TUPE or Toupee. What does it mean?
However you pronounce it, TUPE is the widely-used acronym for the Transfer of Undertakings (Protection of Employment) Regulations 2006. It is the legal framework which safeguards employees’ rights when a business (or a part of it) is transferred from one owner to another, or where there is a change of service provider. It applies to companies of all sizes, in both the public and private sector.
In practical terms, TUPE is designed to protect the rights of those employees who find themselves being transferred to work for the new employer, or are dismissed as a result of the transfer.
It is a very complex area of law and it is not unusual for employment specialists to be drafted in to assess whether the TUPE regulations apply to a particular set of circumstances.
The most common triggers of TUPE are
- mergers, or sales or businesses or parts of businesses to new owners, or
- outsourcing (to external contractors), insourcing (bringing service provision back in-house) or re-tendering between contractors.
The employees of the old employer automatically become employees of the new employer at the point of the transfer. The new owner essentially steps into the shoes of the old owner. Temporary staff, workers, independent contractors and the self-employed do not transfer, however.
Existing contracts and terms of employment, such as salary, job title, bonus and holiday entitlement and sick pay provisions should remain unchanged. Trade union recognition and collective agreements are transferred with the affected employees. Any existing period of service will also count towards an employee’s continuous employment with the new employer.
Certain duties and liabilities are also transferred to the new employer, including any outstanding disciplinary and grievance affairs, ongoing employment tribunal claims, the obligation to meet any agreed pay increases and any collective agreements that are in force at the time of the transfer.
There is a notable exception to these obligations, however; occupational pension schemes need not continue on the same terms, although a minimum level of pension provision must still be offered. These requirements vary for the acquisition of privatised companies, and for outsourcing by government organisations.
Dismissal as a result of the transfer is deemed ‘automatically unfair’ except for a limited number of qualifying reasons; put simply, where the dismissal is for either an ‘economic, technical or operational’ (‘ETO’) reason requiring changes to the workforce, and which is unconnected to the transfer. Similarly, any changes to the employees’ contracts or terms of employment must be for an ETO reason and agreed by both the old and new employers, unless the employees’ contracts already provide for such changes to be made. As an aside, these provisions are indefinite; there is no set period of time after which it will be ‘safe’ to implement changes to new employees’ contracts so as to harmonise them with those of the existing employees, without the risk of a connection to the transfer being established.
All things considered, TUPE is not a cast-iron guarantee of job security, and any employee who objects to the transfer will be deemed to have resigned as from the date of the transfer. However, there would be no entitlement to statutory redundancy, notice pay, or to claim for unfair dismissal.
Employers should inform affected employees about a TUPE situation and in some cases, early consultation with any affected employees of both companies is also carried out.
Are your future plans for your business affected by TUPE? Do you want to know more about it and what it means to you? If so, please Talk to Tollers. We’re here for you.