TUPE is an important area of employment law that relates to the protection of employee rights on the sale of a business or the contracting out of services. These regulations were overhauled in 2006. They have proved to be a controversial piece of legislation because, although they provide protection to employees, the regulations do not sit comfortably with the concept of outsourcing services to improve them and reduce costs.
What does TUPE mean for employees?
The regulations were introduced to protect employees when the business that employs them changes hands i.e. there is a transfer of an undertaking, (e.g. a takeover, merger, service provision change or outsourcing). This means that employees and their rights/ responsibilities automatically move from the old employer to the new employer when the business changes hands, enabling employees to enjoy the same terms and conditions, with continuity of employment, as they did with their previous employer.
The transfer must be notified to the employee representatives in advance of it happening, and the employees must be consulted with respect to any proposals that may affect them. A failure by the employer to consult the concerned employees could result in the employees receiving compensation of up to 13 weeks pay each.
Under TUPE, if an employee’s terms and conditions of employment change substantially to their detriment and these changes are due to the transfer, the employee has the right to resign and claim constructive dismissal.
What does this mean for businesses?
TUPE applies to many different types of business transactions and needs to be considered every time the business is involved in outsourcing, in-sourcing, acquiring or selling part (or all) of a business. Businesses regardless of size and sector need to be aware of the implications of TUPE.
If you take over a company, part of a company or the service of a company, you have a legal obligation to take on those employees who were part of that undertaking, business or part of the business at the time of the transfer, or would have been employed had they not been unfairly dismissed because of the transfer. These employees must be taken on on the same terms and conditions of employment as their previous employment with the old employer. In addition, in taking on the employees, all their rights and liabilities will transfer to the new employer.
An employee’s dismissal, if related to the transfer (and not for a genuine economic, technical, or organisational reason) will be automatically unfair. As such, the employee will be entitled to bring an employment tribunal claim for unfair dismissal provided, they have at least 2 years continuous service. The new employer could also face paying collective awards to all relevant employees of up to 13 weeks pay.
How can Taylor&Emmet LLP help?
TUPE regulations are complex and often very hard to determine when and where they apply. If any business thinks that a transaction may involve TUPE, it is essential they seek specialist legal advice in order to fully understand their statutory obligations as there are liabilities and financial penalties associated with non-compliance of TUPE regulations. Taylor&Emmet’s Employment Team are experienced in advising businesses on the impact of TUPE on all commercial transactions.