TUPE

Ian Dawson, Head of Employment, gives us his thoughts on some common misunderstandings regarding TUPE.

We are bidding for a contract, we are not buying the business, surely TUPE won’t apply?

Unfortunately, often it will!

TUPE will apply where there is a sale and purchase of a business, but also in some cases when there is the transfer of a contract. This will include what is often called “contracting out” or “outsourcing”, where an existing contract is taken over by a subsequent contractor, often following a re-tendering process and also where activities are carried on by a contractor and are then taken “back in-house” by the business. This is often called “contracting in” or “insourcing”.

The same obligations under TUPE apply where there is a relevant service provision change.

I don’t want to take on all of the employees. There are too many. Why do I have to?

TUPE aims to protect the terms and conditions of employees. Generally, employees will transfer with their existing terms and conditions, including continuous employment where there is a relevant transfer under TUPE.

Disputes can arise where employees may only work for part of their time in the business, or the part of the business which is to be transferred. Appropriate advice, during the due diligence process, will help establish which employees should transfer and those who should not.

If there are areas of dispute, then any problem areas can be addressed as part of the sale process with appropriate protection and indemnities built into the relevant sale documentation.

Sensible discussions can also take place between the seller and the purchaser, to reduce the risk of claims, for example with some employees to be transferred internally within the seller’s group.

It is important to try and avoid potential future litigation, as practically if there is a dispute as to whether TUPE applies, employees who are affected, or who have been dismissed, would be likely to bring claims against both the seller and buyer.

I have been told that I have to consult with the employees who I will be taking on. Surely this can’t be right?

There are obligations, under the legislation, on both the seller and buyer to consult where TUPE applies. The extent of the obligations, will however depend on a number of factors and the obligations can vary depending on whether it is the seller or buyer who is involved.

For example, a buyer may be legally obliged to consult with its existing employees, if those employees may be affected by the integration of the other employees into the business.

There are also requirements to consult with “appropriate representatives” and in some cases this will require elections to take place to appoint such representatives.

There can be a significant risk of claims for the failure to consult under TUPE which can be up to 13 weeks’ gross pay for each employee (with no cap on the weekly amount for a week’s pay) if consultation does not take place.

I have been told that I can’t change any terms after a TUPE transfer.  Surely this isn’t right?

The general starting point is that employees who do transfer under TUPE transfer under their existing terms and conditions, but their ongoing obligations to the employer also continue. For example, if an employee has been subject to disciplinary action, and there is an existing warning this will still apply following the transfer.

However, it is not correct that changes cannot be made to the terms and conditions after a transfer. This will depend on the reasons for the possible changes, for example if there is a genuine business reason for the changes and the extent to which any variations are connected or unconnected with the transfer.

With appropriate advice, these issues can be addressed and steps taken to consult with the employees, following the transfer, where changes are necessary and there are genuine business reasons for varying the terms and conditions.

Our team

Ian Dawson

Partner

Head of Employment

Direct Line +44 (0)113 297 7735

Jeremy Shulman

Partner

Employment & HR

Direct Line +44 (0)113 297 7748

Jim Wright

Partner

Employment & HR

Direct Line +44 (0)113 297 8938

Tom Watkins

Associate

Employment & HR

Direct Line +44 (0)113 297 8069