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Transfer of undertakings

Updating author: Patrick Brodie, consultant: John McMullen

Summary

  • When the whole or part of an employer's business or undertaking is sold or transferred as a going concern to another employer, a TUPE transfer is said to occur. A TUPE transfer may also consist of a "service provision change" whereby activities are outsourced to an external contractor, brought back in-house, or where there is a change in the contractor carrying out such activities. The term "TUPE" is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (the TUPE Regulations 2006). (See The Transfer of Undertakings (Protection of Employment) Regulations 2006)
  • Various provisions of the TUPE Regulations 2006 were amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (SI 2014/16) (the amending Regulations 2014), which came into force on 31 January 2014. (See Impact of the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014)
  • The seller of the business is referred to as the "transferor", while the recipient of the business is known as the "transferee". In the case of a service provision change, a client engaging a contractor will be the transferor and the contractor the transferee. When a contract changes hands, the outsourcing contractor will be the transferor and the incoming contractor the transferee. If the client takes the service back in-house, the outgoing contractor will be the transferor and the client will be the transferee. (See The Transfer of Undertakings (Protection of Employment) Regulations 2006)
  • A TUPE transfer is referred to in the Regulations as a "relevant transfer". (See The Transfer of Undertakings (Protection of Employment) Regulations 2006 and Meaning of "relevant transfer")
  • A transfer takes place at a single point in time, which is the date on which responsibility as an employer for carrying on the business of the transferred unit moves from the transferor to the transferee. (See Timing of a transfer)
  • Whether an employee is assigned to the transferring undertaking is a question of fact in each case. (See Assignment to the transferred undertaking)
  • When there is a relevant transfer, the transferee inherits the contracts of employment of the persons employed by the transferor immediately before the transfer took place. The transferee also inherits the transferor's rights, power and duties and most of the transferor's liabilities in respect of those employees. (See Meaning of "relevant transfer" and Effect of a relevant transfer on contracts of employment)
  • Collective agreements (and the rights and obligations that go with such agreements) transfer when there is a relevant transfer. However, in relation to transfers that take place on or after 31 January 2014, the TUPE Regulations 2006, as amended, provide that rights and obligations relating to a provision of a collective agreement do not transfer, where the provision is agreed after the transfer, and the transferee does not participate in the collective bargaining relating to that provision. (see Effect of a relevant transfer on collective agreements)
  • Where there is a relevant transfer, and the transferor operated an employer-contributed pension scheme for transferred employees, the transferee is legally bound to offer them a prescribed level of pension provision. (See Effect of a relevant transfer on pension arrangements)
  • An employee who is dismissed where the sole or principal reason is the transfer is treated in law as having been unfairly dismissed. (See Dismissal of an employee because of a relevant transfer)
  • However, that rule does not apply to an employee dismissed for an "economic, technical or organisational reason entailing changes in the workforce". Such a dismissal will be treated by an employment tribunal as having been for "some other substantial reason" or redundancy, as the case may be. Where the transfer takes place on or after 31 January 2014 and notice is given, or the termination takes effect, on or after that date, the amending Regulations 2014 provide that "changes in the workforce" include a change to an employee's place of work. (See Dismissal of an employee because of a relevant transfer)
  • Employers contemplating the sale or transfer of the whole or any part of their business or undertaking (or the acquisition or purchase of another employer's business or undertaking) must inform appropriate employee representatives of certain matters. If measures are envisaged in relation to the affected employees, the employer that envisages the measures must consult the employee representatives about them. A failure to do so will lead to the imposition of a punitive award. (See Duty to inform and consult representatives)
  • The transferor must notify the transferee of certain specified items of employee liability information not less than 28 days before the transfer. In relation to transfers that occurred on or before 30 April 2014, this information is required no less than 14 days before the transfer. Failure to do so can lead to a complaint to tribunal and a compensation award that is generally subject to a minimum of £500 per employee in respect of whom the transferor has failed to provide the information. (See Duty to notify employee liability information)
  • Regulations 4 and 7 of the TUPE Regulations 2006, which deal with the effect of a relevant transfer on contracts of employment, and the dismissal of an employee because of a relevant transfer, do not apply where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner. (See Effect of bankruptcy or insolvency on a relevant transfer)
  • The "Code of practice on workforce matters in local authority service contracts" was withdrawn on 23 March 2011 with immediate effect but remains relevant to local authority service contracts in existence prior to that date. (See Code of practice on workforce matters in local authority service contracts)
  • The Government's "Principles of good employment practice" sets out what it expects of its suppliers in their employment practices. Compliance with the principles is voluntary. The "Code of practice on workforce matters in public sector service contracts" still applies to public sector contracts in existence prior to 13 December 2010. (See Principles of good employment practice and Code of practice on workforce matters in public sector service contracts)

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