If you outsource services such as catering or cleaning then you most probably will need to know about TUPE at some point. If you plan to buy or sell your business then it is essential that you know about the concept. The abbreviation stands for the Transfer of Undertakings Protection of Employment Regulations and they are intended to protect employees when the work the employees are doing transfers to another employer.
This article is intended for those for whom the concept is new. It is a simplified and brief summary. If you face a TUPE situation, other than the most minor, you are recommended to take professional advice.
What does TUPE mean?
For example, if you have people employed in your kitchen and decide to have the kitchen managed by an outside contractor then those staff working in the kitchen have the right to be employed by the new contractor. In fact they have very little choice. But they do have the right to employment on the same terms and conditions and to continuity of service.
Similarly if you buy another care home or take on another care agency then those employees too have the right to employment on the same terms and conditions and to continuity of service. The same applies to your employees if you sell the business.
The general rule is that the employee follows the work.
Of course you cannot oblige an employee to transfer if the majority of their work does not transfer to the new employer. They may be able to insist that they remain in your employ. But in other circumstances if they refuse to transfer then they lose their rights and you do not have to continue to employ them.
Who is the transferor and whom the transferee?
These terms are used to distinguish the two employers involved.
If you take over another care agency, say, Supacare, then Supacare transfers the business to you; Supacare is the transferor. In this example, you are the transferee.
Each part has differing responsibilities.
Responsibilities if you are the transferor
You must
1) Inform all employees, which means telling them:
- When the transfer will take place
- Why it is taking place
- Any effects it has for them or, if none, that it is so
2) Provide the transferee with Employee Liability Information (ELI) before the transfer. See appendix. (Potentially £500/employee can be claimed otherwise.)
3) Consult if there are to be any effects on the employees as a result of the transfer eg:
- a new dress code
- reorganisation of the work
- If you have 10 or more employees (i) you may be required to invite the election of representatives.
- There is guidance on consultation on the ACAS web page (see below)
4) If a Trade Union is involved then consult with them.
Responsibilities if you are the transferee
The transferee must check all the ELI information. It is important to realise that all the employees rights transfer to the transferee, for example:
- Unfair dismissal claims
- Discrimination claims
- Continuity of employment
- Terms and conditions of employment
- Collective agreements (Trade Union agreements but not recognition)
- Personal injury liabilities
If the transferor tells you everything, and you do not object, then you will be liable to defend any claims (perhaps unsupported by the transferor) and be liable for any awards.
If you object, perhaps because an employee has been dismissed recently and may make a Tribunal claim, then the matters can be negotiated. But bear in mind transferors sometimes go bust!
You must also watch for sharp practice by the transferor or undesirable terms. For example:
1) Swapping good workers for poor workers just before a business is being transferred
2) Employees being given a loan prior to transfer
3) Failure to pay employees prior to transfer
4) Not paying week in hand or not crediting it to the transferee.
5) Not naming all the employees who are to transfer (because they will transfer with the undertaking whether named or not).
6) Giving employees last minute wage increases
7) Restrictive or limiting clauses in the contracts so the transferee cannot alter hours or duties for example
8) Providing enhanced redundancy or maternity packages that are not declared
9) Covenants or confidentiality clauses that will lack effect after transfer, or which are too unreasonable to enforce.
What a transferee must not do
The employee is protected and the transferee cannot change terms and conditions even if the transferee has been misled (though they may have a claim against the transferor).
Until recently (ii) you could not provide a new package that contained “pluses and minuses” even if the net effect was a “plus”. While detrimental effects are still not lawful there is now scope for agreement with employees. Compromising terms and conditions can lead to a claim of constructive dismissal.
Dismissals connected with a transfer are invariably unfair except in certain special circumstances. One could be an organisational reason necessitating a change in the workforce, i.e. redundancies, but it is crucial to take advice first!
What if?
What if the employee objects to the transfer?
- If the employee does not transfer with the undertaking he or she loses employment rights with both the transferor and the transferee. This is one reason why it is important to have names of all who are transferring.
- The transferor will have to pay any outstanding amounts, such as holiday pay but the employee effectively resigns without notice.
What if the employee works only part of their time on the transferred contract?
- If the employee works for a substantial part of their time on the transferred part of the contract then they transfer. There may be some flexibility during negotiation or consultation.
You fail to carry out consultation?
- You may well face an Employment Tribunal claim. There is a punitive level set as an award to the employees (and Trade Union) affected. It may be possible to negotiate prior to a hearing, especially if there is some uncertainty over whether the claim would succeed.
You fail to provide Employer Liability Information
- A claim might be lodged against you at Tribunal and you could be liable to make an award of £500, or more, per employee transferred. Of course, if you are the transferee then you can make a claim this award to compensate your losses.
Further information, including on the latest changes is available on the ACAS website.
Malcolm Martin – QCS Expert Human Resources Contributor
(i) This applies to transfers which take place on or after 31 July 2014. Prior to this date, micro-businesses will still be required to invite representatives.
(ii) This applies to variations agreed on or after 31 January 2014 and transfers which take place on or after 31 January 2014
