The extraordinary times in which businesses are currently operating have led to more businesses taking long term decisions which have, in turn, led to acquisitions, mergers or business owners simply selling their business to a new owner. That sale may include physical assets or may simply be the goodwill of a business.
The law is designed to protect the employment rights of all employees who are caught up in an acquisition, merger or the sale of their employer’s business to another organisation, even if the ‘buying’ of the business does not include actual money.
Staff transfer to the new owner under the TUPE Regulations (Transfer of Undertakings (Protection of Employment) Regulations 2006) with all their terms and conditions intact – including their continuity of service.
- For example, if an employee began working for Bloggs & Sons in 2012 and Bloggs & Sons sell their buiness to Smith & Daughter in 2020 that employee of Bloggs & Sons become the employee of Smith & Daughter and their 8 years continuous service continues unbroken by the transfer.
The Transferor (that is the organisation selling their business) has a legal obligation to provide the Transferee (that is the organisation buying the business) with accurate employee information at least 28 days before the transfer. That information will include discipline, grievance and attendance records. The Transferee will be assuming all liabilities in relation to the employees so the Transferee should undertake due diligence.
- For example, if an employee has a final written warning that warning will transfer intact to the new employer.
- For example, if an employee has an unresolved grievance, that grievance will transfer to the new employer.
TUPE does apply to pensions. Whilst an actual pension scheme may not transfer, the new employer must provide an equivalent scheme to the staff transferring in to the new employer and the new employer must contribute an equal amount to that previously contributed by the Transferee. Effectively the TUPEd staff should not suffer detriment.
Does TUPE only apply to employees? It does not apply to independent consultants. It definitely applies to employees. Whether or not it applies to workers is currently being considered by the Courts. The Employment Tribunals have decided that TUPE does apply to workers but that decision has been appealed and at the time of writing there is no final decision. You should consider that it does apply to workers until and unless we know otherwise.
The Transferor and the Transferee are both legally obliged to consult with their staff prior to a TUPE transfer. That consultation will consist of explaining what is happening and explicitly the affect of the transfer on the individuals. There will, of course, be an effect on all the employees for both the Transferor and the Transferee.
If a Transferee employee does not want to transfer that will be a resignation.
Any redundancy found to be as a direct result of TUPE, whether before or after the transfer, is likely to be an unfair dismissal.
Following a TUPE transfer, the acquiring employer may find himself with employees on different terms and conditions of employment. For example, the acquired employees may have a greater annual leave entitlement than their existing employees. It is a fallacy that an employer can harmonise those terms and conditions after a defined length of time, TUPE exists indefinitely. Of course, if harmonisation is going to improve terms and conditions then it is unlikely it will be challenged but if harmonisation is detrimental then there is a risk of a challenge through the Employment Tribunals.
Once the transfer has been completed the new employer may, for example, find that they have more staff than they need. The law allows the recipient organisation to change their workforce as a whole, provided only that they can show those changes are for an ‘economic, technical or organisational reason’. So, for example, if redundancies are contemplated then those redundancies must not relate just to those employees who have transferred into the organisation, they should also include staff who previously worked for the recipient organisation. Please, keep an in depth audit trail if you are considering post TUPE redundancies!
Finally, TUPE may also apply to the transfer of a contract. For example, if you have a contract with a cleaning company and decide to exit that contract and use a different cleaning company (or take the work in house) then the cleaner(s) employed to undertake your work may TUPE transfer to the new contract cleaning company (or you) if they have been employed specifically (or for a majority of their time) to undertake your work.
TUPE is a complex area of employment law. Please take advice from your HR support and your Accountant (tax liabilities) if you are involved in an acquisition, merger or sale of a business. That advice may save you angst and money further down the line.
For further advice please contact me on 07766 167160 or at email@example.com