BHW Solicitors’ specialist Employment Department, headed by Amanda Badley, have wide ranging expertise and experience with TUPE.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (‘TUPE’) came into force on 6th April 2006, replacing TUPE 1981.
The Current Law
TUPE stems from EU law, and it is designed to give a certain level of protection to employees in situations where there is a relevant transfer.
A ‘relevant transfer’ means either;
“a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity” (TUPE Regulation 3(1)(a); or
“a service provision change” (TUPE Regulation 3(1)(b). A service provision change applies in a situation where a business outsources work to a contractor, such as engaging the services of a cleaning agency. An employer may not necessarily employ a cleaner in the traditional sense, but that worker may still be covered by the service provision change.
An ‘economic entity’, as referred to above, means an organisation that operates with a purpose of pursuing an economic activity. This means that businesses are covered by transfers under TUPE, but the Regulations could also apply to the transfer of part of a business. It should also be noted that the definition pertains to the pursuit of an economic activity. This means that the business does not necessarily have to be profitable.
A business, or economic entity, retains its identity if it is still in existence after the transfer. Essentially, the business needs to continue operating with the same or similar economic objectives. If a transferee is still operating the business in a similar fashion, with a similar objective, it has retained its identity. It is irrelevant if the business is run in a different way, or if the transferee takes a different approach in carrying out its objective, so long as the objective and operation of the business is the same or similar to before the transfer.
It is possible for a transfer to be covered by both sections of TUPE – a transfer of a business and a service provision change – discussed above.
Application of the Law
When the business is transferred under a ‘relevant transfer’, the transferee will become responsible for all employees. In other words, the transferee will become liable for any potential claim arising from a dismissal of an employee. This liability can stem from either a dismissal made by the transferor directly before the transfer, or a dismissal made by themselves following the transfer. The key concern is whether or not the employee was dismissed solely because of the transfer.
Dismissal under TUPE
Under TUPE, employees are protected from a dismissal arising as a direct consequence of the transfer. For example, if an employee is dismissed on the sole basis of the transfer, that dismissal will be deemed as automatically unfair.
In order for a dismissal to potentially be seen as fair in a situation where a business is being transferred, the employer will need to prove that there was a different reason. There are only a few reasons that will not be automatically construed as unfair, and these are economical, technical or organisational reasons (ETO reasons). If one of these reasons apply, the dismissal could still be construed as unfair, but it will not be automatically unfair.
Furthermore, the transferee takes on the employees under their existing terms of employment. The transferee cannot then make any changes to the employees’ contracts of employment unless there is an ETO reason for the change.
An employee can object to the transfer, and therefore object to becoming an employee of the transferee. In these circumstances, the employee’s contract of employment will be deemed as terminated; there is no dismissal, TUPE will not apply and the employee will not be entitled to compensation.
TUPE also means that both the transferee and the transferor are obliged to inform any representatives (recognised trade unions, or, if there are none, an elected employee) of the effect of the transfer on the employees. This duty to inform will extend to a duty to consult the representatives if there are any proposals that require action to accommodate the transfer in relation to the employees.
It should be noted that, even under TUPE, an employee will still need to be entitled to the usual rights of employment – namely an unbroken period of two years’ employment.
Similarly, even if an employer can prove there was an ETO reason and the dismissal is construed as fair, it may also still need to prove that the dismissal was procedurally fair.