TUPE is one of those words that many people are familiar with, but often do not know what this means in practical terms and what responsibilities this may impose on employers, or even when such obligations may arise. It is important that businesses are aware of where a transfer of undertakings may take place, and consequently the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE Regulations”) will apply. Why is this important? You guessed it; employers face claims being issued against them in an Employment Tribunal, and being liable to pay employees compensation, if they fail to comply with their obligations towards those assigned to the transferring activities, or otherwise impacted by the transfer.
As with most matters, the starting place is to establish when the TUPE Regulations may apply. A TUPE transfer occurs in the following two situations, known as “relevant transfers”:
- The business transfer e.g., an organisation, or even part of an organisation, is transferred (meaning its mains assets have transferred, but the activities being undertaken remain the same/similar, which would include where two businesses merge - ; or
- A service provision change – e.g., a service, for example IT services, are transferred to a new provider, meaning they would take over the contract for such services. This would include situations where:
- A contract comes to an end and is taken on by a new contractor (“retendering”);
- A contract ends and a business decides to not re-tender the work, but instead to bring the responsibility for the work back within their business (“insourcing); and
- Where a business decides to give the responsibility for work currently undertaken in-house to a contractor (“outsourcing”).
In any transfer, there would be the transferor (i.e., the entity that employs the employees at the time) and the transferee (the entity which acquires the transferor’s business or takes over providing services for the transferor). Sometimes both the transferor and transferee can be part of the same “group” of companies - the transfer of undertakings being within a group does not prevent the TUPE Regulations from applying and consequently due process needing to be followed. There are different processes to follow dependant on which party you are to the TUPE transfer; the focus of this discussion being those of the transferee (i.e., the Company, which is either acquiring a business, or taking over a contract for the provision of certain services).
Once it has been established that the TUPE Regulations apply, prior to the transferee taking on any new employees, there are a number of important considerations and actions to be undertaken. The outline of a basic step-by-step TUPE transfer process from the transferee’s perspective, would be as follows:-
Step 1 – Ensuring you are taking on the right employees.
The complexity of this task is likely to be dependant on what relevant transfer is taking place. Where a whole business is being transferred, as you would assume, all employees employed by the business would transfer under the TUPE Regulations, and therefore, this step is a relatively simple one.
However, if only part of a business is transferring, or in the case of service provision change, it is not so easy as you will need to agree with the transferor which of their employees is carrying out the work that you are taking on. This is commonly referred to as an “organised grouping of employees”. Where there is a clear group of employees dedicated to the activities in question, this should hopefully not be controversial however, difficulties may arise where there is uncertainty as to an employee’s duties/ connection to the activities. In such cases, an assessment would need to be undertaken to see what proportion of an employee’s role is linked to the activities, and a decision reached as to whether they should transfer under the TUPE Regulations on this basis. If an agreement cannot be reached with the transferor in this respect, it is advisable to seek legal advice to try and assist in an agreement being made.
Step 2 - Check the information about the employees you have agreed to take on.
Once the organised grouping of employees has been agreed, the transferor has a duty to provide you with information relating to the employment terms of these employees. This is commonly known as “Employee Liability Information”, or “ELI” for short. Such information should be received at least 28 days before any transfer under the TUPE Regulations takes place.
ELI includes a wide range of information about the employees, including, but not limited to, details regarding their written statement of terms, disciplinary/grievance records, any Tribunal claims that have been raised, employee benefits, holiday accrual etc.
This information is what the transferee relies upon when employing those transferring after the TUPE transfer. Therefore, it is vital this information is correct, and you are comfortable with what has been provided. If you have additional questions/ concerns, then it is important to raise these at this point with a view to getting further information. If having raised further enquires, you, as the transferee, are still not satisfied, there is the option to explore agreeing indemnities with the transferor in respect of any concerning areas, to provide the transferee with additional protection. This is something that would need to be negotiated between parties and again, seeking legal advice, may be beneficial to assist with this.
In the event that the information provided is incorrect or incomplete (or not provided at all!), the transferee could look to issue a claim against the transferor in an Employment Tribunal, with compensation of at least £500 potentially being awarded for each employee in the organised grouping (i.e., each employee transferring).
Any changes which occur from the time of the transferor providing you with the ELI information should be communicated to you, without delay, by the transferor so you remain up to date ahead of the transfer.
Step 3 – Ascertain if any changes are required on the basis of the ELI
Once you have had the opportunity to review the ELI, it may be that you, as the transferee, want to consider making changes to the transferring employees’ terms of employment.
One of the key principals of the TUPE regulations, is allowing employees to transfer under these without amendments to their terms of employment. However, it is appreciated that, in some situations, changes to working practice, for example pay dates, benefits or holiday entitlement, may be desirable. Any such changes made during a TUPE transfer, are referred to as “measures”.
When considering measures, it is important to bear in mind that making an employee’s terms of employment less favourable, is unlikely to be accepted, and you could be at risk of breaching the TUPE Regulations and a claim being issued against you, as the transferee, if you enforce such contractual amendments post-transfer. However, beneficial changes, e.g., increases in salary or additional holiday entitlement, are likely to be well received.
In any event, you are required to inform the transferor of any proposed measures, enabling the transferor to comply with their duty to inform and consult with the affected employees. If the transferor considers the proposed measures are likely to cause employee concern, they will often look to discuss these with you (due to the potential of employees making joint claims in Tribunal against transferee and transferor) so that they can understand whether they are truly needed and, if so, the rationale behind these changes (so this can be explained to the transferring employees as part of their consultation process.
Step 4 – Inform and Consult
The transferee’s duty in relation to informing and consulting is only in respect of employees of their business who may be affected by the TUPE transfer, i.e., any employee of the business whose work may be impacted b the transferring employees. It is important to bear in mind that you may ned to consult with a recognised trade union or authorised employee representatives, rather than with affected employees directly – this will depend on the numbers involved and legal advice should be sought to understand the obligations in your situation.
Whilst not legally required, the transferee may wish to agree with the transferor that they will also attend the consultation meetings with the transferring employees in order to hopefully allow for a smoother transfer – remember, these will be your employees post-transfer, so it is advisable to build good relations from the start!
Step 5 – The transfer
Once the previously outlined steps have been completed, you are ready for transfer (provided the 28-day period from ELI information has passed).
In the event that any of the affected employees do not wish to transfer, they have a duty to let the transferor know in writing before the transfer. In such a case, the transferor would liaise with the employee in respect of this decision but should provide you with an update in this regard as it is a change to the previously provided ELI information. You will not obtain responsibility for this employee upon the transfer if they object to the transfer taking place.
It is good practice, after the transfer, to write to the employees who have transferred across to you under the TUPE Regulations to confirm this has taken place. You may also wish to consider issuing them with a new contract – this (or a contract variation letter) would be required in any circumstances where measures have been introduced upon transfer.
Listen to our podcast on the transfer of undertakings here.
