TUPE Advice

One of the first issues to consider as an employer is whether there is a relevant transfer at all, which can depend on factors such as:

• whether the business or service retains its identity
• whether the activities remain fundamentally the same
• whether there is an organised grouping of employees assigned to the work in question

These are often the points that create uncertainty, especially in service provision changes and partial transfers. If TUPE is assumed to apply when it does not, or ignored when it does, then this can have significant commercial and legal consequences.

If TUPE applies, the incoming employer generally steps into the shoes of the outgoing employer. That usually means taking on the transferring employees on their existing terms and conditions, in turn preserving their continuity of service. It can also mean inheriting certain liabilities connected with those employment relationships.

These can include:

• pay and contractual benefits
• holiday entitlement
• collective agreements in place before the transfer
• liabilities linked to past employment issues in some situations

Pensions are more complicated and do not transfer in exactly the same way as other contractual rights, which is one reason why it is important to carefully review the pension position with any transfer.

Not properly managing the procedural side of TUPE is often where employers expose themselves to avoidable claims. Both the outgoing and incoming employers may have duties to inform and, where measures are proposed, consult with affected employees or their representatives before the transfer. Employees must be informed even where no measures are proposed.

The outgoing employer must also provide employee liability information to the incoming employer at least 28 days before the transfer date. That information should be accurate, up to date and sufficient to allow the incoming employer to understand the workforce it is taking on. Failure to inform and consult properly can lead to an award of up to 13 weeks’ gross pay per affected employee, which is one reason TUPE consultation needs to be planned carefully.

TLW Solicitors can help businesses work out who is affected, what needs to be communicated, whether representatives need to be elected, and how consultation should be handled so that the process is smooth and defensible.

Post-transfer change is one of the main risk areas in TUPE. Employers often want to align terms, reporting lines or ways of working after a deal or service change, but TUPE places real limits on what can be changed simply because of the transfer. Changes made for that reason are often void.

The main exception is where there is a genuine economic, technical or organisational reason involving changes in the workforce. Even then, the position needs to be handled carefully:  a genuine post-transfer redundancy or restructure may still be possible, but only with the right reasoning and a fair process. Trying to use TUPE as a route to harmonise terms for administrative convenience is much harder to defend.

TUPE is not only an employment issue, it is also a deal-risk issue. Hidden liabilities, unresolved grievances, holiday accrual, discrimination claims and poor workforce data can all affect the value and risk profile of a transaction or service handover.

That is why due diligence and contractual protection matter: warranties and indemnities can be critical in allocating pre-transfer risk, but they only work properly if the TUPE issues have been identified early enough for the documents to reflect them.