The Transfer of Undertakings (Protection of Employment) Regulations 2006 otherwise known as TUPE, protects the rights of employees if the business they are working for is taken over or often if a service they provide to a customer is to be provided by another business. All employees and linked liabilities move from the old employer to the new employer on a TUPE transfer. For more information on TUPE, you can read our extended article here.
When does TUPE apply?
TUPE will only apply in certain circumstances where there has been a ‘relevant transfer’. This is either where there is a business transfer or a service provision change. For more details of what these terms mean please see our article here. TUPE is a complex area of law and so it may be that you have specific questions relating to your business and its proposed dealings. Our specialist TUPE lawyers can assist you.
Checklist for managing a TUPE transfer
As a transferor, who is selling part or all of their business or changing service provider and currently employs the employees subject to a TUPE transfer, here are a list of considerations for managing the transfer:
- Check that you understand TUPE and how and when it applies – seeking legal advice from an expert at an early stage if you think that TUPE may apply to your business sale or service provision change, is a prudent step.
- Identify employees who will transfer – it may not just be employees, some workers may also be subject to the TUPE Regulations, and so again if you require legal advice it is wise to seek this early in your transaction. Try to get discussions about who exactly transfers out of the way as early as possible as these are topics that can commonly escalate into disputes when parties start discussing an imminent transfer.
- Consider the overall timing of the transfer - try to discuss feasible timeframes with the other party to the transfer as early as possible. TUPE processes can often take longer than expected due to negotiation of terms and the information and consultation process. Early collaboration will avoid a last minute rush to complete the transfer.
- Calculate costs - you may need to calculate potential redundancy costs for anyone that’s not expected to transfer out of your business and is unlikely to have a role within your business.
- Diarise key deadlines - make a note of any key deadlines in the TUPE process. Good practice is to start with the expected transfer date and work backwards from there, taking into account the requirement to provide employee liability information at least 28 days before the transfer and to complete information and consultation processes ‘long enough before the transfer.
- Create an internal team or allocate a team member to manage the transfer with experience of handling TUPE transfers (if possible) to oversee the logistics and process including information and consultation obligations and paperwork. Make sure someone in your team has the time and resources available to manage communications with the new employer, with trade union representatives if you are operating in a unionised environment, and with the affected employees themselves.
- Consider how to manage the transfer - consider how and what you will communicate to staff, look at the benefits and risks to your business of the transfer, how staff will be distributed, and talents retained after the transfer, and any measures which may need to be taken.
- Prepare transaction documents - try to draft and agree the main commercial terms relating to TUPE as early as possible. This is usually a ‘TUPE schedule’ that’s attached to the business sale or outsourcing agreement. The TUPE terms should at a minimum include the expected transfer date, a set of standard TUPE indemnities and a list of transferring employees, as well as any special terms needed to address key risks that come out of the due diligence process. Try to involve specialist lawyers to help to ensure the terms are as favourable to you as possible.
- Employee Liability Information – sharing information about the employees transferring and affected by the transfer and how communication and the transfer will be managed should be discussed and agreed with the new employer. This, together with a timeframe for the transaction and exchange of information will need to be agreed to ensure a smooth transition. Our TUPE lawyers can help you consider what should be discussed and agreed with the new employer and how this can be done in a manner compliant with data protection law.
- Warranties and indemnities – it is highly advisable that you seek legal advice about any warranties and indemnities you provide to the new employer relating to employees. Our experienced employment lawyers can guide you on what warranties are more standard and those which may require redrafting or renegotiating before being agreed to best protect your business’ interests.
- Agree on transition arrangements – practical things like whether the new employer will meet staff before the transfer and whether transferring employees will get to see new premises, if applicable are worth discussing at an early stage. Also, how customers receive communication about the transfer and any impact it may have on them are worth consideration.
- Inform and consult – with employees affected by the transfer through Trade Unions or employee representatives. If you are exempt as a microbusiness, you can inform and consult directly with affected employees. There is an obligation to inform and consult whether employees are transferring or not and whether they are currently at work or on any form of leave. Employee representatives should be given paid time off and not suffer any detriment as a result of their duties as an employee representative or to receive training to carry out those duties.
- Consult on any ‘measures’ – you will need to communicate with representatives and affected employees on any proposed changes in working practices after the transfer, including any proposed redundancies.
- Maintain good employee relations - TUPE transfers can create uncertainty for affected employees. They may not fully understand what it means for their employment and the possibility of transferring out of an organisation to a completely new employer can be unsettling. Try to be as transparent as possible with your employees to minimise disruption and grievances or claims. It’s good practice to invite a new employer to meet your employees in advance of a transfer so that they can start the process of familiarising your employees with the new organisation, although there’s no requirement to do so if there is sensitivity around this.
- Manage customer relations - a TUPE transfer can be a sensitive time for customer and client relations, particularly if the transfer is taking place due to an outsourcing transaction and you are the service provider for the client. If you are the outgoing provider, you may need to consider how to manage the ramping down of your service and transition to a new provider without damaging the relationship with your client if you have other contracts with them.
- Keep a record of the process - given the risk of TUPE related claims, make sure you keep adequate records of your TUPE process, including notes of consultation meetings and a clear paper trail of all letters and emails sent to affected employees, employee representatives and trade unions (if applicable) about the transfer.
- Think ahead about post-transfer matters - As the old employer, you should take steps to understand the effects of the transfer on teams and employees who did not transfer out of your organisation and monitor workloads and employee morale.
As a transferee about to take on new employees you will want to consider the following:
- Check that you understand TUPE - whether and how it applies to your transaction and to whom. All employees who are part of the ‘organised grouping’ will transfer if there is a service provision change. Do seek specialist TUPE legal advice if required.
- Consider the transaction as a whole – look at the benefits and risks to your business that the transfer could bring. Take the time to become aware of the financial and operational details of the old employer’s business so that you know what your business’ likely costs and liabilities will be. A proposed timeframe is also useful to discuss at an early stage. Think about how your clients may be affected by the transfer too - if you’re taking over a service from someone else for the client as part of an outsourcing deal, you’ll need to make sure you have sufficient experience to be able to fulfil the contract.
- Calculate costs - as the new employer, you’ll want to understand the basic HR costs from inheriting new employees under TUPE. You’ll also want to know whether there are any special or extensive costs, for example from having to honour expensive terms under the transferring employees’ existing contracts or the risks associated with not doing so.
- Diarise key deadlines - make a note of any key deadlines in the TUPE process. Good practice is to start with the expected transfer date and work backwards from there, taking into account your right to receive employee liability information at least 28 days before the transfer and to complete your own information and consultation processes ‘long enough before the transfer.
- Create an internal team or allocate a team member to manage the transfer with experience of handling TUPE transfers to oversee the logistics and process including information and consultation obligations and paperwork. Make sure someone in your team has the time and resources available to manage communications with the old employer, with trade union representatives if you are operating in a unionised environment, and with the affected employees themselves.
- Carry out thorough due diligence – as the new employer, it’s critical that you review the terms of employment of employees who are expected to transfer to your business. You should request copies of the employment contracts, policies, incentive and pension terms and information about other liabilities such as ongoing claims and disputes. If you identify any material liabilities, you should seek legal advice and negotiate specific terms in the commercial agreement to apportion liability. You should also review all Employee Liability Information (ELI) supplied by the former employer.
- Consider whether ‘measures’ may need to be taken – look at the employment contracts and working practices of the employees in their current employment and whether any changes would need to be made. If redundancies are likely to be required, consider how this might be done. If there are 20 or more redundancies proposed after the transfer, you may want to ask the old employer for permission to begin pre-transfer consultation. If measures are needed, you will need to provide information on these measures to the old employer long enough before the transfer to allow the old employer to consult employees on these matters.
- Employee terms and conditions – these should generally remain the same or be no less favourable after a TUPE transfer. If you cannot offer the same terms as the old employer, you will need to think of suitable equivalent alternatives which can be offered. There may be exceptions relating to pensions, so if you have questions, seeking specific advice from a lawyer in advance is wise. You will want to inform the old employer about any proposed changes. Instructing a solicitor to guide you through what is legally advisable if changes are to be made, is prudent.
- Is a change of location required? – if staff will need to work at another location you will need to consider their individual circumstances and whether reasonable adjustments will be required for staff and whether it is reasonable for them to change location. You will also want to consider whether and when they should visit their new workplace.
- Inform and consult – just as the old employer is required to inform and consult, as the new employer you will need to identify which employees are to transfer to your business, and to ensure that relevant trade unions or elected representatives (or employees directly if you are exempt) are informed about the transfer. This is whether employees are currently at work or on any type of leave. Employee representatives will be entitled to paid time off and no detriment for training and duties relating to the TUPE transfer.
- Communicate clearly with employees – so that employees remain motivated and are not concerned by the transfer, any change in ways of working, roles and responsibilities or team members and structure. It is important to reassure employees about their future working for you so that employees key to the future of your business do not resign. Asking the old employer if you can visit their workplace and speak with transferring employees about the effect of the transfer on them, can assist, although the old employer is not obliged to give you access to their employees.
- Check for inconsistencies in information – if you are able to speak directly with employees and gather information directly from them, cross-check this with ELI and other due diligence information collected from the old employer and ask the old employer about any inconsistencies. Within 60 days of the transfer, you will also need to check the transferred employees have the right to work within the UK.
- Keep a record of the process - given the risk of TUPE related claims, make sure you keep adequate records of your TUPE process, including notes of consultation meetings and a clear paper trail of all letters and emails sent to affected employees, employee representatives and trade unions about the transfer.
- Prepare to welcome new employees- advance consideration of an induction for new staff, training and harmonisation of working culture, systems and policies will make the transition smoother. Looking at announcements that will be made to customers, other staff and business contacts about the new staff members and ensuring staff feel integrated within the business and know where to direct questions, will likely assist with motivation and productivity. Ongoing communication about whether employees have the resources and support required to fulfil their roles is also in the interests of your business longer term.
Summary
Whether you are the outgoing or incoming employer, if TUPE applies to your business sale or service provision change you will want to make sure you have the knowledge to navigate through this complicated area of employment law. Our expert employment lawyers can assist you with assessing whether TUPE applies and what your obligations are. We can guide you through the specifics of the process if you need more detail than the checklist provided above.
The government is currently consulting on some minor changes to address two historical cases, which have caused some uncertainty regarding who TUPE can apply to. The two proposals are:
- Amending the definition of employees to specifically exclude workers to remove the ambiguity that workers in addition to employees are also covered by TUPE; and
- Confirming that employment can only TUPE transfer to one employer and should not be split between multiple employers to address the conclusion reached by the ECJ.
The government’s consultation is open until 11 July 2024, but given the General Election on 4 July, it is uncertain what progress will be made on this in the short term.
