Often when important changes happen within a business, whether it’s being entirely transferred over to another owner, or part of it is being bought out, the question many employees ask is “what does this mean for me?”
TUPE stands for Transfer of Undertakings (Protection of Employment), and is essentially a way for employees to be protected should the business they work for go through the changes mentioned above. TUPE law also enables any liabilities associated with employees to be moved over when the business changes hands.
TUPE is relevant to many different businesses, and many different transactions they may be making, no matter their size. TUPE regulations protect the following two types of transfers:
- Standard transfer – where a business moves over to another owner, or merges with another business to create a new, single entity. This also relates to parts of businesses coming under new ownership.
- Service provision transfer – SPCs, according to Regulation 3(1)(b)(i)-(iii) concern outsourcing, second generation outsourcing and/or re-tendering, and in-sourcing.
Some new business owners may decide to cut their workforce in half to save on costs, or even before a transfer happens there may be redundancies that appear seemingly out of nowhere. It can be a frustrating and stressful time for many employees.
Regulation 3(1)(a) explains this as: “a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the UK to another person where there is a transfer of an economic entity which retains its identity.”
But what does this mean for employees? When the transfer happens, all employees of the business being transferred are automatically moved over, including the terms and conditions of their employment contracts. Although it is the legal right of employees to transfer with their previous contractual terms in tow, there may be special circumstances that don’t apply with regard to pensions.
If an employee takes their employer to court for breach of TUPE regulations, the following factors will be considered:
- The type of undertakings that are being transferred and whether these include assets such as buildings or mobile property
- Whether any clients/customers of the business have been transferred
- Whether the employees of the business have been transferred and their terms and conditions of their contracts kept in place
- Any intangible assets that are being transferred, such as patents and trademarks
- The correlation between the activities carried out prior to and after the transfer
Service provision changes
SPCs, or service provision changes, relate to the following three elements:
- Second generation outsourcing/re-tendering
This is where a role that is usually carried out internally to the business (for example, financial adviser) is “outsourced” to an external contractor.
2. Second generation outsourcing/re-tendering
Where a role carried out by an external contractor is given to a different contractor instead, through second generation outsourcing and/or a re-tendering process. There may be a few reasons for a business to go through this process; the contract is ending and they wish to explore more cost-effective options; they have had a negative experience with the current contractor; the current contractor is ceasing trade.
Where a role carried out by an external contractor is brought in-house to be carried out by the client instead. Whether or not this role was previously in-house prior to being completed externally does not matter in this scenario.
SPCs can be complex, so it’s important to seek legal advice if you feel your employer has breached TUPE regulations in this regard. When determining if an SPC has happened, your solicitor will need to check certain requirements were met, such as the identification of activities that describe the role/service and the identification of employees involved.
NOTE: It’s important to note that public sector business transfers aren’t normally covered by TUPE law, but there may be some exceptions to this regarding public sector businesses moving into the private sector.