A guide to TUPE

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) implement European laws designed to protect employees whose contracts of employment are in effect transferred to a new employer who takes over all or part of the business of the old employer. 

When will TUPE apply?

TUPE will apply whenever there is a "relevant transfer". There are two types of TUPE transfer:

• a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom where there is a transfer of an economic entity which retains its identity; or 
• a service provision change (SPC). 

The legislative provision for the first category is sometimes referred to as a standard business transfer. The second type of transfer, an SPC, was only introduced in 2006. It was included in TUPE so as to help remove uncertainties over the application of TUPE where there were few assets other than the actual workforce. 

Looking at the first limb an economic entity is defined as "an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary." 

In some cases, TUPE may apply where just a part of an undertaking is transferred. This can occur even where before the transfer the part transferred had not existed previously as an identifiable entity.

Consideration will need to be given to whether the economic entity retains its identity post-transfer. This would generally involve assessing if the new employer or transferee continues or resumes the activity in question. A number of factors may be relevant in determining this issue such as:

• the type of business or undertaking; 
• whether tangible assets transfer such as buildings and stock; 
• the value of intangible assets at the time of the transfer; 
• whether the majority of the undertaking's employees are taken over by the new employer; 
• whether or not customers are transferred; 
• the degree of similarity between the activities carried on before and after the transfer; 
• the period, if any, for which those activities were either interrupted or suspended.

Under the second limb an SPC can arise in one of three prescribed circumstances:

• 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"); 
• 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"); or 
• 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.

However, the application of the SPC provisions is conditional on the fact that "immediately before" the service provision change there is an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client.

It follows that in order for TUPE to apply, the activity must be serviced by an organised grouping of staff. This can narrow the application of TUPE considerably for example in the case of Eddie Stobart Ltd v Moreman 2012 it was held that staff did not transfer even though they were carrying out the work for the client as they had not been consciously put into an "organised grouping" to serve the client.   

It is also important that post-transfer the activities are 'fundamentally' the same. Some minor difference between the nature of the tasks carried on before and after should not prevent TUPE applying. However, in Enterprise Management Services Ltd v Connect-up Ltd [2012] where the new contract excluded about 15% of the computer support work, it was held not to be the same activity and TUPE did not apply. 

The activities must continue to be carried out for the same client too so where the client changes in addition to the contractor there will be no SPC. 

There is also an express exception from the SPC provisions where the transfer involves 

• a single specific event or a task that is intended to be for only a short-term duration or 
• where the contract is for the supply of goods. 

The extent that the first exclusion applies was considered in the case of Lidell’s Coaches v Cook 2012 in which it was held that the phrase “in connection with a single specific event or task of short-term duration” could apply to all single specific events and all tasks of short term duration. There had been some doubt as to whether it would apply only those events or tasks which are both single specific and of short-term duration. 

It is important to realise that ordinarily share transfers are not covered by TUPE either. This is because for there to be a relevant transfer, there must be a transfer "to another person". This means that the identity of the employer must actually change. In the case of typical share transfers, the identity of the employer remains the same it is just the ownership of the shares that change. 

However, following a share sale the acquired business may be 'taken over' by the other business and at that point, TUPE may apply. 

Who transfers?

The starting point is that is that it will be the employees of the undertaking in question immediately before the transfer.

However, as was shown in Inex Home Improvements Ltd v Hodgkins 2015, the fact the employees were temporarily laid off pending the next work order at the time of the SPC may not prevent them being included. In contrast in BT Managed Services Ltd v Edwards and another 2015 it was held that an employee who had been absent due to long-term sickness and in receipt of PHI did not transfer as it was never expected that he would return to work due to his medical condition.

Where there is a transfer of part it can be difficult to establish whether the employee is assigned to the relevant part that is transferring. 

In Duncan Webb Offset (Maidstone) Ltd v Cooper and others [995 a non-exhaustive list of relevant factors was identified -

• The amounts of time spent respectively in the transferred undertaking and in other parts of the business
• The amount of value given to each part by the employee
• The terms of the employee's contract of employment insofar as they establish what the employee could be required to do
• How the cost of the employee's services has been allocated between different parts of the business.

It was held that employees who devoted approximately 80 per cent of their working time to the transferred undertaking were assigned to it although they also carried out a certain amount of work for other parts of the group. 

The issue of assignment can also arise when considering whether particular employees are assigned to an organised grouping where there is a service provision change. Just because the company being taken over only has one client will not mean that all employees will be within the group as was seen in the case of Edinburgh Home-Link Partnership v Edinburgh Council 2012.  In that case, a Charity provided housing outreach and support services on behalf of the Council. When the Council decided to bring these services in-house the entire workforce transferred across apart from the two directors of the Charity. As their roles were broadly strategic and related to the general running of the Charity rather than the provision of housing services to the Council they had not been assigned to the organised grouping of employees who had transferred.

What rights and obligations transfer?

The transferee assumes all the rights and liabilities in relation to the employees that transfer. Generally, any dismissal by reason of the transfer is deemed to be automatically unfair and there is an obligation to match the same terms and conditions of employment that the transferor had provided.

This includes liability for discrimination claims and other tortious liabilities such as personal injury claims. 

Union recognition also transfers to the transferee. An independent trade union that was recognised by the transferor in respect of any description of transferring employees is deemed to be recognised by the transferee to the same extent as by the transferor. 

However, this transfer of union recognition only applies where the transferred organised grouping of resources or employees maintains an "identity distinct" from the remainder of the transferee's undertaking after the transfer. A group of employees who are absorbed within a larger group already employed by the transferee will not retain their identity and recognition of the union will not transfer. 

Whilst it does appear that everything transfers it is worth noting some specific exceptions including 

• Occupational pension rights 
• Criminal liabilities  
• Responsibility for PAYE liabilities in respect of payments up to the date of the transfer 
• NICs in relation to payments made before the transfer

Consultation obligations

There are obligations to inform and consult with employee representatives before a transfer. This requirement applies to any employees who may be affected by the transfer or by measures taken in connection with the transfer, whether or not they are employed in the undertaking or part to be transferred.

The information must be provided long enough before the transfer to enable the representatives to consult with the affected employees. There must be a consultation where an employer (it will be the transferee) envisages that it will take measures relating to the transfer with respect to some/all affected employees. 

There is no minimum period of time that collective consultation has to last and there is no requirement that collective consultation has to begin a minimum number of days before the date of the transfer. 

The relevant information that must be provided to the employee representatives is made up of:

• The fact of the transfer, 
• The date when it is to take place and 
• the reasons for it. 
• The legal, economic and social implications of the transfer for the affected employees. What is meant by "legal, economic and social implications" will be a question of fact in each case. 
• The measures which the employer envisages it will take in connection with the transfer in relation to "any affected employees" or, if no measures are to be taken, that fact. 

The information provided to the representatives must also include "suitable information" relating to the use of agency workers (if any) by the employer. This means:

• The number of agency workers working temporarily for and under the supervision and direction of the employer.
• The parts of the employer's undertaking in which those agency workers are working.
• The type of work those agency workers are carrying out.

If a union is recognised then the union representatives will be the appropriate representatives for collective consultation. If there is no union recognised employees should be given the opportunity to elect representatives.

Employee liability information

The transferor must provide the transferee with a specified set of information which will assist him to understand the rights, duties and obligations that will pass to him when the employee's transfer. This is aimed at helping the transferee employer prepare for the arrival of the transferred employees:

The identity of the employees who will transfer;

• The age of those employees
• Information contained in the “statements of employment particulars” for those employees
• Information relating to any collective agreements which apply to those employees
• Instances of any grievances or disciplinary action raised in the preceding two years where the ACAS Code of Practice applies. 
• Instances of any legal actions taken by those employees against the transferor in the previous two years, any instances of potential legal actions which may be brought by these employees where the transferor has reasonable grounds to believe such actions might occur.

The information should be given not less than 28 days before the transfer.