What happens to employees when a business changes hands? TUPE explained.

It’s common for all or parts of a business to change hands and be transferred from one owner to another. But what happens to the employees working for that business when ownership changes? This is where TUPE comes in – the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). This article explains the TUPE process, its purpose, when it applies, and five key things to include in a TUPE Process.  

The Transfer of Undertakings (Protection of Employment) Regulations, known as TUPE, were originally brought in under EU law (the Acquired Rights Directive) in 1981 and updated in 2006. They were designed to protect employees when all or part of a business is sold, or when activities are outsourced or service providers change.

Although the UK has since left the EU, TUPE remains binding and in force in UK law, ensuring employees are not disadvantaged by a change of ownership.

So, when a business or part of a business transfers from the current owner (known in the transaction as the transferor) to a new owner (the transferee), TUPE ensures that the affected employees’ employment rights are protected.

What TUPE does

When a business or part of a business transfers from one owner to another, TUPE ensures that:

• Employees automatically transfer to the new owner
• Their employment rights and Terms and Conditions remain the same
• Their continuous employment is preserved, as though it had never been interrupted

When does the TUPE process apply?

TUPE can apply in a number of different situations and business transactions, for example:

• The sale of all or part of a business.
• When a business transfers specific assets such as equipment, property or IT systems.
• When a business outsources some of its activities to a service provider, or brings activities back in-house, for example, recruitment, call centres, IT systems, facilities managment, payment processing.
  

It’s important that employers know when TUPE applies and the potential employment liabilities if a TUPE transfer process is absent, incomplete or implemented incorrectly.

Getting it wrong can be expensive. Employment Tribunals can fine both businesses (the transferor and transferee) who fail to comply with TUPE’s information and consultation obligations, up to 13 weeks’ gross pay per employee affected by the transfer.

The human impact

For employees, hearing that a business is being sold or transferred can be unsettling and worrying. From my own HR experience of managing TUPE transfers, I know that for employers too, it can feel like a battleground between transfering parties.

5 things to include in a TUPE Process

TUPE law requires that the TUPE planning process covers the following 5 steps:

1. Announce the transfer to affected employees, explaining when the transfer is going to take place.
2. In organisations employing more than 10 staff, inform employees that they will need to elect employee representatives (if no trade union or existing employee representatives are in place).
3. Hold regular meetings between the current business (the tansferor), the new business (transferee), and the transferring employees.
4. Keep employees informed throughout of the process as it is happening, provide regular email updates and hold face-to-face / all-hands meetings.
5. Plan early. Both the transferor and transferee should take time to plan the TUPE process well in advance, taking in to account all issues and assessing potential risks and liabilities that could arise.

This ensures that, as well as protecting employees, both transferor and transferee businesses are de-risked and placed in the most favourable commercial position.

This list is not exhaustive. TUPE can be complex, and recent (2018) case law ruling that TUPE protections extended to workers — so it’s safest to plan on that basis — adds further uncertainty. This isn’t legal advice of course. If you need advice, assistance or a heads-up on a prospective TUPE transfer, please get in touch with The Legal Partners team.

The Department of Business, Energy and Industrial Strategy published guidance on TUPE to cover developments since 2014. Acas has also published guidance for employees and employers and CIPD has published a TUPE Q&A behind its paywall for members.

Anna Venditti now freelances as a Management Accountant, having held both CFO and HR Director positions concurrently for an Internet Services and Broadcasting company, for whom she worked for 11 years, prior to the sale and TUPE Transfer of the business.  Formerly a client, Anna is a key member of The Legal Partners team.