The concept underlying these regulations (known as TUPE) is to safeguard the right of employees where their employer changes identity. The effect of the regulations in short is to ensure that the employee remains employed on the same terms and conditions and subject to the same rights as before. A common scenario occurs where the employees of Company A become employed by Company B – following a takeover by Company B of Company A.
The regulations cover all “economic entities” – so that the regulations cover private businesses, Government departments, Charities and so on. They also cover part transfers, for example one shop of a chain of shops.
In order for the regulations to apply the “economic entity” must have retained its identity following transfer of undertakings. A tribunal will look at the circumstances and consider, for example:-
- Have the majority of the staff transferred?
- Have assets transferred – for example leases, equipment etc?
- Is there a similarity between the activity of the old organisation and the new one, for example is an employer “contracting out” perhaps canteen services – which it previously undertook in house.
The regulations place duties on the selling Company to provide information to all employees and consult with them. There are also rules as to how much information should be provided in relation to the employees to be transferred.
Effect of transfer
Where TUPE applies all old terms and conditions of employment pass from the first employer to the second including:-
- Terms of the employment contract.
- Statutory protection e.g. redundancy, unfair dismissal etc.
- Liabilities for breach of duty – for example personal injury claims against the old employer.
But excluding certain entitlements in respect of occupational pensions.
Transfers and unfair dismissal
Any dismissal occurring (before or after) the transfer of undertaking which arises in consequence of the transfer is automatically unfair (giving rise to a claim in an employment tribunal for unfair dismissal) unless the reason is “economic, technical or organisational”.
Transfers of undertaking raise particularly complex questions requiring specialist advice.