Transfer of Undertakings (TUPE)

When one organisation is taken over by another, two organisations merge, or where services are transferred from one organisation to another, responsibility for the rights of employees is taken on by the new employer. This is called a Transfer of Undertakings (TUPE).

The legal obligations of a TUPE transfer are set out in The Transfer of Undertakings (Protection of Employees) Regulations 1981 and the Transfer of Undertakings (Protection of Employees) Regulations 2006.

Relevant transfers

TUPE applies to ‘relevant transfers’, including:

‘Business transfers’ and
‘Service provision changes’.

In the voluntary sector, most TUPE transfers will be service provision changes or outsourcing services.

Obligations to provide information

The transferor (previous employer) is obliged to give the transferee (new employer) written information before the transfer about employees who are to transfer and all rights and obligations towards them.

The following must be provided:

The identity and age of the employees who will transfer
Information contained in the employees’ written particulars of employment
Information on any collective agreements affecting the employees
Information about any disciplinary proceedings taken against the employees or grievances brought by them in the last two years
Information about any claims brought by the employees against the transferor in the last two years.
Information about any claims that the transferor reasonably believes might be brought.

The information should be given at least 14 days before the transfer or as soon as is reasonably practicable. The information should be no more than two weeks old.

Obligations to inform representatives of affected employees

The Regulations place a duty on both the transferor and transferee employers to inform and consult representatives of their own employees who may be affected by the transfer.

Affected employees might include:

Those individuals who are to be transferred
Their colleagues in the transferor employer who will not transfer but whose jobs might be affected by the transfer
Their new colleagues in employment with the transferee whose jobs might be affected by the transfer.

Information that must be provided to employee representatives

The employer must inform the representatives:

That the transfer is going to take place, approximately when, and why
The legal, economic and social implications of the transfer for the affected employees
Whether the employer envisages taking any action in connection with the transfer which will affect the employees, and if so, what action is envisaged
The previous employer must also disclose to employee representatives whether the prospective new employer envisages carrying out any action which will affect the employees, and if so, what.

Obligations to consult

Where actions (‘measures’) are proposed (e.g. management restructuring), in relation to affected employees, the present employer of these employees must consult with the appropriate representatives in 'good time' before the transfer.

Failure to inform and consult

The transferor and transferee are jointly and severally liable for any award of compensation made by an Employment Tribunal for failure to inform and consult.

Any possible award of compensation would be triggered by an Employment Tribunal claim raised by employee representatives or, in some cases, employees. The award is of up to 13 weeks’ pay per employee.

Pensions

Occupational pension rights earned up to the time of the transfer are protected by social security legislation and pension trust arrangements.

Strictly speaking, ongoing pension provisions do not transfer under TUPE (although retirement-related terms and conditions such as the right to early retirement may transfer).

For pension provisions after the transfer, the Pensions Act 2004 states certain minimum requirements. It states that where transferred employees were entitled to participate in an occupational pension scheme prior to the transfer, the transferee employer must establish a minimum level of pension provision for the transferred employees.

This minimum ‘safety net’ requires the transferee to match employee contributions, up to 6 per cent of salary, into a stakeholder pension, or offer an equivalent alternative.