Understand the TUPE regulations

The Transfer of Undertakings (Protection of Employment) Regulations, 1981 (amended by 1998 Directive) implemented the 1977 European Community Acquired Rights Directive. The regulations apply when a business or trade is transferred from one employer to another.

TUPE confusion

For TUPE to apply there needs to be an identifiable economic entity which is being transferred. Determining this has caused some conflict, particularly as the UK courts and European Court of Justice (ECJ) have taken different directions, with the UK tending to lean towards the rights of the employee and the ECJ moving towards protection of the employer.

For example, a non-profit making organisation may be considered an economic entity if it has a function that pursues an economic undertaking. The ECJ looks at the organisation as a whole in its assessment. Because of these confusions it is important to seek legal advice to find out whether TUPE applies.

Complying with TUPE - existing employer

The first consideration for an employer when TUPE applies is to consult with trade union representatives or elected employee representatives. Employers must give advance notification that a transfer is proceeding and give specific details of the proposed undertaking including:

Transfer date
The legal, economic and social implications of the transfer for the affected employees
Details of any additional actions taken by the old or new employer that will affect the positions of the affected employees

A letter should set out the consultation process, and it must make provision for discussions if the affected employees require this. Failure to consult may lead to an employee taking a case to tribunal, which could result in a maximum penalty charge of 90 days (13 weeks) pay for each affected employee

Complying with TUPE - new employer

Under TUPE regulations the new employer must continue:

The terms and conditions of employment
Any outstanding claims (e.g. unfair dismissal or personal injury claims)
Recongition of any trade union or collective agreements affecting the employer that were in force before the transfer

An employee may not be dismissed by either the new employer or the old one because of the transfer, unless the reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce.

There has been even more confusion regarding the new employer's obligations for carrying over employee pensions. Currently, occupational pension schemes rights do not transfer under TUPE. However, any occupational pension rights earned up to the time of the transfer are protected by social security legislation and pension trust arrangements. The Department of Trade and Industry has recently issued a press release suggesting that it will be consulting on this point of TUPE in the future.