1. Overview of the TUPE Regulations

The Transfer of Undertakings (Protection of Employees) Regulations, known as “TUPE”, were originally introduced in 1981 to comply with the European Union Acquired Rights Directive (77/187). They were later replaced by the Transfer of Undertakings (Protection of Employees) Regulations 2006 (TUPE 2006).

Some core features of TUPE are set out below:

• the purpose of the TUPE Regulations is to protect the employment terms and conditions of existing employees when the business that employs them is transferred from one organisation to another;

• TUPE protects only employees — not the self-employed or agency workers;

• TUPE is only triggered where there is a change in the legal identity of the employer, in other words, where one employer organisation is replaced by another employer organisation. It is not triggered where the ownership of the employer changes (for example, a share sale) unless this results in a change in the employer’s identity;

• TUPE applies to both the public and the private sectors;

• TUPE applies regardless of whether an organisation operates for profit; and

• TUPE applies regardless of the size of the business.

Tribunals’ approach to interpreting TUPE

When interpreting the Regulations, tribunals are expected to adopt a “purposive” (as opposed to a literal or restrictive) approach, with a view to achieving the European objective of “safeguarding employees’ rights in the event of transfers of undertakings or businesses”. In practice, this means that where wording is ambiguous, tribunals are expected to choose the interpretation that best achieves the Regulations’ aim of safeguarding employees’ rights. There have been a number of important new cases since the last LRD guide to TUPE was published in 2006. It would be fair to say that the European objective of safeguarding employees’ rights guides most of these new cases.

Public sector employers are (in “Eurospeak”) “emanations of the State”. This means that public sector employees who bring a tribunal claim can choose between relying on the TUPE Regulations themselves or the underlying Directive. This is known as “direct effect” (North Wales Training and Enterprise Council Limited (t/a Celtec v Astley [2006] UKHL29).

When does TUPE apply

TUPE will only apply where there is a “relevant transfer” from one employer (the transferor) to another (the transferee). The definition of a relevant transfer is contained in Regulation 3 and explained in Chapter 2 of this booklet. Briefly, there will be a TUPE transfer if an identifiable business or part of a business changes hands, or a particular service is contracted out, given to a different contractor or brought in-house.

Consultation and collective rights

Representatives of affected employees have a right to be informed about a proposed transfer. They must also be consulted about any measures which the original or future employer envisages taking concerning those employees.

Regulation 13 specifies the employer’s duties to inform and consult. Regulation 14 sets out requirements for the election of employee representatives where there is no recognised union, and Regulation 15 explains what action representatives and/or individual employees can take if their employer has failed to inform or consult them.

Collective agreements relating to any employee who transfers will transfer with them (Regulation 5) and a recognition agreement will transfer if the group it relates to retains a distinct identity after the transfer (Regulation 6).

The Regulations require the out-going employer to pass specified information about the transferring workforce to the in-coming employer before the transfer takes place (Regulation 11). These rights are explained in Chapter 4 of this booklet.

How does TUPE affect terms and conditions

Broadly speaking, the effect of the Regulations is to preserve the continuity of employment and the terms and conditions of transferring employees. On the transfer date, employees of the transferring employer (the “transferor”) automatically become employees of the new employer, on the same terms and conditions (except for certain occupational pension rights). It is as if their contracts of employment had originally been made with the new employer (the “transferee”).

The Regulations provide some limited opportunity for the transferee or transferor to vary, with the agreement of the employees concerned, the terms and conditions of employment and contracts, for a range of defined reasons connected with the transfer. These are described in the Regulations as “economic, technical or organisational” (ETO) reasons. The scope to make contractual changes for an ETO reason is limited. These limitations are discussed in Chapter 5.

Under TUPE, the new employer also takes on all the old employer’s rights and obligations to its employees (except those relating to pensions). These include, for example, any liability for personal injury or unpaid wages, notice or holiday pay, or acts of discrimination that took place before the transfer. This means that great care must be taken when bringing a tribunal claim connected with TUPE, to make sure it is against the correct employer. Advice should be taken and if there is any uncertainty at all, the safest course is to claim against both employers and to let the tribunal settle the issue.

The Regulations also govern the position of employees who refuse to transfer. Refusing to transfer can have serious negative implications for employees. Careful advice should always be taken before deciding to object to a transfer. The implications of an objection to transfer are looked at further in Chapter 6.

Unfair dismissal rights

The Regulations contain specific provisions to protect employees from dismissal before and after a relevant transfer. The rights of employees on dismissal (including constructive dismissal) are set out in Regulation 7 and covered in Chapter 6 of this booklet.

TUPE and insolvency

Where a transferor employer is insolvent, the Regulations make it easier for the parties to vary contracts of employment, with a view to preserving jobs. Insolvency is discussed in Chapter 7.

Some practical points

There is no need for employees to be issued with a new contract of employment after a TUPE transfer, because the old contract remains in force. All that is required is for the employer to notify the employee in writing of the identity of the new employer. Where permissible changes to contract terms have been agreed (see Chapter 5), these will need to be notified to employees as a variation to the Statement of Employment Particulars, within one month of the transfer date, in the usual way.

Out-going and in-coming employers will need to notify the Inland Revenue of changes to PAYE and this will usually involve the issue of P45s to the transferring workforce.