Workforce Issues

Employees can be vulnerable when the owners of the business in which they work sell the business.  For this reason the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the TUPE Regulations) were introduced. Note however that the TUPE Regulations do not apply to the purchase or sale of shares in limited companies, even when all the shares change hands.  This is because in that situation the identity of the actual employer, i.e. the limited company, does not change.

The purpose of the TUPE Regulations has always to been to protect employees during and after the sale or transfer of their employer’s business to a new employer. An employee’s employment automatically transfers on the same terms of employment as existed immediately before the transfer.

If an employee makes a claim in an Employment Tribunal for any reason associated with a transfer under the TUPE Regulations it will be the new employer’s liability – even if the circumstances giving rise to the claim occurred before the transfer and the new employer knew nothing of it.

Even if only part of a business is sold or transferred, the employees who mainly work in that part of the business will usually be protected by the TUPE Regulations and transfer with it.

There have been a large number of cases challenging aspects of the TUPE Regulations and amendments have been made to the regulations themselves over the years. The newest amendments are to be implemented in April 2006 and the DTI has produced Guidance Notes on their implementation and a summary of the main changes follows:

 

• The scope of the TUPE Regulations will be widened to clarify the position concerning service provision, outsourcing and insourcing (i.e. where services previously provided by an external subcontractor to a business are moved in-house).
  
  
• There will be a new duty on a transferor (the current employer selling or transferring the business) to provide to the prospective transferee (new employer) certain information about the employees.
  
  
• New special provisions should make it easier for an insolvent business to be transferred to new employers.
  
  
• Employees have always had the right to transfer under the same terms of contract and there have been difficulties in changing those contracts – even by agreement with the employees – without breaching the TUPE Regulations. The new changes to the regulations will provide more flexibility for employers and employees to agree to vary contracts when the changes are linked with a relevant transfer.
  
  
• It has always been the case that if an employee is dismissed and the reason for the dismissal is connected with the transfer, this will be an automatically unfair dismissal. However complications in applying this legal principle have caused a large number of claims over the years. The new provisions are intended to clarify the circumstances where it will be unfair to dismiss employees for reasons connected to a relevant transfer and to reflect other developments which have come about through subsequent case law.

 

The TUPE Regulations will still be complicated. If you are proposing to buy or sell a business as a going concern with employees involved it is important that you fulfil the TUPE Regulations. Remember also that the TUPE Regulations will apply if you are about to enter into, or finish a contract, for services in which employees are engaged but do not apply in the context of a corporate share sale. Failure to comply with the TUPE Regulations exposes a new employer to all claims which would, but for the transfer of the business, have been brought against the previous employer, and the liability and associated costs can be high in the event of a failure to comply.

 
To avoid any exposure to the problems arising from non-compliance, or for advice on how to deal with the problems which might have come to light since a transfer, contact the employment or commercial team at Borneos.

 

 

If you would like to discuss how we might help you, please:

 

• call any of our office numbers listed at the bottom of this page;
• contact one of our specialists direct by clicking on their name below; or
• complete our enquiry form
  

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Members of our team specialising in this area:

Andrew Peck, Mark Thompson

Jordan Glackin