A guide
to the TUPE regulations
Time and again we are asked by employers about TUPE rules and regulations have composed a quick guide to the regulations. Don’t forget to also read the amendments to TUPE, covered in our Employment Law Update below, resulting from the Employment Act 2008 coming into force.
TUPE is an acronym for “Transfer of Undertakings (Protection of Employment) Regulations 2006”.
This guide briefly describes the TUPE Regulations 2006. TUPE is a complex area, so it is essential to seek legal advice for individual circumstances.
Purpose
The TUPE Regulations are designed to protect the rights of employees when a business or undertaking, or part of one, is transferred to a new employer.
Transfers covered by the Regulations
The Regulations apply to “relevant transfers” which cover the two broad categories of business transfers and service provision changes.
Generally, TUPE has been found to apply to:
- Sales of a business, or part of it, by a sale of assets
- Where all or part of a sole trader’s business or partnership is sold or transferred.
- Where two companies cease to exist and combine to form a third
- A change of licensee or franchisee
- Contracting out of services
- Changing contractors
However, TUPE does not apply to:
- Transfers by share take-over because, when a company’s shares are sold to new shareholders, there is no transfer of the business - the same company continues to be the employer;
Transfers of assets only (for example, the sale of equipment alone would not be covered, but the sale of a going concern including equipment would be covered)
- Transfers of a contract to provide goods or services where this does not involve the transfer of a business or part of a business;
- Transfers of undertakings situated outside the United Kingdom.
What happens to employees during a transfer of undertakings?
If TUPE applies, all terms and conditions of work and continuity of employment are preserved. This applies to all employees employed immediately before the transfer; and those who would have been so employed had they not been unfairly dismissed for a reason connected with the transfer.
All employees automatically become employees of the new employer, unless they inform either employer that they object to being transferred.
If an employee feels they have been unfairly dismissed because of a transfer, they can appeal against the decision using the organisation’s internal procedures. If this doesn't resolve the issue, the employee may complain to an employment tribunal. Employees with less than one year’s service cannot usually present claims under TUPE as employment protection rights have not accrued.
Defences to the application of TUPE
A dismissal of an employee because of the transfer will be automatically unfair unless there is an economic, technical or organisational (ETO) reason as a basis for a refusal by the prospective transferee to take on the employees of the transferor.
Examples include:
- Economic reasons - where the demand for output has fallen to such an extent that profitability of the entity is unsustainable without dismissing employees.
- Technical reasons - where the transferee wishes to use new technology and the employees employed by the transferor in the entity do not have the requisite skills.
- Organisational reasons - where the transferee operates at a different location and it is not practical to transfer employees.
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