If a business acquires another business with existing employees, an important piece of legislation called "TUPE" may apply. TUPE, also known as The Transfer of Undertakings (Protection of Employment), came into place to safeguard employees' jobs should a business or part of the business be taken over by another. You may well have heard of this but how do you know if it applies to your acquisition or sale, and what are your responsibilities?
When does TUPE legislation apply and what are my responsibilities?
TUPE may well apply when a business transfers to another with no significant change in function or activity e.g. when one business acquires another business or subsidiary, or if a contract moves to a different provider e.g. if a cleaning contract is outsourced or brought back in house.
Under TUPE legislation, all of their terms and conditions of the transferring employees must remain the same and their continuity of service is protected.
As soon as the service provision change or the business transfer is known, the current employer must consult with either a trade union or employee representative. They need to know that the transfer is happening, when it will happen and why, how it will affect them and whether any ‘measures’ will be put in place by the new employer.
If the employer has less than 10 employees, they can consult with them directly. If they have 10 or more employees, if there is no trade union, they should an employee representative is elected.
In addition to existing terms and conditions of employment, any collective agreements are protected and any failures of the current employer to observe rights i.e. any liability for discrimination or unfair treatment will pass on to the new employer.
What are ‘measures’?
Although the terms and conditions of employment of transferring employees are protected, the new employer may impose ‘measures’ if they have a valid economic, technical or organisational reason to do so. This is known as a valid ETO.
Economic reasons are to do with how the company is performing, technical reasons are to do with the equipment or processes the company uses and organisational reasons are to do with the structure of the company. So, the new employer may have valid reasons for making redundancies post transfer so long as it’s not connected with the transfer itself.
The employee also needs to be made aware of this measure before the transfer takes place and they need to agree to it.
If an employee doesn’t agree to the transfer, they are effectively resigning, however if they object to the transfer because of more detrimental terms and conditions, they could claim unfair dismissal, if they did not feel that the new employer had a valid ETO.
What information needs to be exchanged pre transfer?
The current employer must provide the new employer with information about the transferring employees. This is called ‘due diligence’. This information includes personal details, details of any disciplinary and grievance action taken within the past two years, legal action or potential legal action that they think an employee might raise.
This information must be exchanged four weeks before the transfer takes place.
Changes to employee’s terms and conditions post transfer.
Employees’ terms and conditions can be amended even if this is financially detrimental to the employee post transfer but this is only permitted if it will prevent job losses and it must be agreed with trade union representatives and employees.
Any change can’t break statutory employment rights.