This ‘automatic transfer’ will preserve employees’ terms and conditions of employment and their continuous period of employment will not be broken notwithstanding the change in employer. Given this automatic transfer of employees it will be important to understand at an early stage whether or not TUPE will apply as this may fundamentally affect the viability, structure and cost of a transaction.
TUPE will apply to broadly two types of transaction, a business sale or a service provision change i.e. where a service provider changes (for example where a business outsources a particular function). It may even apply on a simple share sale if the business is then consolidated with or integrated into another. Where a business sale takes place, TUPE will normally apply if the business (or part of the business) which is to be sold retains its economic identity both before and after the sale. A common example is the sale of a particular business division to a third party. In this scenario both the seller (“outgoing employer”) and the buyer (“incoming employer”) will have to comply with TUPE.
TUPE will also usually apply where a service provider changes and where a group of employees has historically been assigned primarily to carry out the services which will be transferring. In this instance the original provider (also the “outgoing employer”) and the new provider (“incoming employer”) will be affected.
If TUPE applies then, in good time prior to the transfer taking place, the outgoing employer must provide certain mandatory information to the incoming employer (including details of the employees who are to transfer). The outgoing employer must also provide information about the transfer to recognised trade unions or elected representatives of affected employees. If the incoming employer proposes to take any ‘measures’ in respect of the transferring employees (which in practice will likely cover any changes whatsoever to the employment of transferring employees) then the outgoing employer will also have to consult with the unions or elected representatives. A failure to comply with these duties could lead to a protective award being made of up to 13 weeks’ actual (not capped) pay per employee, which, depending on the numbers involved, could add up to a significant sum!
Employees will also be protected against dismissal and if the sole or principal reason for an employee’s dismissal is a TUPE transfer, the dismissal will automatically be unfair. This type of claim can be brought from day one of an employee’s employment, an exception to the usual requirement that the employee have two years’ service before qualifying to issue an unfair dismissal claim.
Where TUPE applies careful consideration of its impact must take place at the earliest opportunity. Time lines should be prepared to ensure that there is sufficient time for all of the mandatory steps and actions to be taken in good time before the transfer takes place.