When a business changes hands or outsources services, employees may be worried about their jobs. In the UK, Darwin Gray, a leading commercial law firm, can provide guidance on how the TUPE (Transfer of Undertakings (Protection of Employment) Regulations) protect employees affected by these changes. Whether it’s a business transfer or a service provision change, TUPE ensures that employees automatically transfer to the new employer with their existing terms and conditions intact.
In this post we’ll look at what TUPE is, how it works and what employees and employers need to know.
What is TUPE?
TUPE stands for Transfer of Undertakings (Protection of Employment). It’s a set of regulations that protects employees when the business they work for changes hands or the services they provide are outsourced to a new supplier. TUPE applies in the private and public sector so employees can’t be unfairly dismissed and their terms and conditions remain the same. Darwin Gray can help both employees and employers navigate the complexities of TUPE to ensure a smooth transition.
How Does TUPE Work?
When a relevant transfer occurs (a business transfer or service provision change) the affected employees are legally entitled to transfer to the new employer. These employees are called transferring employees. The incoming employer (the new company) takes over the employment contracts of the transferred employees so their existing terms and conditions remain the same.
Some key points of the TUPE process are:
- Inform and Consult: Employers must inform and consult with the affected employee before the transfer takes place. This is usually done through employee representatives or trade unions.
- Employee Liability Information: The outgoing employer (the old company) must provide the incoming employer with information about the employees, including grievance records, contracts and any outstanding disputes. This is called employee liability information.
- Protection of Employment Rights: TUPE protects employees from changes to their existing employment contracts such as reduced pay or benefits unless both parties agree to changes.
What Kinds of Transfers Does TUPE Apply To?
TUPE applies in two situations:
- Business Transfers: This is when the ownership of a business or part of a business is transferred from one employer to another. For example if a company is sold the employees transfer to the new employer along with the business.
- Service Provision Changes: TUPE also applies when a company outsources services, for example a restaurant changes food supplier or when services are brought back in-house. In these cases the employees who worked on those services will transfer to the new supplier.
Employees’ Rights Under TUPE
One of the main purposes of TUPE is to protect the rights of affected employees by a business transfer or service provision change. Under TUPE transferring employees are entitled to a range of protections so their employment contracts and rights are preserved after the transfer to the new employer. Below is a summary of the key rights employees have under TUPE.
1. Automatic Transfer of Employment
When a business transfer or service provision change occurs employees automatically transfer to the incoming employer. This means the employment relationship continues with the new employer and employees don’t need to reapply for their jobs. Their continuous employment is preserved which is important for calculating redundancy pay or for claims in case of unfair dismissal.
2. Preservation of Terms and Conditions
Under TUPE all existing employment rights and terms including salary, holiday entitlements, working hours and other contractual benefits are protected. The new employer can’t alter these terms unilaterally except where collective agreements are involved or where both parties agree to changes. This means transferring employees experience no detriment as a result of the transfer.
3. Protection Against Unfair Dismissal
If an employer dismisses an employee because of the transfer and the sole or principal reason for the dismissal is the transfer itself this is automatically unfair dismissal. Employees who believe they have been unfairly dismissed can bring their case to an employment tribunal. But if the dismissal is for a valid reason such as redundancy or a significant change in the business structure unrelated to the transfer the dismissal may be fair.
4. Consultation Rights
Before the transfer occurs both the outgoing and incoming employers must inform and consult with the employee representatives or a recognised independent trade union. During this consultation employees must be told about the transfer, its effects and any proposed changes the new employer will introduce. Failing to consult employees can result in a claim for compensation and employees may be awarded up to 13 weeks pay.
5. Redundancy Rights
If redundancies are necessary after the transfer employees’ redundancy pay and proper procedures are still protected. The new employer must follow the correct redundancy procedure and employees have the right to redundancy pay if they meet the legal requirements such as having worked for the company for two or more years.
6. Insolvency Situations
When a business is insolvent TUPE still offers protections but with some flexibility to save jobs. In some cases changes to an employment contract, including reductions in pay can be allowed if it’s part of a rescue plan for the business. But transferring employees are still protected from unfair dismissal and any unpaid wages or redundancy pay may be covered by the government in these situations.
7. Occupational Pension Schemes
TUPE doesn’t generally transfer occupational pension schemes from the old employer to the new employer but employees may still be entitled to pension rights under separate legislation. The new employer must offer a pension scheme that’s at least comparable to the one provided by the previous employer so employees’ terms relating to pensions are not ignored.
8. Right to Refuse the Transfer
Employees have the right to refuse the transfer but this comes with consequences. If an employee refuses they will be treated as having resigned and will not be entitled to redundancy pay or other compensation. That’s why it’s important for employees to think carefully and seek advice if they are unsure about the transfer.
What happens if TUPE is breached?
If the new employer fails to comply with TUPE the employees can claim for unfair dismissal or breach of contract at an employment tribunal. Employers who don’t meet the TUPE requirements can face significant fines and have to reinstate or compensate employees.
Can employees refuse to transfer?
Employees have the right to refuse the transfer to the new employer but this means they are resigning and will not be entitled to redundancy pay or other compensation. If they have concerns about the TUPE process they should seek advice from their union or legal representatives.
TUPE and insolvent businesses
When a business is insolvent TUPE still offers some protection. But the incoming employer may not be bound by all the terms of the existing contracts. In cases of insolvency redundancy or changes to employment terms can be allowed to save jobs and the business.
TUPE in outsourcing and service provision changes
Outsourced services like cleaning or catering are often subject to TUPE transfers. When a company hires a new service provider the employees transfer to the new company providing the service. The new employer must respect the employees’ terms of employment and offer equivalent jobs in accordance with TUPE regulations.
Summary
TUPE offers important protection for employees during business changes whether it’s a business transfer, outsourcing or service provision change. Employees’ existing employment rights are protected so they can’t be unfairly dismissed or forced into worse terms. For employers TUPE imposes strict obligations to inform and consult with employees and handle the transfer in accordance with the law. Whether you are an employee or an employer understanding TUPE and how it works is key to a smooth and fair transition during business change.
