TUPE Advice for Employers

TUPE can create different issues for each side of a transaction. The outgoing employer must identify which employees are assigned to the transferring business or service. The incoming employer needs reliable information about the workforce and the liabilities it may inherit. Both employers must consider their duties to inform and consult affected employees or their representatives before the transfer.

At Pearcelegal, we advise employers across Solihull and the West Midlands on the employment aspects of business transfers and service provision changes. We can assess whether TUPE is likely to apply and help you prepare for consultation. We can also advise on the treatment of affected employees and any measures proposed in connection with the transfer.

TUPE should be considered at the beginning of the transaction. Questions about employee assignment and proposed workforce changes can affect the deal terms. They can also affect the information exchanged between the parties and the time needed before completion. Early advice gives you time to agree responsibilities and communicate with employees before the transfer takes place.

Contact Pearcelegal on 0121 270 2700 to arrange a free initial consultation with a solicitor, or complete our contact form.

How can we help with TUPE?

You may need advice as an outgoing employer, an incoming employer or a business commissioning outsourced services. We can define the work required at the outset and focus on the issues created by your proposed transfer.

Does TUPE apply to your transfer?

TUPE may apply where an economic entity transfers and retains its identity. The regulations may also apply to a qualifying service provision change when work is outsourced or moved between contractors. Insourcing can fall within the same rules. Each situation depends on the statutory conditions and the facts of the arrangement.

For a service provision change, the activities carried on after the change must be fundamentally the same as those carried on before it. Before the change, there must usually be an organised grouping of employees in Great Britain whose principal purpose is carrying out those activities for the client. The rules exclude certain arrangements involving a single specific event or a task of short-term duration.

A share sale does not usually change the employer because the employing company remains the same legal entity. TUPE will therefore not ordinarily apply merely because its shares change ownership. The transaction may still create employment issues, so the structure and planned workforce changes should be reviewed before terms are finalised.

What happens to transferring employees?

Where TUPE applies, the contracts of assigned employees generally transfer to the incoming employer. Their continuity of employment is preserved. Rights and liabilities connected with those contracts also transfer in most cases, and qualifying pre-transfer acts or omissions are treated as acts or omissions of the incoming employer.

Assignment is fact-sensitive. An employee’s job description and place within the organisation may be relevant. The proportion of working time devoted to the activities can also help, but no single factor necessarily decides the issue. We can review the operation as a whole and advise which employees are likely to transfer.

Occupational pension rights require separate analysis. TUPE excludes certain rights relating to old-age, invalidity or survivors’ benefits under an occupational pension scheme from the ordinary automatic-transfer rule. Other pension obligations may still arise under separate legislation or the transaction documents, so pensions advice may be required.

What information must you provide?

If you are the outgoing employer, you must usually give the incoming employer employee liability information at least 28 days before the transfer. Special circumstances can alter that timetable where compliance is not reasonably practicable. You must also notify the incoming employer in writing if the information changes after disclosure.

The statutory information covers each transferring employee’s identity and age. It also includes the employment particulars required by section 1 of the Employment Rights Act 1996, relevant collective agreements and specified information about recent disciplinary action or grievances. Details of relevant legal proceedings and potential claims must also be included.

An incoming employer can bring a tribunal claim if the outgoing employer fails to meet the disclosure duty. Compensation is normally at least £500 for each affected employee, unless the tribunal considers a lower sum just and equitable. Transaction warranties and indemnities can allocate financial risk between the businesses, but they do not remove employee rights.

How should you inform and consult?

Before the transfer, each employer must provide prescribed information to appropriate representatives of its affected employees. The information must be given long enough before the transfer to allow consultation. Where an employer envisages measures, it must consult with a view to seeking agreement and consider representations made by the representatives.

Affected employees can include people who will remain with the outgoing employer. Employees already working for the incoming employer can also be affected by the transfer or proposed measures. If a recognised trade union covers the affected employees, consultation usually takes place through its representatives. Otherwise, existing authorised representatives or representatives elected for the transfer may be used.

Direct consultation may be available where no appropriate representatives exist and the employer has not invited an election. The employer must have fewer than 50 employees or fewer than 10 employees must be transferring. The regulations set the detailed conditions, so the proposed approach should be checked before consultation begins.

Failure to inform or consult can lead to a tribunal award of up to 13 weeks’ pay for each affected employee. Depending on the breach, the outgoing and incoming employers may share liability. Clear records of the information provided and the consultation undertaken can help demonstrate compliance.

Can you change terms after transfer?

A contractual variation is generally void if the sole or principal reason is the transfer. A change may be valid where the main reason is an economic, technical or organisational reason involving a workforce change and the employee agrees. A contractual power to make the change may also be relevant, although the wording and ordinary contract principles still need to be considered.

Harmonising terms solely because the incoming employer now has employees on different contracts is unlikely to provide a lawful reason for reducing transferred terms. Changes that improve an employee’s terms can be treated differently. Changes unconnected with the transfer remain possible, subject to agreement and the usual rules for varying employment contracts.

Terms derived from a collective agreement can sometimes be renegotiated after one year. The change must leave the employee’s contractual rights and obligations no less favourable overall. We can assess the reason for a proposed change and advise on the agreement and consultation process required.

Can redundancies follow a TUPE transfer?

A dismissal is automatically unfair if the sole or principal reason is the transfer itself. The special automatic-unfairness rule may not apply where an economic or technical reason involves changes in the workforce. An organisational reason involving such a change can have the same result. The employer must still establish a potentially fair reason and follow a fair process.

The incoming employer can sometimes begin collective redundancy consultation before completion if the outgoing employer agrees. Pre-transfer consultation requires careful coordination. Employees should not be selected or dismissed by the incoming employer before they transfer, and separate collective consultation rules may apply if the statutory threshold is reached.

Any proposed redundancy exercise should be planned alongside the TUPE process. Selection pools and criteria must reflect the business requirements without penalising employees because they transferred. We can advise on the proposed structure and prepare the documents needed for consultation.

Why choose Pearcelegal?

Get in touch

TUPE can affect the employees and liabilities included in a business transfer or service change. Pearcelegal can help you establish whether the regulations apply and prepare a lawful process for the people affected. Contact Pearcelegal on 0121 270 2700 today to arrange a free 30 minute consultation with a solicitor. You can also fill in our contact form.