12. Business transfers and contracting out — TUPE
[ch 12: pages 446-448]Business transfers and outsourcing, and their effect on the employment relationship, are regulated by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). TUPE was originally enacted in 1981 to comply with a European Directive known as the Acquired Rights Directive.
TUPE is intended to safeguard the jobs and rights of employees when the identity of their employer changes as a result of a transfer such as a business sale or merger, or the re-tendering of a service contract. As a matter of European Union (EU) policy, TUPE is also supposed to help prevent the “race to the bottom” that would take place if competing businesses were free to cut costs following a transfer by sacking staff or cutting their wages.
In brief, where is applies, TUPE operates automatically. It means that the new employer automatically takes on transferring employees and must honour their wages and other contract terms.
TUPE law was modified in January 2014 by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (CRTUPEAR). Their purpose was to make transfers easier and quicker for employers and to lessen the protection available to affected employees, in preparation for government plans to greatly expand the outsourcing of public services to the private sector.
Government guidance, A guide to the 2006 TUPE Regulations (as amended by the Collective Redundancies and Transfer of Undertaking (Protection of Employment) (Amendment) Regulations 2014), can be downloaded from the website of the Department for Business, Innovation, Energy & Skills (BIES). The guidance is non-statutory, meaning that tribunals are not required to follow it. Acas has also produced guidance for employers: Handling TUPE transfers. Unions have also published their own guidance for reps on the new regulations.
Some key facts about TUPE
• TUPE protects only employees, not agency workers or the genuinely self-employed;
• TUPE is only triggered when there is a change in the legal identity of the employer, in other words, where one employer replaces another. This has two important consequences:
◊ TUPE is not normally triggered by a share sale, because the employer remains the same before and after the shares change hands; and
◊ TUPE is not normally triggered where an existing service provider bids successfully to retain their contract. The service provider does not change, so TUPE does not apply;
• two years’ service is needed to claim unfair dismissal based on TUPE;
• TUPE applies in both the public and the private sector;
• TUPE applies whether or not a business is for profit;
• TUPE applies to a transfer regardless of the size of the employer, or the number of employees affected. There can even be a TUPE transfer affecting just one person;
• TUPE applies to internal reorganisations that result in a change of employer. There does not need to be a formal sale and purchase agreement for TUPE to apply. TUPE applies automatically whenever the employer’s identity changes;
• employers and employees are not allowed to agree between themselves to exclude TUPE protection;
• in the public sector, intra-governmental transfers are not covered by TUPE. Instead, they are subject to COSOP: the Cabinet Office Statement of Practice: Staff Transfers in the Public Sector (see page 476);
• TUPE can apply where jobs transfer out of the UK, even to a non-EU country, as long as the old employer is based in the UK (see Hollis Metal Industries Ltd v GMB & another [2008] IRLR 187);
• TUPE protection does not run out after a set amount of time, but the more time that passes after the transfer date, the easier it becomes for the employer to argue that its actions have nothing to do with TUPE, and are the result of other factors such as changes to economic conditions;
• changes to TUPE legislation made in January 2014 have made it significantly easier for employers to change contract terms after a transfer, but consent is still required for any contract change;
• as with all other tribunal claims, tribunal fees must be paid in order to enforce rights under TUPE. See Chapter 13 for more information;
• since TUPE is based on an EU Directive, it is vulnerable to change as a result of the vote to leave the EU. For more information, see the box on page 19 of Chapter 1.
A guide to the 2006 TUPE Regulations (as amended by the Collective Redundancies and Transfer of Undertaking (Protection of Employment) (Amendment) Regulations 2014) (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/275252/bis-14-502-employment-rights-on-the-transfer-of-an-undertaking.pdf)
Acas: Handling TUPE transfers (www.acas.org.uk/media/pdf/j/p/Handling-TUPE-Transfers-The-Acas-Guide.pdf)
LRD booklet: TUPE — a guide to using the law for union reps (www.lrdpublications.org.uk/publications.php?pub=BK&iss=1706)