TUPE – Transfer of Undertakings
TUPE is an acronym for ‘Transfer of Undertakings (Protection of Employment) Regulations 1981’. These regulations can appear complex and it is very important, as with other areas of employment law, that employers proposing to sell or merge their business, or contract out services, get both TUPE law and procedure right. In particular, it is not always immediately obvious whether or not a TUPE transfer has taken place. A failure to understand and properly apply TUPE regulations can be very expensive indeed.
What employment rights are provided by TUPE?
In the broadest of terms, TUPE protects employees’ jobs when the ownership of a business changes – ensuring that they become employees of the new business, on the same terms and conditions, on transfer of the business.
In particular TUPE regulations provide the following employment law rights for workers:
- an obligation to inform and consult with representatives of those employees who are affected;
- protection against dismissal connected with any TUPE transfer; and
- The transfer to any new employer of the rights obligations and liabilities of any transferring workers (except the obligation to consult)
The regulations provide that a relevant TUPE transfer are defined as ‘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.’
This has 3 parts:
- a separate economic entity
- transfer of the economic entity
- that economic entity retaining its identity after transfer
Since 2006 the TUPE Regulations have been extended to apply to situations where there is a change of service provider. This can apply to a situation where there is a change of contractor, for example, in a re-tendering exercise.
When do the TUPE regulations apply?
TUPE has generally been found to apply to the following transactions:
- sales of a business or part of a business
- a change of franchisee or licensee
- contracting out of services
- a change of contractor
- where all or part of a sole trader’s partnership or business is sold or otherwise transferred.
However, TUPE generally doesn’t apply to these transactions:
- any transfer of shares (where the identity of the employer remains the same)
- a pure asset sale (where there are no employees involved)
- the supply of goods for use by clients (e.g. the supply of food to a client for sale in a staff canteen, as distinct from a situation where a contractor actually runs that canteen for the client)