Understanding TUPE

What are your obligations if another organisation requests to amalgamate with your setting or take over the running of it? What should you do if you want to change cleaning providers or bring the service in house?

The first thing to consider are the TUPE (Transfer of Undertakings Protection of Employment) regulations, which prevent employees from losing their jobs when a business is sold, a service is outsourced, or there is a change in contractor. These regulations affect both the outgoing employer (the transferor) and the incoming employer (the transferee), and adhering to them is mandatory.

TUPE applies where there is a change in the legal identity of the employer for all or part of an ongoing business (undertaking). It does not apply where only the shares of a limited company are sold.

In relation to supply of services, TUPE can apply when outsourcing a service from a client to a contractor, changing from one contractor to another and insourcing (bringing the contract in-house).

When employees are transferred, the new employer is restricted from making changes to their contracts, even if this means they are on better terms than other personnel.

Before the transfer, both organisations must share information and consult with employees about their plans. Failure to do so can result in compensation of up to 13 weeks’ gross pay for each affected employee.

An employer cannot choose which employees they take on. Everybody assigned to the business will automatically transfer. Failure to comply with this can result in claims of unfair dismissal.

The transferor must provide the transferee with employee liability information (ELI) as early as possible or at least 28 days before the transfer date. This includes:

• the employee’s name and age any disciplinary and grievance records from the last two years (including ongoing cases)
• any claims they have made against the transferor in the last two years (or may make once they transfer)
  
• any collective agreements with a trade union that affect the employee terms and conditions
  

After employees have transferred, the new employer can only make redundancies related to the transfer if there is a genuine need for economic, technical or organisational (ETO) reasons.

When a dispute has been raised, employment tribunals look at several factors to decide if there has been a “transfer of an economic entity which retains its identity”. These depend on the nature of the business and consider: a statement of employment particulars

• whether tangible assets, such as buildings and equipment, are transferred
• the importance of these assets to the business
  
• whether intangible assets, such as a supplier database, customer database or intellectual property, are moved over
  
• whether employees are transferred or similar personnel are needed
  
• how alike the activities of the business are before and after the process
  
• if these activities are suspended for any time
  

If employees do not want to transfer to the new employer, they can decline and this would be treated as a resignation. In this case, they wouldn’t be entitled to redundancy pay or be able to claim unfair dismissal.

An employee might be able to end their employment and make a claim for constructive dismissal if their working conditions would be substantially worse after the transfer. Working conditions could include:

• the terms of the contract
• physical working conditions
  
• the location of the workplace i.e. a difficult or much more expensive commute
  

Employment is complex area of law so we recommend seeking advice from Law-Call if you think TUPE could apply. Useful checklists are available on the ACAS website (www.acas.org.uk) for outgoing and incoming employers.

As an Alliance member, you have access to Law-Call's 24-hour legal advice telephone service.

Details can be found in the Alliance member benefit overview section of EYA Central: bit.ly/U5Law-Call.