What happens when you 'acquire' a workforce.

The Transfer of Undertakings (Employment Protection) Regulations (2006) represented an attempt to introduce a greater degree of clarity to the earlier regulations. The 2006 regulations specifically brought the provision of contracted out services into the scope of TUPE. The 2006 regulations were subsequently amended further by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations (2014). 

Much of earlier TUPE case law has been built around contracted-out service providers such as office and hospital cleaners. In the majority of commercial transfers (e.g. acquisitions) TUPE applies and employees whose employment is transferring to a new ultimate employer enjoy protection in terms of continuous service and terms & conditions of employment. Under current legislation the following apply to a transfer:

  • The employment contracts of employees together with all rights, powers, duties and liabilities (except for certain occupational pension rights) under them pass from the old to the new employer.  Variations to terms and conditions of employment may be made, by agreement, for economic, technical or organisational reasons but not for reasons directly related to the transfer;
  • Employees are protected from dismissal in the same way as they would be if the transfer were not taking place unless such a dismissal for economic, technical or organisational reasons (similar to the ETO reasons that apply to redundancy legislation);
  • There is a requirement for both the old and the new employer to consult with employee representatives (together with the requirement to hold elections for employee representatives) about the implications of the transfer and proposals relating to those employees who may be affected by the transfer.  Employers with less than 10 employees are not required to invite the election of representatives for consultation purposes if no existing arrangements are in place;
  • There are minimum requirements for 'employee liability' disclosure from the transferor to the transferee employer.

A frequent misunderstanding of the TUPE regulations is that it affords protection to all employees assigned to the transferring business or activity. This is not the case - it affords protection to those who 'would otherwise be made redundant' by reason of the transfer.

Special rules now apply to going-concern transfers of insolvent businesses. These were designed to make it less unattractive for a prospective acquirer of an insolvent business to take it on as a going-concern. The two main features of these rules are:

  • Debts owed to employees by the existing employer (such as unpaid wages) may not necessarily pass to the new employer but may be paid instead by the Secretary of State;
  • 'Permitted variations' to the employees terms and conditions of employment may be made (such as a reduction in wages). However, these must only be made with the agreement of the transferor, insolvency practitioner, new employer and employee representatives

TUPE remains a highly complex area of Employment Law and specialist legal advice should be sought wherever any ambiguity or doubt exists.