What is TUPE?
These are commonly known as TUPE. These regulations derive from EU acquired rights and place certain obligations on employers to safeguard employee’s rights when transferring business from one company to another.
They are complex and guidance should be sought when in this position. When considering purchasing another company the due diligence undertaken should always contain an investigation of the TUPE obligations which will come to the company acquiring the business.
Why should I worry?
TUPE is obligatory and is designed to protect the employees. Situations e.g. bankruptcy of the transferring company can arise which will modify or perhaps remove the need for TUPE, other situations known as ‘pre-pack‘ bring them to the fore.
There are 21 subsections within the TUPE regulations which cover the scope of the regulations, the process, how and when to consult affected employees, penalties for non-disclosure of TUPE to the acquiring company, bankruptcy of transferring company and other relatively minor administrative details.
What should I do?
TUPE requires that the transferring employees are consulted about the changes. If there are more than 20 affected employees the process is more complex, they are allowed to transfer with their existing terms and conditions (pension rights may be affected) across to the new company continuity of service from the old company is maintained. The transferring employees can opt to take a new contract from the acquiring company if the terms are better than they have previously enjoyed but they still maintain continuity of service.
Although the acquiring company will take on all transferring employees they can be dismissed under certain circumstances even though any redundancy and notice pay will be calculated on the employee’s combined service from both companies hence the need for due diligence in this area.
Employers should be aware a dismissal for a reason connected with the transfer of a business or undertaking is automatically unfair unless the employer can show that the reason was “an economic, technical or organisational reason” entailing changes in the workforce.
There is no statutory definition of what is “an economic, technical or organisational reason“. A dismissal by reason of redundancy will, however, generally count as being for “an economic, technical, or organisational reason”.
The “changes in the workforce” envisaged by the regulation will normally be a change in the number of employees but other types of change can suffice. Thus a real change in the functions of the workforce is a substantial or key area can be sufficient to enable an employer to use the “ETO defence“.
If the employer can claim the benefit of the “ETO defence” it does not follow that the dismissal will have been “fair“. All it means is that the dismissal was not automatically unfair. To establish that the dismissal is fair, the employer must still satisfy the Tribunal that he has acted reasonably, including that he has followed proper procedures as in any other unfair dismissal case.
To repeat this is a complex subject this is only a brief overview expert guidance should always be sought when approaching a situation where TUPE may be involved. Please contact me here >>>