Understanding TUPE: An employers guide
TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations.
They were first passed in 1981, overhauled in 2006, and amended in 2014. TUPE is a significant and complex piece of legislation adopted by the UK to implement the European Acquired Rights Directive. The TUPE regulations govern the employment aspects of acquisitions, outsourcing and mergers. Its purpose is to protect EMPLOYEES when the business (or part of the business) in which they work changes hands.
The TUPE regulations apply where there is;
- An acquisition of a business/organisation (or part of) which retains its identity, or
- A service provision change.
These regulations do not apply to a share purchase or if the change is in the provider of goods rather than services.
When there is a relative transfer or service provision change covered by the regulations, their effect is to transfer employees and any liabilities associated with them, from the old employer to the new employer by operation of law.
It is vital if you are planning any changes to your business that could be covered by the TUPE regulations to seek professional assistance at the earliest stage possible to ensure you are fully aware of the liabilities you may inherited from transferring employees, what requirements the regulations will place on you as the employer and any risks of claims from affected employees.
What is a relevant transfer covered by the TUPE regulations;
An acquisition of a business/organisation (or part of) which retains its identity.
From regulation 3:
‘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’
Let us break this down a little; ‘a transfer of an economic entity which retains its identity’
In determining whether there is a relevant transfer, we will break this into two parts:
- Is there an identifiable economic entity that is capable of being transferred?
- Will the economic entity retain its identity after the transfer in question?
As is often the case with TUPE, the regulations themselves do not clearly define what each phrase means so case law is left to establish definitions.
You will need to establish; is someone acquiring the business (it does not have to be a profit making business it could be for example a charitable non-profit organisation) or part of the business? If so, will it be identifiable after the acquisition (there is no need for money to change hands for there to be an acquisition)?
The Advice team at HR24 will assist you to identify the entity to transfer-what does it consist of? What does it look like? What does it do? Then ascertain if it will transfer, will its identity be retained post transfer (it does not need to be identical but fundamentally similar).
Now let us consider a service provision change.
From the regulations – A service provision change that is a situation in which:
(i) Activities cease to be carried out by a person (“a client”) on his own behalf and are carried out instead by another person on the client’s behalf (“a contractor”);
(ii) Activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf; or
(iii) Activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf.
The Advice Team at HR24 will help you confirm if one of the three service provision change criteria has been met and if it has, will look to confirm if there is an organised grouping of employees which has the principle purpose is carrying out of the activities concerned on behalf of the same client, as all this is required for the TUPE regulations to apply.
There are many establishing case laws to consider when ascertaining if TUPE is likely to apply so expert advice is strongly recommended the planning stage.
Our next TUPE article will look at the obligations placed on employers by the TUPE regulations in a relevant transfer situation.