Change of Employer and TUPE

The Transfer of Undertakings (Protection of Employment) regulations (TUPE) applies to employees of businesses in the UK.

TUPE ensures that employees are protected during changes to the structure of a business. This is a complicated area of law for which we provided detailed advice to ensure both your business and employees are protected from the problems that can occur in relation to a transfer.

What Rights Does TUPE Give an Employee?

From our experience at Spire, we know that one of a business’s best assets is its staff.  TUPE protects employee’s existing legal rights when their employment transfers to a new employer including their terms and conditions of employment, with the exception of their pension.

TUPE applies when:

  • The company is sold to a new owner. This includes business mergers (two companies combine to form a new company) and acquisitions (where one company takes over the business of another)
  • A service originally carried out by a company is awarded to a contractor
  • A service contract ends with the service being taken in-house
  • A service contract is assigned to a new contractor during a re-tendering process

Under the TUPE regulations, employees of the outgoing employer (the transferor), become employees of the incoming employer (the transferee), at the point of the business transfer. We will make sure you are properly appraised of the process and aware of the many phases that need to take place. Employees will continue with the same terms and conditions of their original employment and their continuous service should be preserved.

It is a requirement under TUPE that employees are consulted before a transfer takes place. We prepare you for the consultation process and the preparation of the disclosure for any anticipated measures.

An employee with a minimum of two years’ service is protected from dismissal whether immediately before or after the transfer of a business. The only exception is where an employer can demonstrate that the dismissal is due to an economic, technical, or organisational (ETO), reason which involves a change to the workforce. This means the employer must establish that it is for a reason relating to the profitability of the business or the organisational structure.

What Does TUPE Mean for My Business?

There are several legal obligations employers must follow if they are transferring existing employees to a new business as well as if they are taking on new employees from another business.

When transferring existing employees to a new employer, the original employer must:

  • Provide information to trade unions or employee representatives as part of the consultation process
  • Ask the new employer about any changes they are looking to make which may affect the employees
  • Provide the new employer with information about the current employees

If employees are being transferred from another business, the employer must:

  • Consult with trade unions or employee representatives in relation to proposed measures which may affect existing employees due to the transfer
  • Let the previous employer know of any changes proposed which may affect those who transfer to the business
  • Honour the employee’s current terns of employment
  • Follow a fair redundancy process for all the employees with two years or more service, and pay them a redundancy payment

A failure to consult could result in the employer being held liable in the Employment Tribunal for a protective award of up to 13 weeks gross pay for each employee. With our advice each step of the process is made clear to you to protect your business interests.

We can guide you through each step of the process thereby ensuring you are fully compliant. From informing your employees of the transfer, to advising on necessary redundancies, we will be on hand to ensure your business is protected from claims.

Will TUPE Protect an Employee From Dismissal?

If an employer is seeking to dismiss an employee after a transfer and the sole or main reason is due to the transfer of the business, an employee with two or more years’ service or other recognised protected characteristic may have a claim for unfair dismissal. This is unless the employer can show an ETO reason requiring changes in the workforce.

If you wish to make a variation to an employee’s contract after the transfer or wish to restructure which could result in a dismissal taking place, we recommend you seek detailed legal advice.

Does an Employee’s Pension Scheme Transfer to the New Business Owner?

An employee’s contractual rights in respect of personal pension arrangements will not automatically transfer to the new employer (the transferee). Most pension rights under occupational pension schemes are excluded from TUPE but those under a personal pension scheme may transfer.

There are duties that are imposed under TUPE which require employees to have access to a pension scheme albeit it may not be exactly what they previously enjoyed. It is important for the transferee to establish the type of pension scheme originally in operation. This is so the financial implications of the transfer are clear before the transfer takes place to assess any liability that may be incurred. We hold a wealth of knowledge in relation to the due diligence that needs to take place to assess any risk.

If you are purchasing a company, you may be worried about complying with the TUPE regulations. Our highly regarded and experienced employment team can advise you on all aspects of an employment transfer and prevent expensive legal disputes. It is a complex piece of legislation that we provide specialist advice and guidance on.

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