The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) provides for the transfer of employees following the transfer of a business or where services are outsourced (collectively referred to as “relevant transfers”).
Any business concerned with a transaction involving the sale or purchase of a business concern (or part), the sale or purchase of assets or the outsourcing of a service (such as cleaning or catering) will likely need to consider the impact of TUPE in relation to the transaction.
For TUPE purposes the seller or outsourcing business in a transaction is generally referred to as the “transferor” and the buyer or the service provider in respect of an outsourcing is generally referred to as the “transferee”.
Effect of TUPE
The key aim of TUPE is to ensure employees are not affected by a change of employer as a result of a change in ownership or management. In order to achieve this aim, TUPE applies automatically to relevant transfers and has the following effects:
Contracts of employment automatically transfer from the transferor to the transferee,
The contracts of employment transfer without amendment and all of the entitlements and liabilities of the contracts transfer to the transferee. Employees’ length of service with the transferor is preserved,
The transferee is not permitted, save in limited circumstances, to alter transferring employees’ terms and conditions of employment as a result of the transfer, and
Both the transferor and the transferee have obligations to inform (and possibly consult) with employees concerning the transfer.
Employee Liability Information
The transferor is required, further to regulation 11 of TUPE, to provide the transferee with certain information regarding transferring employees. This is generally referred to as “employee liability information” or “ELI”.
In general, the information to be provided includes the details the transferor would be obliged to provide employees with at the outset of their employment to include rates of pay, working hours, entitlement to holiday and notice amongst other basic provisions. In practice, particularly with a business or asset purchase the buyer will want to undertake due diligence which may go further than the minimum required ELI that is required by TUPE.
ELI must be provided to the transferee not less than 28 days before the transfer (although in practice this is often not adhered to). If a transferor fails to provide a transferee with the required ELI or fails to provide complete and accurate ELI, the transferee may bring a claim for any loss arising from such failure.
Informing and Consulting Employees
The transferor and transferee have obligations under TUPE to inform (and in some cases consult with) their employees in relation to a relevant transfer.
Obligations of the transferor:
The transferor is required to inform affected employees of the fact of the transfer and any measures to be taken by the transferor or transferee which may impact the transferring employees as a result of a transfer,
In order to comply with the obligation to inform affected employees, the transferor must provide information to employee representatives who represent the affected employees.
Where there are no existing employee representatives (or a union) the transferor must allow the affected employees to elect representatives. It is generally not sufficient for the transferor to simply inform the affected employees directly
Obligations of the transferee:
The transferee must provide the transferor with details of any changes (generally referred to as “measures”) to be implemented post transfer which may affect the transferring employees.
The transferee may need to consult with affected employees with regard to any measures it anticipates implementing (such consultation may be required with both the transferee’s existing staff and the transferring employees).
A failure in respect of the obligation to inform (and where necessary, consult with) employees may lead to claims by the affected employees and or the transferor/transferee. Claims by employees for a failure to inform (or simply the failure to allow for the election of representatives) carry significant risks; the maximum award for damages is currently 13 weeks’ gross pay (uncapped) per employee.
Advice The above note provides an overview of the basic impact of TUPE. Specific advice should be taken well in advance of a potential transfer in order to avoid the risk of failing to comply with TUPE and the risk of claims which may carry significant liabilities.
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 Except where the transferor has 10 or fewer employees