Employment support for buying or selling businesses – TUPE

TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006.

When does TUPE apply?

TUPE implements an EU directive which is designed to ensure that employees working in a business that transfers are treated in a similar way to those working in a company that is sold.

TUPE applies where there is a “business transfer”. This may either be as the result of a sale of a business or as a result of a change in service provider.

What TUPE does

TUPE applies to a transfer from a transferor (usually the seller of a business) to a transferee (usually the buyer). If TUPE applies:

Anyone employed by the transferor in the “organised grouping of resources or employees” immediately before the transfer automatically becomes the transferee’s employee on their existing terms of employment (including pay) and without a break in their period of employment. This includes employees who are dismissed before the transfer, but for a reason connected with it which is not an “economic, technical or organisational reason entailing changes in the workforce” (often called an ETO reason).

All rights, powers, duties and liabilities under the employment contracts pass to the transferee. This could even include trade union recognition in some circumstances.

Any changes to the employees’ terms will be void if the sole or principal reason for the change is either the transfer itself or a reason connected with a transfer which is not an ETO reason.

Any dismissal will be automatically unfair where the sole or principal reason for the dismissal is the transfer itself or a reason connected with the transfer that is not an ETO reason. It will also be necessary to show that the dismissal was procedurally fair. This will include any resignations in response to a repudiatory breach of contract or to substantial changes in working conditions to the employee’s material detriment.

Employees may refuse to transfer (known as objecting), but the effect is to terminate their employment without any right to compensation.

Both parties must inform and, if they propose any “measures”, which is pretty wide, consult, representatives of their own affected employees in relation to the transfer. If they fail to do so, an employment tribunal can award up to 13 weeks’ actual pay for each affected employee.