TUPE Regulations 2006
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE Regulations”) are designed to ensure that the following three things happen when there is a transfer in the ownership of a business:
- That employees main terms and conditions of employment are maintained following transfer of ownership of a business;
- That employees are transferred to the new employer and not dismissed;
- That employees are properly consulted and informed about the transfer.
When does TUPE apply?
The TUPE regulations, and therefore the protection that they afford, only apply to ‘relevant transfers’. Relevant transfers apply to economic entities as defined by the leading case Spijkers v Gebroeders Benedik Abbatoir CV  and include
- A business changing hands but continuing to operate.
- A change in service provision such as outsourcing a particular area of the business or bringing it back in house.
- Change in ownership of licensed premises (such as a brewery or pub landlord)
Service provision changes (at 2. above) sound complicated but are relatively straightforward and perhaps best illustrated by way of example.
A company employs nine members of staff to come in after normal working hours and clean the factory and offices. If the company decides to outsource the cleaning work to a contractor then the 9 cleaners should not be dismissed but should be employed by the new contractor. If the company subsequently decides to bring the cleaning back in-house the staff will be protected by TUPE again.
When does TUPE not apply?
It is worth noting that TUPE does not apply when there is merely a change in share ownership. Changes to the controlling interest and even wholly owned status of a company do not matter because the company continues as a legal entity and its employees continue to be employed by the company not the people or organisations that own it.
What effect do the regulations have on employees?
Under the TUPE Regualtions, employees should automatically continue to be employed with all of the same terms and conditions as if nothing has happened. They, and all of the rights they have accrued (including length of service), are automatically transferred to the new business.
Employees from the transferor (old business) and transferee (new business) must be consulted.
What will happen if employees do not wish to transfer to the new company?
Employees are entitled to refuse to transfer but such a refusal will be treated as terminating their contract. Although the contract has been terminated it will not be classed as a dismissal so employees would not be entitled to compensation or redundancy pay if they refuse to go across to the new company.
Automatic Unfair Dismissal
Dismissals which are a direct result of the TUPE transfer will be classed as automatically unfair if they are “because of the transfer” or “a reason connected with the transfer”.
ETO Defence for dismissal
Notwithstanding what has been said above about the prevention of changes to employees’ terms and conditions there is an often used defence which organisation rely on.
If the changes are due to economic, technical and organisation reasons then they may be justified. Known as ETO reasons or the ETO defence this gives rise to a set of circumstances in which changes can be made.
Duty to consult
Section 15 of the TUPE regulations entitle employees to present a complaint to an employment tribunal if the company that they worked for fails to consult them during a TUPE situation.
Employers must provide information about:
- The take-over and when it is likely to happen;
- How the take-over might affect employees;
- Any possible reorganisation.
Changes to TUPE regulation
The regulations were updated in 2014.
Perhaps the most startling change brought in is that where a TUPE transfer takes place and workers are required to work at a different location then the change in location will not necessarily give rise to redundancy claims.
Tom Street qualified as a solicitor in 2003 and has over 20 years experience in employment and litigation law. He studied law at the University of Manchester before undertaking the legal practice course at the College of Law in Guildford, going on to complete his legal training at a firm in Chancery Lane, London. Once fully qualified, he moved to a niche litigation practice in the City of London.
In 2010, Tom set up his own legal practice, Tom Street & Co Solicitors and as part of this, in accordance with his strongly held objective to provide everyone with an easy pathway to justice he established the online portals Do I Have A Case? and Tribunal Claim. These websites are trading names of Tom Street & Co Solicitors.