TUPE

TUPE is an acronym for ’Transfer of Undertakings (Protection of Employment) Regulations 1981’.

The TUPE Regulations preserve employees' terms and conditions when a business or undertaking, or part of one, is transferred to a new employer.

TUPE introduces three concept into UK employment law:

• The automatic transfer principle: employees transfer to the purchaser of a business who inherits all rights, liabilities and obligations in relation to them.
• Protection against dismissal in connection with TUPE transfer.
• The obligation to inform and consult with representatives of the affected employees.

When does TUPE apply?

TUPE applies to a “relevant transfer”, which means either or both of the following:

• A transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity (a business transfer). The involves three elements:
• an economic entity;
• a transfer of that economic entity; and
• the economic entity retaining its identity following the transfer.
• A client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work “in-house” (a service provision change).

Share sales

TUPE does not apply to a transfer of shares.

Automatic transfer principle

Where there is a relevant transfer:

• The Contracts of Employment of the employees automatically transfer to the buyer on their existing terms.
• The buyer effectively steps into the seller’s shoes with regard to the transferring employees. All of the seller’s rights, powers, duties and liabilities under or in connection with the transferring employees’ contracts pass to the buyer.
• Employees who object to the transfer do not become employees of the buyer. Instead, their Contracts of Employment terminate on the transfer date and there is no dismissal.

Changing terms of employment

The buyer 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:

• the reason for the variation is an Economic, Technical or Organisational (ETO) reason; or
• the reason for the variation is the transfer, but the terms of the contract permit the employer to make such a variation.

Protection against dismissal

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 only potentially unfair.

Obligation to inform and consult

Both the seller and the buyer must inform and consult with recognised trade unions or elected employee representatives 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 seller to consult with them about it.

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