In this article, we focus on the immigration matters that should be considered on a TUPE transfer and explain the necessary steps to take when involved in a transaction.
Inheriting employees via TUPE - right to work checks
Where TUPE applies, right to work checks carried out by a transferor (the seller or previous contractor/supplier) are deemed to have been carried out by a transferee (buyer or incoming contractor) upon transfer. The transferee, the new employer, effectively benefits from a statutory excuse (see Business Immigration series: 1 - Right to work checks) obtained from the right to work checks carried out by the transferor, the previous employer.
If checks are incomplete or were not carried out correctly, then no statutory excuse exists. Upon transfer, the transferee will be responsible for any liabilities arising from the employment of the migrant workers. The transferee should therefore carry out its own statutory documentation checks to confirm transferred em-ployees have the right to work in the UK. A grace period of 60 days from the date of transfer is applied, to allow the checks to be carried out.
Where possible, it is recommended that the transferee obtains copies of all checks carried out by the trans-feror. This is reliant on co-operation from the transferor, but having the documents may prove crucial in the event that there are problems with later checks as the transferee can then seek to rely upon the historical checks of the transferor.
This task may seem onerous but completing the correct checks will protect you, as a transferee, against a civil penalty of up to £20,000 per employee, where employees are found to be working illegally.
It is also recommended that where there is an intra-group transfer, right to work checks are carried out to avoid the risk of a civil penalty; unless the new employer is certain that the previous group company carried out and retained copies of the complete and accurate checks.
If an employer does not have its own procedure or checklist, the Home Office right to work checklist sets out each stage of the checking process and is a useful tool in discharging the burden of showing that the checks have been carried out correctly and accurately.
Applying for a sponsor licence under Tier 2: procedure
The transferee may acquire employees who were employed under a Tier 2 visa with the transferor. A sponsor licence is not transferable. If the transferee does not have a sponsor licence, or has a licence not covering the tiers/categories required, it must apply for the licence or extension within 20 working days of the trans-fer.
If the transferee fails to make such an application within 20 working days or if an application is refused, all employees who transferred under Tier 2 visas are liable to have their leave to work curtailed to 60 days, un-less an exemption applies. If the transferee continues to employ an individual beyond their 60-day curtail-ment, the transferee may be subject to civil and/or criminal sanctions.
A deliberate failure to make an application for a sponsor licence with the aim of avoiding the ongoing em-ployment of any sponsored migrants post transfer, may result in an unfair dismissal complaint from the employee (assuming the employee has the requisite length of service).
It is not possible to set out the full application process here, although if the transferee requires a sponsor licence, it should consider the following steps:
- assess eligibility and suitability for each category/tier and make any relevant changes to its HR sys-tems and decide who will be the key personnel;
- gather the appropriate documents for submission with the application - these are set out in Annex A of the Home Office's Tiers 2 & 5 sponsor guidance. Obtain certified copies if you are not sending the originals. Be aware that there are very specific certification rules;
- submit the online application, pay the relevant fee and send hard-copy documents within five work-ing days of the application date;
- be prepared for a visit from the Home Office;
- applications can take up to 12 weeks (longer in some cases) to be processed, but provided the transferee makes their application within the required time frame, it can continue to employ the transferring employees whilst the application is considered.
Sponsorship management system: reporting requirements upon transfer
Where a TUPE transfer takes place, the transferor and transferee must both complete a number of tasks as a licensed sponsor. As indicated above, if the new employer does not have a sponsor licence, it should apply for one post transfer. There is nothing to stop them from making an application pre-transfer if re-quired.
Upon transfer, a level 1 user for the transferor must:
- report the transfer via the sponsorship management system (SMS) within 20 working days of the transfer date;
- include full details of the transferring sponsored migrants;
- confirm whether the licence will be surrendered or dormant if no longer required by the transferor;
- if there is no longer a level 1 user within the transferor, a level 1 user for the transferee can report on the requirements above.
Upon transfer, a level 1 user for the transferee must:
- report the transfer via the SMS within 20 working days of the transfer date. This can be a problem if the transferee has no licence. Practically, it is recommended that the transferee notifies the Home Office of the transfer by way of covering letter when it makes its licence application and then up-dates the SMS as soon as it has access to the system;
- include full details of the sponsored migrants who have transferred;
- apply for an increase in the allocation of certificates of sponsorship if necessary;
- apply for access to the transferor's SMS in order to report migrant activity. Transferring employees will not show on the transferee's SMS. Alternatively, the transferee can report migrant activity by emailing the Home Office's Tier 2 and 5 Migrant Reporting team including full details of the transfer-or, transferring migrants and details of the change;
- if the transferee has applied for a sponsor licence, upon grant of the licence it must confirm by orig-inal signed letter full details of the transferring sponsored migrants and that it is taking full sponsor-ship responsibility for those employees going forward.
- Failure to adhere to the reporting requirements above could lead to the revocation of a sponsor licence, im-pacting on an employer's ability to employ sponsored workers (both existing and in the future). Also, de-pending on the nature of the employer's business, it may have an impact on the disclosures the employer is required to make for the purposes of commercial bids/tenders etc.
What to do if an employee's role is changing post transfer
Unless there is a material change to the employee's role or a salary adjustment post transfer, the employee will not need to make a new application for leave and the transferee will not be required to assign a new cer-tificate of sponsorship.
A fresh certificate of sponsorship and application for leave must be made post transfer where an employ-ee's core duties/responsibilities fall within a new Standard Occupational Classification (SOC) code that is different to the original SOC code. In the majority of cases, this will also require a resident labour market test (resident labour market tests will be covered in further detail in a later article).
As part of the due diligence process, a transferee should enquire whether any sponsored employees have been promoted, received salary increases above incremental increases or if their duties/responsibilities have changed significantly since their last grant of leave. This is important as any compliance failings by the transferor could have an impact on the transferee's sponsor licence.
Next time we'll be looking at a sponsor's reporting obligations in more detail.