TUPE advice for employers

Several factors are relevant in identifying which employees should transfer under TUPE. The test used by employment tribunals is the "assignment" test. Employment tribunals will look for a substantial degree of assignment, including by assessing the time spent by employees on the transferring undertaking or activities, and the kind of duties carried out. Employees temporarily assigned to a transferring undertaking or service will not transfer.  

In most cases, it tends to be clear if an employee is "assigned" to a transferring undertaking or service. Difficulties can arise where only part of a business transfers and an employee performs duties for other parts of the business as well, or on a service provision change, where an employee works on a number of contracts.  

Another important consideration when identifying who will transfer is that TUPE applies to "employees", but this is not the same test of employment as for other employment protection rights. TUPE may apply to workers, as well as employees, but will not extend to self-employed consultants working under a contract for services. 

Employees who object to the transfer of their employment do not transfer under TUPE.  

• Employees in the undertaking (or employees who provide the services) have the right to transfer automatically to the new employer on their existing terms and conditions of employment  
• Liabilities in respect of the employees who transfer, such as for unpaid wages or legal claims move across to the new employer 
• The employee’s continuous service with the old employer is preserved 
• Old age pensions under occupational pension schemes do not transfer, but the new employer will still be obliged to provide a minimum level of pension benefits  
• The employer has to give specified information about the transfer in writing to elected employee representatives of affected employees. It must also consult the representatives about any measures it proposes in connection with the transfer with a view to reaching agreement on those measures. Where an employer has fewer than 10 employees, it may be able to provide the information directly to the affected employees and consult them directly. Failure to comply with these obligations could entitle an affected employee to compensation of up to 13 weeks’ pay 
• The old employer is required to give the new employer information about the staff transferring, their contracts of employment and any associated liabilities 
• Employees dismissed because of a TUPE transfer will be automatically unfairly dismissed and will be able to claim unfair dismissal provided they have two years’ service. The new employer will be liable for these unfair dismissals, even if the old employer (transferor) carried them out  Where a dismissal is for an economic, technical or organisational reason (an "ETO reason”) entailing a change in the workforce, it will not be automatically unfair. However, employees may still be able to claim unfair dismissal if, for example, the employer does not follow a fair procedure when dismissing them.  

On a TUPE transfer, the remaining balance of an employee's accrued but untaken annual leave entitlement for the holiday year transfers to the new employer. Therefore, the old employer does not have to pay the employee for accrued but untaken holiday up to the TUPE transfer. 

On a TUPE transfer, an employee's contractual rights in respect of personal pension arrangements will automatically transfer to the new employer. Therefore, the new employer must make the same contributions to the contract based pension scheme as the old employer made. 

Old age pensions under occupational pension schemes do not transfer, but the new employer will still have to provide a minimum level of pension benefits going forwards. 

Employees can refuse to transfer to the new employer but, depending on the circumstances of the case, they can lose valuable legal rights if they do object.  

• Employers involved in a TUPE transfer (both transferor and transferee) need to inform appropriate representatives of affected employees about the transfer.  They must provide specified information to the appropriate representatives including the reasons for the transfer, when it is proposed to take place and the legal, economic and social implications of the transfer. Employers also need to inform the representatives of any proposed “measures”. The new employer is required to provide the old employer with information on its proposed measures to allow the old employer to comply with its duty to provide this information 
• Employers must provide this information long enough before the transfer to enable consultation with the representatives to take place
• If an employer proposes any changes following the transfer, they will have to discuss these "measures" with the representatives of their affected employees with a view to reaching agreement on them 

There is no set timetable for consultation. Employers have to provide the relevant information in "good time" before the transfer so that consultation can take place. The larger the transaction and the more employees affected, the longer the timetable will need to be. 

If there is a failure to inform and consult, a complaint can be made to an  employment tribunal. If successful, the tribunal can award whatever compensation it considers just and equitable having regard to the seriousness of the employer's failure, up to a maximum of 13 weeks' gross pay per affected employee. 

An employer has a defence if it can show that there were special circumstances making it not reasonably practicable for it to comply with its information and consultation obligations, and that it did its best to comply in the circumstances. 

TUPE information and consultation breaches can result in joint and several liability between the old and new employers (transferor and transferee), although the parties will usually reach a written agreement about who will be responsible for such liabilities.  

A failure to comply with TUPE consultation obligations could therefore expose employers to claims and potentially significant liabilities. 

The old employer must provide employee liability information to the new employer. 

They must provide the new employer with written details of the transferring employees including their identity, age, particulars of employment, disciplinary and grievance records, any claims and any collective agreements that will have effect after the transfer. This information must be given not less than 28 days before the transfer, although in practice the new employer will want this information as soon as possible. 

If there is a failure to comply with this duty by the old employer, the new employer can apply to an employment tribunal for compensation. Compensation will be assessed having regard to the losses suffered as a result of the failure, with a minimum award of £500 per employee, unless the employment tribunal considers it just and equitable to award a lower amount. 

The new employer is required to take on the transferring employees on their existing terms and conditions of employment. The new employer is prohibited from making any changes to the terms and conditions of employment of the transferred employees if the sole or principal reason for the variation is the TUPE transfer.  

In 2014, some changes were made to TUPE which potentially make it easier for employers to make changes to terms and conditions if:  

 • the employment contract already allows for a change to be made, such as the application of a mobility provision in the contract, or  

• the employer and employee agree the change in circumstances where the sole or principal reason for the variation is an ETO reason 

Unfortunately, because ETO reasons require there to be a change in the number or the functions of the workforce, or a change in workforce location, this often makes it difficult for incoming employers to harmonise terms and conditions of employment of staff after a TUPE transfer. 

If an independent trade union has been recognised by the old employer in respect of the transferring employees, recognition will transfer to the new employer to the same extent. 

Terms and conditions in employment contracts that have been incorporated from collective agreements may be renegotiated after one year, provided that overall the terms are no less favourable to the employee.