Business Transfers and Service Provision Changes - TUPE

The Transfer of Undertakings Protection of Employment Regulations 2006 (“TUPE”) protects an employee’s rights when a business they work for transfers to another owner or when a service they perform is contracted out to another organisation.

It is not possible to contract out of the TUPE regulations but employees can opt out of transfers should they so wish.

If a buying business (Buyer) or the selling business (Seller) does not comply with its obligations under the TUPE legislation there can be severe ramifications.  In some cases liability for certain claims can transfer through to the Buyer or organisation taking on the contract where there is a service provision change..

In effect the TUPE regulations transfer all the transferor’s, powers, duties, and liabilities under or in connection with employment contracts of transferring employees to the Transferee.

In addition, if an employee is found to have been automatically unfairly dismissed immediately prior to the transfer and because of the transfer, the liability for their dismissal can transfer to the Buyer. In the event an employee’s employment is terminated after the transfer it can be possible for the buyer to rely upon a justification of it being because of an economical, technical or organisational reason entailing a change to the workforce. The Buyer would still need to go through a fair process and legal advice should always be sought if this is to occur.

There is an obligation on the Seller to inform and consult with employees about the transfer and its effect on their employment. The Buyer also holds a joint liability with the Seller if this obligation has not been complied with.  It is usual to find warrantees and indemnities in the transfer agreement relating to the same.

Duty to Inform

Under Regulation 13(2) of TUPE 2006 the Seller is obliged to disclose information to affected employees prior to the Transfer and to facilitate consultation about the proposed transfer where measures are envisaged.

The Biscoes Employment Team can assist you with these obligations, whether acting for the Seller or the Buyer to establish that this duty has been duly satisfied.

Duty to Consult

If the Buyer intends or is likely to take any measures which may affect the transferring employees after the transfer in relation to their terms and conditions of employment then the Buyer is obligated to inform the Seller of the same and the Seller is under the duty to consult with the employees about the intended or likely measures that the Buyer may take following the transfer.

The Biscoes Employment Team can also assist in this regard which may include assisting with electing and appointing employee representative and collective consultation.  

Failure to comply with these obligations can give rise to a claim for a protective award of up to 13 weeks full pay for each employee who has failed to be informed and consulted.

Seller’s Duty to Notify

There is certain accurate information about the employees which the Seller must disclose to the Buyer in accordance with the TUPE legislation.  Failure to provide this information can result in awards for up to £500 per employee.

The Biscoes Employment Team can guide Buyers and Seller through transfers and other businesses through service provision changes to ensure all obligations are discharged.

We can advise businesses specifically in relation to the risks of claims that they face from transferring employees as a due diligence exercise and assist with the negotiation and implementation of any requisite warrantees and indemnities which may be sought.