfer
• Legal, economic, and social implications
• Measures envisaged (or that none)

Timing

• Long enough before transfer
• To enable consultation if measures envisaged
• Typically 2-4 weeks minimum

Employee Representatives

Inform through:

• Recognised trade union
• Elected employee representatives
• Directly to employees (if no representatives and not reasonably practicable to elect)

Duty to Consult

If any measures envisaged affecting employees:

• Consult with representatives
• Consider their views
• Reply to representations
• Give reasons if rejecting

Failure to Inform/Consult

Penalty: Up to 13 weeks' actual pay per affected employee.

Joint liability between old and new employer.

Employee Liability Information (ELI)

What Must Be Provided

Transferor must give transferee:

• Identity and age of transferring employees
• Written employment particulars
• Disciplinary and grievance actions (last 2 years)
• Legal actions (last 2 years)
• Collective agreements

Timing

At least 28 days before transfer (or as soon as reasonably practicable).

Penalty for Failure

Minimum £500 per employee where failure causes loss.

Dismissals and TUPE

Automatically Unfair

Dismissal is automatically unfair if:

• Sole or principal reason is the transfer, OR
• Connected with the transfer and not an ETO reason

Applies to:

• Dismissal by old employer before transfer
• Dismissal by new employer after transfer

ETO Reasons

Economic, Technical, or Organisational reasons entailing changes in workforce:

Economic: Business reasons (cost cutting, efficiency) Technical: Equipment or processes Organisational: Structure changes

Must "entail changes in workforce":

• Changes to numbers employed, OR
• Changes to job functions

Still Need Fair Process

ETO reason makes dismissal potentially fair, but:

• Still need fair procedure
• Follow normal unfair dismissal rules
• Proper consultation for redundancy

Changing Terms and Conditions

General Rule

Changes connected to transfer are void (even if agreed).

Permitted Changes

Changes are permitted if:

• Unconnected to the transfer
• ETO reason entailing changes in workforce
• Sufficiently distant in time from transfer

Timing

No set period, but:

• Changes immediately after transfer are suspicious
• Longer the gap, more likely to be valid
• Evidence of genuine reason needed

Harmonisation

Can't immediately harmonise transferred employees' terms with existing workforce.

May be possible later if:

• Sufficient time passed
• Clear business reason
• Proper process followed
• Employee agreement obtained

Objection to Transfer

Employee's Right

Employees can object to transferring:

• Inform old employer before transfer
• Employment terminates on transfer date
• No automatic unfair dismissal claim
• No redundancy pay (usually)

Effect

Employee treated as having resigned:

• Continuity broken
• No statutory claims against either employer
• Unless dismissal/resignation was due to substantial detrimental change

Substantial Detrimental Change

If transfer involves substantial change to detriment:

• Employee can resign
• Treated as dismissal by employer
• Can claim unfair dismissal and/or redundancy

Due Diligence

For Buyer/New Contractor

Before transfer, investigate:

• Who will transfer
• Their terms and conditions
• Any claims or disputes
• Pension obligations
• Collective agreements

Key Documents

Request from seller/current contractor:

• List of employees
• Contracts of employment
• Staff handbook
• Payroll information
• Outstanding claims
• Disciplinary matters

Warranties and Indemnities

Commercial protection:

• Warranties about accuracy of information
• Indemnities for undisclosed liabilities
• Cover for pre-transfer claims

Common Scenarios

Outsourcing

Company contracts out cleaning to contractor.

TUPE applies if:

• Organised grouping of employees
• Principal purpose is cleaning
• Service continues

Effect:

• Cleaners transfer to contractor
• Keep existing terms
• Continuity preserved

Contract Re-tender

Contract for security services changes from Contractor A to Contractor B.

TUPE likely applies:

• Same activities continue
• Same employees likely assigned
• Service provision change

Insourcing

Company brings contracted IT support in-house.

TUPE applies:

• Service provision change
• IT staff transfer to company
• Become direct employees

Business Sale

Company sells a division as going concern.

TUPE applies:

• Business transfer
• Economic entity retains identity
• Employees assigned to division transfer

Practical Steps

For Transferor

1. Identify transferring employees
2. Gather ELI information
3. Provide ELI to transferee (28 days before)
4. Inform and consult representatives
5. Continue employing until transfer date
6. Hand over records

For Transferee

1. Request ELI information
2. Due diligence on workforce
3. Inform and consult representatives
4. Plan for integration
5. Communicate with transferring employees
6. Set up payroll and systems

Timeline

Timing	Action
As early as possible	Due diligence begins
28 days before	ELI provided
Before transfer	Inform and consult
Transfer date	Employees transfer
After transfer	Integration, no immediate changes

Checklist

Transferor

• Identify employees assigned to transfer
• Prepare ELI information
• Provide ELI 28 days before (or ASAP)
• Identify employee representatives
• Inform about transfer
• Consult on any measures
• Continue employing until transfer
• Hand over records

Transferee

• Request ELI early
• Review ELI for risks
• Due diligence on terms
• Identify any measures planned
• Inform and consult representatives
• Prepare for employees to join
• Set up payroll/systems
• Plan communication
• Document everything