The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) exist to protect employees working in a business that transfers to another business.

When does TUPE apply?

TUPE applies where there is one of two types of "relevant transfer":

  1. A "business transfer": i.e. the transfer of a business where there is a transfer of an “economic entity” that retains its identity.

An economic entity is an organised grouping of resources aimed at pursuing an economic activity, and can include part of a business.

The economic entity retains its identity if the operation is being continued. A mere change in the way the operation is carried out does not necessarily change its identity.

  1. A “service provision change”, for example a client changing contractors or bringing the work in-house.

Here, there must be an organised group of employees before the change whose principal purpose is to carry out the activities on behalf of the client. And the activities must be fundamentally the same after the transfer.

It is possible for a transfer to be both a business transfer and a service provision change.

What does TUPE do?

If TUPE applies then:

  1. Anyone employed by the transferor in the "organised grouping of resources" immediately before the transfer becomes an employee of the transferee.
  2. All rights, powers, duties and liabilities under the employment contracts pass to the transferee. This could even include trade union recognition in some circumstances.
  3. Any changes to employees' terms will be void if the principal reason for the change is the transfer itself and if there is no ETO reason. Harmonisation is therefore prohibited and even if the employees consent they could later change their mind and claim any back losses.
  4. Any dismissal will be automatically unfair where the principal reason for it is the transfer and where there is not an ETO reason. Even if there is an ETO reason it will be necessary to show that the dismissal was procedurally fair. This will include any resignations in response to substantial changes in working conditions to the employee's material detriment.

Information and Consultation

Both the transferor and transferee must inform and (if any "measures" are proposed in relation to the employees) consult representatives of their own affected employees in relation to the transfer. If they fail to do so, an employment tribunal can award up to 13 weeks' actual pay for each affected employee. An employer with fewer than 10 employees is entitled to inform and consult affected employees directly in certain circumstances.

For more information, please click here to contact our Employment team.


Posted on 16/11/2016 in Legal Updates

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