EM Law are experts in advising on how TUPE may impact upon a transaction and on guiding businesses through the TUPE process. Our employment and corporate lawyers are from leading law firms with extensive experience in TUPE transactions.
Background to TUPE
TUPE came into force on 6 April 2006 introducing three concepts into UK employment law:
When does TUPE apply?
TUPE applies to a “relevant transfer”, which means either or both of the following:
Some transfers will be both a business transfer and a service provision change.
TUPE does not apply to a transfer of shares, but it would apply to an asset transfer carried out as a precursor to a share sale or a transfer of the business or part of the business to the holding company following a share transfer.
TUPE applies to:
It applies even if:
(Regulation 3(4), TUPE).
Automatic transfer principle
Where there is a relevant transfer:
Changing terms of employment
The transferee takes on the transferring employees on their existing terms of employment, and can only make changes to their terms in limited circumstances.
Changes to terms of employment will be void if the sole or principal reason for the change is the transfer itself, unless either:
(Regulation 4(4) – 4(5), TUPE).
Protection against dismissal
TUPE provides enhanced protection against dismissal over and above general unfair dismissal law for employees with (at least) the qualifying period of service.
Dismissals will be automatically unfair if the sole or principal reason for the dismissal is the transfer itself. If, however, the reason is an ETO reason, then they will instead be potentially unfair (Regulation 7(1), TUPE).
Resignations in response to a repudiatory breach of contract or to substantial changes in working conditions to the employee’s material detriment are treated as deemed dismissals to which the enhanced protection against dismissal applies (regulation 4(9) and 4(11), TUPE).
Obligations to inform and consult
Both the transferor and the transferee must inform and (if appropriate) consult with recognised trade unions or elected employee representatives (if there is no recognised union) in relation to any of their own employees who may be affected by the transfer or any measures taken in connection with it. Certain information must be provided to the representatives long enough before the transfer to enable the transferor to consult with them about it.
A failure to comply with these obligations exposes the parties liable to pay compensation equivalent to up to 13 weeks’ uncapped pay.
The obligation to provide “employee liability information”
The transferor must provide the transferee with certain information about the transferring employees (the “employee liability information”) not less than 28 days before the relevant transfer takes place. If the transferor fails to provide this information, then the transferee has a remedy under regulation 11 and regulation 12 of TUPE.
Some of the fundamental TUPE employment protections are relaxed where the transferor is insolvent. This is designed to facilitate the rescue of failing businesses. The extent of these modifications depends on the nature of the insolvency proceedings to which the transferor is subject. In general, more significant employment protections are removed where the transferor is subject to terminal insolvency proceedings which aim to liquidate the transferor’s assets.
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