Making the Transfer as efficient and liability free as possible: A TUPE Checklist.
When does TUPE apply?
TUPE applies to a “relevant transfer”. A relevant transfer can be where:
- A business or part of a business is sold.
- Work is outsourced from a client to a contractor.
- Outsourced services are transferred from the original contractor to another contractor or back to the client (ie in-sourced).
- A client brings the outsourced services back in-house.
Further analysis and advice is always needed to confirm whether TUPE applies or not.
Whether TUPE does or does not apply will have significant financial implications on any proposed transaction.
Which rights are automatically transferred under TUPE?
- Employees transfer to the new employer on their existing terms of employment and with all
related employment rights, powers, duties and liabilities. Old age, invalidity and survivors’
benefits under occupational pension schemes are excluded.
- The new employer steps into the shoes of the transferring employer in relation to the
transferred employees. Any acts or omissions committed by the transferring employer are
treated as having been done by the new employer.
- Employees who object to the transfer do not automatically transfer to the new employer. Their
contracts will instead terminate on the transfer date.
All businesses will need to review all the employment contracts and benefits of affected employees.
If your staff will transfer from your business you will need to prepare all the “Employee Liability Information” (see section below). For a complete list of what you need to do – contact us.
If staff will transfer to your business your will need to review all the Employee Liability Information (called conduct your Due Diligence) in sufficient time to negotiate the commercial and legal aspects of the contract for your particular transaction so you are protected from taking over expensive liabilities. Contact us for advice how to do this and what to look for to avoid costly liabilities.
Changing terms of employment
Any changes to an employee’s terms of employment are void if the main reason for the change is
- The transfer itself.
- A reason connected with the transfer that is not an economic, technical or organisational
- reason requiring changes in the workforce (an ETO reason).
However, it is possible to make changes to transferring employees’ employment terms if the reason for the change is unconnected with the transfer or is connected with the transfer but is for an ETO reason.
There are legitimate ways to reorganise a workforce after a TUPE transfer has occurred. Contact us to find out how to do this so that your business is not constrained from reorganising the new workforce joining the business.
Protection against dismissal
- Employees are entitled to enhanced protection against unfair dismissal. Any dismissal of an employee with the qualifying period of service is automatically unfair where the main reason for the dismissal is either:
the transfer itself; or
a reason connected with the transfer that is not an ETO reason.
- This enhanced protection also applies if:
an employee resigns in response to a serious breach of their contract; or
the new employer makes a substantial change in the employee’s working conditions which is detrimental to them.
- Employers can be ordered to reinstate, re-engage or compensate the dismissed employee if their complaint is upheld by an employment tribunal.
If your business is receiving new staff you need to proceed within the law and avoid unfair dismissal claims with a maximum liability of up to £85,200 but still achieve your company’s operational requirements.
Obligations to inform and consult
- Both parties involved in the transfer are obliged to inform and (if appropriate) consult recognised trade unions or elected employee representatives in relation to their own employees who may be affected by the transfer. If there are no existing representatives they must be elected by the affected employees for the purposes of consulting over the transfer.
This can be a time consuming and administrative issue which is often overlooked.
Scheduling enough time in the transaction timetable to communicate clearly with affected staff is important and will lead to a smoother transfer of staff.
- An individual employee has the right to bring a claim for breach of these requirements if an employer:
fails to take any steps to invite employees to elect representatives; or
in the absence of election, fails to give information to the affected employee.
- Certain information (for example, the reason for the transfer and where it is expected to take place) must be provided to the representatives long enough before the transfer to enable the transferring employer to consult with them about it.
It is important to involve the business which is receiving the new staff in this process to get them comfortable and ensure that any issues are resolved where possible before transfer. Remember that disgruntled staff in a TUPE process often sue both their “old” and “new” employer. This means
that the “old” employer should not think that “once the TUPE transfer has taken place the issue is off their hands”.
- Although the duty to inform always arises, the duty to consult only arises where an employer envisages taking measures in relation to affected employees.
- Failing to comply with these obligations can expose both parties involved in the transfer to up to 13 weeks’ GROSS uncapped pay for each affected employee. In certain circumstances,both parties can be held to be jointly and severally liable. This can be a significant liability, for example:
If 10 staff would have been entitled to transfer under TUPE but there is no informing and consultation exercise and their average salary (excluding benefits) is £30,000 pa then the maximum liability would be:
13 weeks/52 weeks = 25% x £30,000 x 10 = £75,000 + legal costs + wasted management time.
Take legal advice to avoid these costs arising.
Employee liability information
- The transferring employer must provide information (for example, the disciplinary and grievance records of the transferring employees) to the new employer not less than 14 days before the transfer takes place.
- If the transferring employer fails to comply with this duty, the new employer can apply for compensation based on the losses suffered, with a minimum award of £500 for each employee that the information was not provided for.
If you are preparing the Employee Liability Information contact us for a checklist of the information to prepare and how to present it in as efficient a way as possible.
If you are receiving the Employee Liability Information contact us for a detailed checklist of what you will need and to ask for so you do not receive inadequate information concealing expensive employee liabilities. We can also help you to interpret the information disclosed to you so you know what
employee issues you are undertaking.
Insolvent businesses To help the rescue of failing businesses, some key TUPE employment protections are relaxed if the transferring employer is insolvent. The extent of these modifications depends on the type of insolvency proceedings the transferring employer is involved in.
This Checklist is designed to help you focus on the Main Issues to deal with.
Please contact us to help your TUPE Transfer be as efficient and liability free as possible:
Richard Mullett – 0208 334 8049 / Richard.Mullett@TheLegalPartners.com
Abigail Oprey – Abigail.Oprey@TheLegalPartners.com
This document is not specific legal advice. If you can share your business situation we can advise you what to do next to have a smooth TUPE transfer process and minimise liability.
For more information or queries about issues discussed in this article, please contact Richard Mullett by email. To speak directly with Richard or any other of The Legal Partners team of specialist business and HR lawyers based at our Richmond UK office, or our partner lawyers in Singapore or Guanzhou, please call +44 203 755 5288
This article explains the main legal issues and common situations to consider. It is not a substitute for legal advice. Please get in contact to discuss your particular issue or queries.