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There is a degree of fear, apprehension and sometimes misunderstanding surrounding the application of the TUPE Regulations. As a result, TUPE is a topic which employment law practitioners are consulted on regularly. We examine the scope of the TUPE Regulations and explain in simple terms when they apply.
What is TUPE?
TUPE is an acronym for the European Communities, Protection of Employees on Transfer of Undertakings, Regulations 2003.
When do the TUPE Regulations apply?
The TUPE Regulations apply when a business or part of a business is being transferred from one employer, referred to as the transferor, to another employer, referred to as the transferee.
What do the TUPE Regulations say?
In basic terms, the TUPE Regulations provide that when a business or part of a business is being transferred, the employees who attach to that business, or part of a business, transfer with the business. Not only do the employees transfer, but they also transfer with their accrued service and with their existing terms and conditions of employment intact.
The TUPE Regulations place an obligation on transferring entities, ie the transferor, to inform and consult employee representatives for a period of not less than 30 days before the date of the transfer. In this regard, employee representatives must be informed of:
- the date or proposed date of the transfer;
- the reasons for the transfer; and
- the legal, economic and social implications of the transfer for employees.
To the extent there are any measures envisaged in relation to the employees, the employee representatives must be consulted, with a view to reaching agreement in respect of those measures.
Dismissals as a result of a transfer are prohibited and automatically void. Sometimes, dismissals may be justified for economic, technical or organisational reasons entailing changes in the workforce. However, such dismissals are more likely to be justifiable if they take place after the transfer when the transferee can consider its/his combined pool of employees.
The TUPE Regulations also prohibit changes to terms and conditions of employment to the detriment of the employee for any reason connected with the transfer.
What if an employee refuses to transfer?
The High Court has held that the refusal of an employee to transfer from the transferor to the transferee is deemed to be a resignation.
What about outsourcings?
Some functions within organisations can, in and of themselves, constitute an economic entity. The TUPE Regulations can apply to those functions when they are outsourced, insourced or where there is a changeover in service provider. Good examples include functions such as cleaning, catering, maintenance, security, IT, distribution and transport. The difficulty is that the TUPE Regulations do not always apply – they have to be triggered.
In order to trigger the application of the TUPE Regulations, an outsourcing, insourcing or change in service provider must involve the transfer of an economic entity which retains its identity. This means that the function must essentially be the same after the transfer. Take cleaning as an example – the cleaning function is the same whether it is done by direct employees of an organisation or whether it is outsourced to a third party. At the same time as a function is outsourced or insourced or where there is a change in service provider, there must also be an associated and related transfer of significant tangible or intangible assets or the transfer of a major part of the workforce, engaged in that particular function, in terms of numbers and skills.
When it comes to outsourcing, the courts have drawn a distinction between labour intensive businesses and asset-reliant businesses.
In a labour intensive function, such as cleaning, security, maintenance, call centre, customer service and sometimes finance or human resources, the application of TUPE will depend on whether the new incumbent or service provider accepts into its employment a major part of the workforce, in terms of the numbers and skills. If the majority of employees do not transfer, the TUPE Regulations will not apply.
In an asset-reliant function, such as distribution function which is reliant on lorries, or transport function which is reliant on buses, the physical assets themselves must transfer in order for the TUPE Regulations to apply. If the physical assets do not transfer, the TUPE Regulations will not apply. This is true even if some of the employees transfer with the function.
More often than not, the question is not about what happens if the TUPE Regulations apply but whether the Regulations apply at all.