The UK legislation known as “TUPE” ((Transfer of Undertakings (Protection of Employment) Regulations 2006) provides employment rights to employees when their employer changes as a result of the sale or purchase of a business.
TUPE implements the European Community Acquired Rights Directive (71/187/EEC, as amended by directive 98/50 EC and consolidated in 2001/23/EC). Therefore it is not just the UK that has to implement the Acquired Rights Directive (“ARD”). ALL European countries have to introduce legislation to implement ARD.
The law on whether TUPE applies is complex but, in broad terms, TUPE applies to “relevant transfers”, which will occur when:
A business undertaking (or part of one) is transferred from one employer to another as a going concern (known as a “business transfer”).
A client engages a contractor to do work on its behalf or re-assigns such a contract – including bringing the work “in house” (known as a “service provision change”).
To qualify as a “business transfer”, the identity of the employer must change. Therefore, subject to very limited circumstances, TUPE does not apply to transfers by share take-over because, when a company’s shares are sold to new shareholders, there is not a transfer of a business or undertaking i.e., the same company continues to be the employer. TUPE will normally apply to a transfer of assets.
“Service provision changes” concern relationships between contractors and the clients who hire their services. Examples include contracts to provide such labour intensive services as IT support, office cleaning, workplace catering, security guarding, and refuse collection.
The following is a summary of the types of practical issues that transferor businesses must consider before transfer:
A Transferor employer must look at such matters as:
The Transferor will be required to compile employment information as part of the Due Diligence exercise.
TUPE requires the Transferor employer to provide the incoming Transferee employer with certain information about its employees (“employee liability information”).
The Transferor may, as part of the Due Diligence exercise, be required to provide more employment information than is required under TUPE. Therefore, for the Transferor, it is always worth compiling all the information it has (e.g policies and procedures, anonymised details of the employees etc.).
However, in terms of TUPE the basic “employee liability information” consists of:
The above information should be given not less than 28 days before the transfer or, if special circumstances make this not reasonably practicable, the information must be supplied as soon as is reasonably practicable.
Once the relevant information has been provided the Transferor must provide written notification of any changes (even if they are just before the transfer!).
If the Transferor does not provide the information the Transferee can bring a claim in the Employment Tribunal within 3 months of the date of the transfer (although the Tribunal has the authority to extend the time). The Tribunal can award what it considers just and equitable when awarding compensation subject to a minimum of £500 for each employee (unless the Tribunal considers that it would be unjust or inequitable to warrant the minimum payment).
The Transferor needs to understand which employees are “assigned” and will transfer over.
Please note “assigned” cannot be established by reference to the percentage of the time an employee is engaged in working in the undertaking or part of the undertaking being transferred. Ultimately, it is essentially a question of fact for the Tribunal.
Under TUPE an employer must, prior to transfer, inform employees and/or their representatives of any measures it envisages taking in connection with the transfer (or if it envisages that no measures will be taken, inform them of this) and to consult with the employees and/or their representatives with a view to seeking their agreement to any intended measures.
Measures could include any action, step or arrangement done by the transferor or the transferee over and above what necessarily occurs as a consequence of the transfer itself. For example a change in payment date could constitute a measure.
Failure to comply with the application to inform and consult could result in an award of compensation payable to the relevant employees up to 13 weeks’ gross pay for each employee. There is no limit on the amount of a week’s pay.
Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice. Please seek legal advice if you have any questions about the information set out above.
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