TUPE provides protection to employees in the event that the business they work for transfers to new ownership. In such a situation, the employees will effectively transfer over to the new organisation, too. In many cases, the incoming employer may want to make changes to the transferring employees’ terms of employment in order that all employees (that is, their existing employees and the transferring employees) have the same or broadly similar terms. However, TUPE prohibits them from doing so, except in certain circumstances. This raises the question of ‘how long is TUPE valid for?’, and specifically, the protection it provides to transferring employees and their existing contractual terms.
It is therefore vital for employers acquiring employees under a TUPE transfer to understand the basic rules surrounding the TUPE provisions, and are aware of its complexities and the need for legal advice when considering making changes to employee contractual terms.
What is TUPE?
The TUPE legislation is set out in the Transfer of Undertakings (Protection of Employment) Regulations 2006.
TUPE provides certain protections to employees where the business that they work for transfers either in whole or in part to a new owner. It also applies where a service provision is transferred, for example, where it is outsourced, in-sourced or re-tendered (except in certain specific circumstances).
In essence, the employees associated with the transferring business or service, transfer as well and the new owner becomes their employer at the time of transfer, stepping into the shoes of their original employer.
Which organisations are bound by TUPE?
TUPE applies to all organisations, regardless of the size of their workforce, turnover, profits and so on, if the part of the business that is being transferred is UK-based. For example, an international business which has its Head Office in New York, will have to comply with TUPE in respect of its employees who work at one of its UK-based factories if it transfers that factory to a new owner.
What protections does TUPE provide to the employees?
TUPE provides certain protections to the transferring employees, including:
- the right to be consulted through employee representatives prior to the transfer
- the provision of specified information in writing prior to the transfer
- the retention of their original terms and conditions of employment post-transfer
- no change to their length of continuous service
- the right to claim unfair dismissal if they are made redundant if the sole or principal reason for the redundancy is the transfer
- retention of their holiday entitlement
- the transfer of any potential employment claims against the outgoing employer. For example, if a transferring employee has a potential discrimination claim against
- the outgoing employer, this will transfer across under TUPE and they will, instead, be able to bring the claim against the incoming employer
- the transfer of any collective agreements which applied under the outgoing employer
In addition, any company pension rights of the transferring employees will be protected although there is no obligation on the incoming employer to carry on the same pension.
Does a transferring employee have to transfer to the incoming employer?
No, a transferring employee can choose not to transfer to the incoming employer. This has the same effect as a resignation in that the relevant employee will not be able to claim unfair dismissal or seek redundancy pay in relation to the resignation. If an employee does resign as a result of the transfer, their employment will terminate on the date of transfer, provided that they have notified the outgoing employer or incoming employer.
What happens to a transferring employee’s terms and conditions of employment?
Under TUPE, any transferring employee’s terms and conditions of employment cannot be changed if the sole or principal reason for the change is the transfer. This means that the incoming employer could acquire a sizeable number of new employees, all of whom have different terms and conditions of employment than the incoming employer’s existing employees. This could potentially lead to bad feeling between the existing employees and the new employees where, for example, the new employees are entitled to more holiday or extra benefits. Unfortunately for the incoming employer, TUPE does not allow them to amend the transferring employees’ terms and conditions if the reason for the amendment is simply to align everyone’s contracts of employment.
The issue cannot be tackled from the opposite side either; provided that the outgoing employer knows about the transfer, changing the employees’ terms and conditions of employment prior to the transfer so as to align them with the terms and conditions of the incoming employer is not permitted and this is the case whether the employee in question consents to the change or not.
Once the transfer has taken place, any transferring employees should be provided with an amended written statement of employment which states the name of the incoming employer and confirms that their terms and conditions of employment have remained the same.
What is the period of protection and how long is TUPE valid for?
The period of protection afforded by TUPE is indefinite; if the change to a transferring employee’s terms and conditions of employment is because of the transfer, it will be prohibited, even if it occurs some years after the transfer took place. That said, it may be less likely that an employee will be able to claim that the change was made as a result of the transfer the longer the period of time since the transfer.
Practical advice for employers looking to vary contract terms
Employers are able to vary the transferring employees’ terms and conditions of employment in certain circumstances. These are not straightforward and legal advice should always be sought if you are involved in a TUPE transfer and/or wish to change the terms and conditions of the transferring employees.
Changes made for an economic, technical or organisational (ETO) reason
Changes to the transferring employees’ contracts of employment can be made if (a) there is an ETO reason for the change which relates to the workforce or the workplace and (b) the employee consents to the change.
Note that even if the change is due to an ETO reason, any affected employee’s Changes to the transferring employees’ contracts of employment can be made if (a)
there is an ETO reason for the change consent is still required.
An economic reason will relate to the performance of the business or organisation, a technical reason will relate to the processes or equipment that is used by the business or organisation and an organisational reason will relate to the organisation’s structure. By way of example, relocating the business following the transfer is likely to be classed as an ETO reason although employers should be aware that each case will depend on the facts and tribunals expect the change to be for a true ETO reason – they will not interpret this lightly.
It can therefore be quite an onerous task for an organisation to establish that any change is for an ETO reason; often, a counterargument can be put that the change was solely or principally due to the transfer. Ideally, the incoming employer will be able to show that the change made would have occurred whether the transfer had taken place or not and that all employees were affected by the change, not just the transferring employees.
It is important that the reason for any changes be separated from the transfer as far as possible and that appropriate evidence can be provided. As such, recording management discussions and decision-making in writing is crucial here.
Changes which are permitted in the contract of employment
New employers should review the contracts of employment of the transferring employees as changes to their terms and conditions may be permissible under their contract terms, such as where there is a mobility clause.
Changes to improve the terms with the employee’s consent
Changes can be made to a transferring employee’s contract of employment if the contract so allows, the changes are an improvement on the original terms of employment and the employee or the relevant trade union representatives of the affected employee consent to the change. Written records should document the discussion with the employee and any consent should be given in writing and kept on file.
Collective agreements which have transferred across to the incoming employer can be renegotiated, provided that 12 months or more has passed since the transfer and that the changes are not detrimental to the employees in question.
Redundancies due to an ETO reason
An incoming employer can make redundancies post-transfer if these are for an ETO reason. Again, the employer must be able to show that a true ETO reason exists and that it is not just a smokescreen to enable them to streamline the workforce after the transfer has taken effect. The proper redundancy processes must also be followed.
What if the incoming employer fails to comply with TUPE?
If the incoming employer seeks to amend the transferring employees’ contracts of employment after the transfer in breach of TUPE, that is, where is no ETO reason, the amendments made will be void and the employer will be in breach of contract.
In addition, if the transferring employees’ terms and conditions of employment are changed either before the transfer or afterwards and those changes are worse than the original terms, the relevant employee could terminate their employment and bring a claim for constructive unfair dismissal.
Any redundancies made by the incoming employer in breach of TUPE will result in the relevant employees being able to bring a claim for unfair dismissal against the incoming employer.
It is therefore of paramount importance that employers comply with TUPE. As it is a complex piece of legislation and much will depend on the individual facts of each transfer, legal advice should always be obtained if a TUPE situation arises or could potentially arise.
DavidsonMorris’ employment lawyers can help with all aspects of TUPE, reorganisation and changes to employment contractual terms and conditions. Working closely with our specialists in HR, we provide comprehensive guidance on how to approach and implement organisational change projects to minimise legal risk while ensuring commercial goals are achieved and employee engagement is optimised. For help and advice, speak to our experts.
How long does a TUPE transfer last?
From the employees’ point of view, the actual TUPE transfer may be achieved fairly swiftly, but their rights under the legislation will continue for an indefinite period. Employees will have notice of the transfer as the employers must consult with them prior to the transfer taking place.
Do TUPE rights expire?
No, the majority of TUPE rights do not expire although as time goes on, it may be easier for the incoming employer to distance any changes to their employees’ terms of employment or redundancies from the transfer itself.
Can TUPE terms be changed?
The terms and conditions of employment of transferring employees cannot be changed if the sole or principal reason behind the change is the transfer, although a change which is for an ETO reason is permitted.
Is there a minimum consultation period for TUPE?
There is no minimum consultation period for TUPE although it must be undertaken in ‘good time’ before the transfer takes place. Therefore, large and complex transactions involving many staff members will require a longer consultation period than simpler transactions
Last updated: 28 May 2020