Transfer of undertakings

Updating author: Patrick Brodie, consultant: John McMullen.

On this page:
Summary
Future developments
Action point checklist
Key references
Questions and answers
The Transfer of Undertakings (Protection of Employment) Regulations 2006
Meaning of "relevant transfer"
Timing of a transfer
Assignment to the transferred undertaking
Effect of a relevant transfer on contracts of employment
Effect of a relevant transfer on pension arrangements
Effect of a relevant transfer on collective agreements
Effect of a relevant transfer on trade union recognition
Dismissal of an employee because of a relevant transfer
An employee's refusal to transfer
Duty to inform and consult representatives
Duty to notify employee liability information
Territorial application
Effect of bankruptcy and insolvency on a relevant transfer
Code of practice on workforce matters in local authority service contracts (withdrawn)
Principles of good employment practice and Code of practice on workforce matters in public sector service contracts (withdrawn)

Summary

3.1639

• When the whole or part of an employer's business or undertaking is sold or transferred as a going concern to another employer, which can include a "service provision change" such as the outsourcing of an ancillary function to an outside contractor, a TUPE transfer is said to occur. The term "TUPE" is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246). (See 3.1641 The Transfer of Undertakings (Protection of Employment) Regulations 2006)
• 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 3.1641 The Transfer of Undertakings (Protection of Employment) Regulations 2006)
• A TUPE transfer is referred to in the Regulations as a "relevant transfer". (See 3.1641 The Transfer of Undertakings (Protection of Employment) Regulations 2006 and 3.1642 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 3.1643 Timing of a transfer)
• Whether an employee is assigned to the transferring undertaking is a question of fact in each case. (See 3.1644 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 3.1642 Meaning of "relevant transfer" and 3.1645 Effect of a relevant transfer on contracts of employment)
• 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 3.1646 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 3.1649 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. (See 3.1649 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 3.1651 Duty to inform and consult representatives)
• An employer that is the transferor of a business must notify the transferee of certain specified items of employee liability information not less than 14 days before the transfer. Failure to do so can lead to a complaint to tribunal and a compensation award subject to a minimum of £500 per employee in respect of whom the transferor has failed to provide the information. (See 3.1652 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 3.1654 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 3.1655 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.