TUPE – Business Transfer of Undertaking Regulations – Employers

TUPE – When a business or contract transfers to another owner there are duties on both the transferor and transferee in relation to informing and consulting employees. Failure to go through the proper procedures can result in the employment tribunal making punitive orders of compensation against employees. A failure to inform and consult can be very expensive. We will guide you through this complicated process.

TUPE applies to a “relevant transfer”, which means either or both of the following:

  • A transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity (a business transfer)

This involves three elements:

    • an economic entity;
    • a transfer of that economic entity; and
    • the economic entity retaining its identity following the transfer.
  • A client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work “in-house” (a service provision change)

Where there is a relevant transfer:

  • The contracts of employment of those employees employed by the transferor and “assigned to the organised grouping of resources or employees that is subject to the relevant transfer” automatically transfer to the transferee on their existing terms.
  • The transferee effectively steps into the transferor’s shoes with regard to the transferring employees. All of the transferor’s rights, powers, duties and liabilities under or in connection with the transferring employees’ contracts pass to the transferee and any acts or omissions of the transferor before the transfer are treated as having been done by the transferee, TUPE).
  • Employees who object to the transfer do not become employees of the transferee. Instead, their contracts of employment terminate by operation of law on the transfer date. There is no dismissal.

Getting the TUPE provisions right and following the correct procedure is essential.  Dismissals will be automatically unfair if the sole or principal reason for the dismissal is the transfer itself. If, however, the reason is an Economic, Technical or Organisational reason, then they will instead be potentially unfair.

A failure to comply with these obligations exposes the parties liable to pay compensation equivalent to up to 13 weeks’ uncapped pay. The transferor and transferee may, in certain circumstances, be held to be jointly and severally liable.

For further information on TUPE and how our Employment Law Team can help, call Rothera Sharp today on Nottingham 0800 088 6280 or send us an email to enquiries@rotherasharp.co.uk