Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
The TUPE Regulations provide that where there is a transfer, of persons who fit the definition of an 'employee', all the employees in the relevant business will automatically transfer to the new owner AND all their terms and conditions of employment are preserved.
This sections explains what is (and is not) a TUPE transfer, the rights that transfer under TUPE, obligations under TUPE and the sanctions for failing to comply with the regulations.
Please check our legal news page and our Legal Bitesize (Issue 15) for a summary of a pending case around TUPE Regulations applying to workers.
What is TUPE?
TUPE provides protection to employees when the business that they are working for is transferred (sold for example) to another owner. When a TUPE transfer occurs, the employment of the protected employees transfers automatically from the outgoing owner (who is referred to as the transferor) to the incoming owner (who is referred to as the transferee).
Summary of rights under TUPE:
Employees in an undertaking automatically transfer under same terms and conditions of employment when there is a TUPE transfer (except for some rights relating to pensions (see below for ‘Do an employee’s pension rights transfer?’).
- There is a duty on the transferor and transferee to inform and consult representatives of their employees who may be affected by the transfer.
- Dismissals which are connected to the transfer will be unfair dismissals unless there is a valid economic, technical or organisational reason entailing changes in the workforce (“ETO reason”).
- Dismissals that are related to the transfer may give an employee grounds to claim unfair dismissal.
What is the effect of TUPE?
TUPE provide that where there is a transfer, all of the employees in the relevant business will automatically transfer to the new owner and their terms and conditions of employment are preserved except for some rights relating to pensions (see below for 'Do an employee’s pension rights transfer?') .
The person doing the transferring is called the “transferor” and the person buying/taking control of the business is called the “transferee”. Thus where there is a TUPE transfer, the transfer will not terminate the employees’ contracts of employment.
Instead there is a legal continuation of their employment contracts and the transferee who acquires the business stands in the shoes of the former employer, the transferor.
Employees may have the right to claim unfair dismissal if dismissed because of the transfer. This is explained in greater detail below in 'What are the consequences if an employee is dismissed around the time of a transfer?'..
This protection only applies to employees who have the qualifying length of service for unfair dismissal at the time of the transfer i.e. the individual must have been continuously employed for a period of at least two years. If an employee has less than the qualifying length of service he or she cannot claim automatic unfair dismissal although he or she may be able to claim wrongful dismissal if the appropriate notice has not been given.
When does TUPE apply?
TUPE applies to the "relevant transfer" of an undertaking or part of an undertaking. This occurs when:
- a business, undertaking or part of it, is transferred from one employer to another as a going concern ("referred to as a "business transfer"); and/or
- when there is a service provision change.
TUPE applies to the transfer of an undertaking situated in the UK or in the case of a service provision change where the organised grouping of employees is situated in the UK immediately before the transfer. This does not mean that if part of the workforce ordinarily works outside the UK that TUPE will not apply.
Business Transfers
To qualify as a business transfer the identity of the employer must change and there must be a transfer of an "economic entity" which retains its identity. It is important to note that "economic entity" means "an organised grouping of resources which has the objective pursuing an economic activity, whether or not that activity is central or ancillary ".
When considering whether a business or part of a business has retained its identity, factors which should be taken into account include:
- whether assets have transferred;
- whether the majority of the workforce has transferred;
- whether the customer base is transferred.
None of these factors will be decisive on their own but will help to determine whether the activities carried on before and after the transfer are the same. If they are, the undertaking transferred will have retained its identity and there will have been a transfer of an undertaking under TUPE.
Service Provision Changes
There are three situations which can give rise to a service provision change:
- When an activity which is carried out by a client is transferred to another person (e.g. when a client outsources the activity).
- When an activity which is carried out by a contractor on a client’s behalf is transferred to a different contractor.
- When an activity that is carried out by a contractor on behalf of a client is transferred to be carried out by the client on its own behalf (also referred to as insourcing).
In order for a service provision change to amount to a service provision change: three conditions must apply:
- There must be "an organised grouping of employees...which has as its principal purpose the carrying out of activities concerned on behalf of the client". This excludes services provided where there is no organised grouping of employees dedicated to the client. For example courier services may be provided by any one of a number of couriers on an ad hoc basis according to availability rather than an identifiable team of employees;
- the client must intend that the activities will after the change be carried out by the transferee other than in connection with a specific task or single event of short-term duration e.g. catering for a single conference; and
- The activities do not consist solely of the supply of goods for the client's use e.g. provision of sandwiches to sell in the staff canteen as opposed to running the staff canteen.
In relation to service provision changes, TUPE will apply only where there is “an organised grouping of employees ….which has as its principal purpose the carrying out of the activities concerned on behalf of the client.” This is intended to cover cases where the old service provider has in place a team of employees to carry out the service activities and that team is essentially dedicated to carrying out the activities that are to transfer (though they do not need to work exclusively on those activities). So cases where there is no identifiable grouping of employees will be excluded, because it would be unclear which employees should transfer. For example, if a contractor was engaged to provide a cleaning service which was carried out each day by various different cleaners, rather than by an identifiable team of cleaners, the 2006 Regulation would not apply.
An exception is where the client buys in services from the contractor on a one-off basis for short-term duration, so in those cases the 2006 Regulations will not apply.
References to activities being carried out after the transfer must be ‘fundamentally the same’ as those carried before the transfer in order for a service provision change to take place.
Who is covered by TUPE?
TUPE protect the rights of employees. The TUPE regulations define an ‘employee’ as:
‘…any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services and references to a person’s employer shall be construed accordingly.’
In employment terms a contract of service is a contract of employment, so anyone who is engaged under a contract of employment is within scope of TUPE.
As can be noted, the definition above expressly excludes anyone who provides services under a contract for services. A contract for services is commonly used by employment businesses for their temporary workers. Thus according to this definition workers engaged under a contact for services are not protected by TUPE.
However, there are some views at present which argue that this definition only serves to exclude individuals who provide services under a contract for services where they are in business of their own account(self –employed) and that that workers who are not genuinely self employed are covered by TUPE. This view has been supported by recent case law in: Dewhurst and others v (1) Revisecatch Ltd t/a Ecourier (2) City Sprint (UK) (City Sprint Case)where a Central London Employment Tribunal (ET) held that 'workers' falls within the definition of an 'employee' under TUPE regulations and will therefore automatically transfer from the previous employer (transferor) to the new employer (transferee) with all their contractual/statutory rights in tact after the relevant transfer. Though the decision of this ET is not legally binding on other courts, if the respondents appeal this decision, and the Employment Appeal Tribunal upholds this decision, it will become binding, meaning at a precedent will be set for other ET's to legally comply with.
The impact this will have for employment businesses (if the judgement is correct) will be significant, as the TUPE regulations will then apply if an employment business takes over a contract to supply temporary workers (on a contract for services excluding those who are genuinely self-employed) to a client from another recruiter or vice versa- they lose a contract to another recruiter. Thus if the definition of an 'employee' extends to workers, employment businesses will need to consider the regulations when this situation arises. TUPE will impose obligations which may be onerous for recruiters due to the consultation process with affected employees, information sharing, and restrictions of changing the contractual terms of employees who are TUPE'd over.
Summary of City Sprint Case
"The claimants are three cycle couriers who were employed by Respondent 2- City Sprint until 31 January 2018 when it lost a contract to provide courier services to HCA Healthcare. With effect from 1 February 2018 they were employed by Respondent 1- Ecourier the contractor that won that contract.The claimants brought claims against the respondents which included claims for failures to inform and consult on the transfer under TUPE 2006 and for holiday pay.The employment tribunal decided to hold a preliminary hearing to decide a point of statutory interpretation the scope of the term ‘employee’ within reg 2(1) of TUPE 2006, and whether a 'worker' under Employment Rights Act 1996, s 230(3)(b) and/or reg 2(1) of the Working Time Regulations 1998 (who have NMW rights, and are entitled to holiday pay and rest breaks) falls within that term as a matter of law." (Source: Lexis Nexis.com).
Currently, an Employment Tribunal in determining the status of a worker will not only look at the terms of engagement but at the substance of the relationship as well, and employment businesses involved in contracting out will need to look carefully at both the contractual documents and all other factors relating to a temporary worker’s engagement to determine whether, in fact, that temporary worker is engaged under a bona fide contract for services or is in fact employed under a contract of employment.
If the parties consider that the workers are, on balance, employees they will then have to examine the nature of the entity transferring. They should particularly take into account whether the workers currently engaged on the contract are engaged solely to service its requirements. If the answer to this last point is “yes” it is likely that a transfer of the contract will be a transfer under TUPE.
On the other hand if the outgoing employment business considers that the workers are its employees but the service required under the new contract differs considerably from the service it was providing, the change of contracts will not amount to a TUPE transfer. In this scenario it is likely that the workers will remain employed by the first employment business which may therefore find itself burdened with unexpected liabilities in terms of redundancy payments if it is unable to find alternative assignments for the workers involved.
How are recruiters businesses affected?
Recruiters can be impacted on by TUPE in similar ways to other businesses generally but there are also some specific recruitment activities that are impacted on by TUPE.
Just like other businesses, where there is a business transfer of an employment business or agency the employees will transfer to the new business owner (see 'When does TUPE apply?' above).
Recruiters also need to be particularly aware of the service provision change aspects of TUPE when they seeking new business whether through tender processes or otherwise and also when they are at risk of losing a client contract.
Employment agencies and employment businesses
Winning a contact:
If a client is proposing to outsource activities, such as staffing resources this could give rise to a service provision change and an incoming employment business would need to consider whether it may end up inheriting any of the client’s existing employees under TUPE.
If a client has already outsourced its staffing resources to an employment business but proposes to change to a different employment business, this change of contractors could give rise to a service provision change and the incoming employment business would need to consider whether it will inherit the outgoing employment businesses employees under TUPE. This could apply to both the temporary workers that were being supplied to the client but also any internal staff (e.g. recruitment consultants) that specifically or principally managed the client’s account.
What transfers are not covered by TUPE?
The following transfers are not covered by TUPE:
- A transfer of fixed assets alone;
- Sale of shares in a company.
What is the effect of TUPE on employment businesses and temporary workers?
Employment businesses involved in contracted out services should ensure that they are aware of the legal status of their workers engaged to work on that contract or those workers that they might be inheriting from another employment business in a change of service provider.
When the contract changes hands the assignments of workers who are not covered by TUPE will end. They may either be engaged by the incoming contractor under a new contract for services and reassigned to the contract or offered a new assignment by the outgoing contractor. If they are engaged by the incoming contractor that will not create a TUPE transfer provided the workers were not the employees of the outgoing contractor.
It is possible however that the workers engaged to perform work on a contracted out service are in fact the employees of the employment business holding the contract. In the event that the employment business loses the contract to a competitor it is likely that TUPE will apply and their employees will automatically transfer to the new employment business. Care will have to be taken by both outgoing and incoming employment businesses to determine the status of the workers in question based on both the terms of their contracts and the actual relationship between them and the outgoing employment business. It should not be assumed that because the contract is referred to as a “contract for services” that its terms or the facts of the relationship between them and the outgoing employment business do not form an employment relationship.
It is recommended that detailed legal advice should be taken when tendering for contracted out services or the transfer of a service provision from an employment business. Recent case law on employment status has made the question of whether workers engaged by an employment business are employees or workers a complex one to answer. Where the workers are the employees of the first employment business it is likely that a TUPE transfer will result in the event that the employment business loses out to a competitor.
Is the transfer of employment contracts automatic under a TUPE transfer?
Unless employees object to being transferred and resign from the employment of the transferor prior to the transfer, the contracts of employment of all employees employed by the transferor immediately before the transfer takes place will automatically transfer to the transferee with effect from completion of the transfer as if those contracts were originally made between the employees and the transferee. At the same time all the transferor’s powers, duties and liabilities under those contracts of employment also transfer to the transferee (with the exception of liabilities for criminal offences and certain rights and duties under occupational pension schemes). As there is merely an automatic transfer of employment contracts and no dismissal the employees’ employment will be continuous.
If, as stated above, an employee informs either the transferor or the transferee that he objects to becoming employed by the transferee, his contract of employment (and all the rights and liabilities connected with it) will not transfer to the transferor. In these circumstances the transfer of the undertaking operates to terminate the employment. This is a dismissal.
Can an employer vary a transferred employee’s contract of employment?
Following a TUPE transfer, the transferee may well consider varying provisions of the inherited employees’ contracts of employment, but TUPE restricts the transferee from varying the transferred employees’ contracts.
Where the variation was either agreed on or after that date or took effect after on or after that date, any purported variation to the contracts are void if the transfer is the sole or principal reason for the variation but the variation will not be void if:
a) the sole or principal reason for the variation is an ETO reason entailing changes in the workforce; or
b) the terms of the contract permit the employer to make the variation
There is no statutory definition of an ETO; the interpretation is based in case law. The words ‘entailing changes in the workforce’ do limit the scope of the provision as an employer will need to show that there is a need to change the number of employees in the workforce or the function of the employees in the workforce. ‘entailing changes in the workforce’ do however expressly include circumstances where the transfer involves the employer changing the location of the business.
Additionally, TUPE does not restrict employers from varying terms which form part of a collective agreement if:
a) the variation take place at least one year after the date of the transfer; and
b) the varied provision provides the employee with rights and obligations which are no less favourable to the employee.
A desire to harmonise the terms of the transferred employees with the existing workforce will not be permitted as this is not an ETO reason and is connected to the transfer.
Employment businesses in particular need to be aware of the limitations that apply when a taking over a contract from another employment business to supply temporary workers who have the protection of TUPE. It will not be possible to simply vary their terms and conditions to match those of their existing workforce, even if the temporary workers consent to the variation.
Do an employee’s pension rights transfer?
Rights and liabilities relating to the provision of occupational pension schemes which relate to benefits for old age, invalidity or survivors generally do not transfer under TUPE. However, employees have separate rights under the Transfer of Employment (Pension Protection) Regulations 2005 (see below).
However rights that relate to pensions other than occupational pensions are not excluded from TUPE and these obligations will transfer to the transferee.
The Transfer of Employment (Pension Protection) Regulations 2005 (Pension Regulations)
The Pensions Regulations came into force on 6 April 2005 transferees must offer a minimum level of pension protection to those who were active members or were eligible to become active members of an occupational pension scheme with employer contributions, immediately prior to the transfer. The minimum “safety net” requires the transferee to match employee contributions up to 6% of salary into a stakeholder pension or offer an equivalent alternative. In the public sector the provisions are in line with the Local Government Act 2003.
In respect of contributions to a personal pension it is likely that the obligation to pay these will transfer as it does not come within the definition of an occupational scheme. For employers who are acquiring staff under a TUPE transfer, these regulations add further administrative complexity to the acquisition process, and a potential increase in related costs.
In addition, in order to comply with automatic enrolment pension obligations which came into force on 1 October 2012, transferees will also need to ensure that the pension provision for transferred employees also meets the minimum scheme requirements to be a qualifying scheme for automatic enrolment.
What are the consequences if an employee is dismissed around the time of a transfer?
If an employee is dismissed solely because of the transfer, this could give rise to an unfair dismissal (either prior to the transfer, or after the transfer).
The liability for dismissals made by the transferor connected with the transfer (and any obligation to pay compensation ordered by a Tribunal) automatically transfers to the transferee unless the dismissal took place before the transfer for an Economic Technical or Organisational reason (ETO)
What is an ETO entailing changes in the workforce?
ETO reasons are relevant to TUPE related dismissals and also contract variations. There is no statutory definition of an ETO; the interpretation is based on case law. The words ‘entailing changes in the workforce’ do limit the scope of the provision as an employer will need to show that there is a need to change the number of employees in the workforce or the function of the employees in the workforce.
ETO reasons however are likely to include reasons relating to:
- The profitability or market performance of the new employer’s business (economic reasons)
- The nature of the equipment or production processes which the new employer operates, for example, where the skills of the transferring employees do not match the equipment or technology used and retraining would be difficult or there are too many staff at a particular managerial level for the business, (technical reasons), and
- The management or organisational structure of the new employer’s business (organisational reasons).
The validity of an ETO reason is likely to be permitted where there are changes in:
- The actual numbers employed in the workforce, or
- The functions performed by employees for example a new requirement for an employee to move from a role with a management function into a non- management role, or to move from a secretarial position to a sales positions.
Changes in the workforce includes a change to the workplace location of the employees.
If the dismissal is for some other reason unconnected with the transfer, for example misconduct, TUPE will not apply and the dismissal will not be automatically unfair. In those cases the dismissal will be judged on normal principles relating to fairness
Can a transferred employee claim constructive dismissal?
The TUPE Regulations provide that where the transfer substantially changes the working conditions of transferring employees to their detriment, the employees may resign and treat themselves as ‘constructively dismissed’. This is separate from an employee’s common law right to claim constructive dismissal due to a repudiatory breach of contract.
Do I have a duty to inform and consult with Trade Unions/Employee Representatives?
There is a general duty to consult appropriate representatives of employees who will be affected by a TUPE transfer. The duty arises in relation to all affected employees and this may include both employees of the transferor and the transferee (whether or not employed in the undertaking transferred.)
If there is a trade union that is recognised by the employer then its representatives will be the appropriate representatives.
If there is no recognised trade union the appropriate representatives will either be:
- representatives that the affected employees elect specifically for the purpose of the TUPE transfer; or
- representatives elected for some other purpose but who have the employees’ authority to receive information and be consulted about the TUPE transfer.
If there are no appropriate representatives the employer currently has a duty to invite the employees to elect such representatives in all TUPE transfers except those relating to micro businesses, however updates do the TUPE Regulations due to take effect on 1st January 2024 will remove this obligation for small transfer. All affected employees can vote and the voting should be in secret.
Micro businesses are able to consult with employees directly if there are no ‘appropriate representatives’. A micro business is one with fewer than 10 employees at the time that the duty to consult arises.
On 8th November 2023, the Secretary of state for Business and Trade introduced the Draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023.The regulations make provisions relating to employment under the Work and Families Act 2006 and the Retained EU Law (Revocation and Reform) Act 2023. This follows on from the government’s response to a consultation launched in June 2023 on the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
The reforms will allow small businesses (with fewer than 50 employees) undertaking a transfer of any size, and businesses of any size undertaking a small transfer (of fewer than 10 employees) to consult their employees directly if there are no existing worker representatives in place. Changes to the consultation process remain the same in instances where businesses do not have existing employee representatives to consult. Where employee representatives – including trade unions – are in place, employers will still be required to consult them.
What information must the employer disclose to the appropriate representatives?
The information to be provided during the consultation process is as follows:
- the fact that the business transfer is to take place and approximately when it will take place;
- the reasons for the business transfer;
- the legal, economic and social implications of the transfer of the affected employees; (See below)
- the measures which the employer envisages it will be taking in connection with those affected employees;
- if no measures will be taken then that fact must be stated;
- the measures that the transferee envisages it will be taking with those affected employees transferred.
The information must be provided long enough before the transfer to enable consultation to take place between the employer and the appropriate representatives.
Employee representatives have the right not to be subjected to a detriment by their employer for having participated in the election of employee representatives. In the event that such an employee is dismissed and the principal reason for the dismissal is that s/he took part in an employee election, the dismissal will be automatically unfair. In addition employee representatives should be allowed time off work in order to train for their role.
Legal, economic and social implications will include:
- any effect on employees’ duties;
- terms and conditions of employment;
- the fact that they will automatically transfer to the transferee’s employment;
- the effect the transfer will have on any collective agreements and collective bargaining arrangements;
- what will happen in relation to pension rights;
- and the fact that there will be continuity of employment.
Measures will include:
- redundancies and relocation;
- effect of changes to working practices or pay and benefits.
Where an employer envisages that measures will be taken it must consult with the recognised trade union or employee representatives (as appropriate) with a view to seeking their agreement to those measures. The employer must consider the representations made by the union or employee representatives and reply to those representations and state the reason for any rejection of representations. Unlike the duty to consult that arises when an employer is making more than 20 employees redundant, the duty to consult in relation to the transfer of an undertaking applies regardless of how many or how few employees are affected. An employer will only be excused from the duty to consult if there are special circumstances which mean that it would not be reasonably practicable for an employer to do so. Such circumstances will be very rare.
What are the consequences of failure to inform or consult with the employees?
Failure to inform either a recognised trade union or elected employee representatives entitles the union/employee representative to present a claim to the industrial tribunal. If the claim is successful the tribunal will make a declaration that there has been a failure to comply with TUPE and may award up to 13 weeks’ pay for each employee. There is no cap of a week’s pay and it will therefore be whatever that employee’s week’s pay would be. It is not possible to offset any payments made to a worker under the contract of employment or by way of damages for breach of contract in relation to the transfer against the award.
Is there an overlap between TUPE consultation and redundancy consultation?
In some case a TUPE transfer will result in redundancies being made by either the transferor or the transferee. There are separate rules that determine what steps an employer needs to take to consult with employees in relation to redundancy. Specific consultation obligations apply where more than 20 employees are to be dismissed in a 90 day period.
Where 21 – 99 employees will be made redundant the employer must consult over a 30 day period, while more than 100 employee redundancies requires a 45 day consultation period.
If the transferee is proposing to make 20 or more redundancies that include any of the employees who are likely to be transferred, it is possible to begin a redundancy consultation prior to the transfer. This is dependent on the transferor’s agreement.
What happens if there is a collective agreement in place?
Where there is a collective agreement between the transferor and a trade union which is recognised by the transferor in respect of any of the employees transferred, the transferee will step into the shoes of the transferor after the agreement as if the collective agreement had been made between the union and the transferee.
What happens if the transferor recognises a particular union?
After the transfer, the transferee must continue to recognise the unions recognised by the transferor in respect of any of the employees transferred. However this obligation only arises where the business or part of it transferred maintains an identity distinct from the remainder of the transferee’s business. If the transferee merges the transferred business with the existing business there will be no requirement upon the transferee to recognise the trade union. This obligation is not as onerous as it might appear as under the Employment Relations Act 1999, there is no obligation upon an employer to recognise a trade union in any event and it may therefore recognise or de-recognise a trade union as it wishes. De-recognition may however have industrial relations consequences and give rise to issues relating to procedural fairness in dealing with employee disputes or dismissals.
Can an employee contract out of their rights under TUPE?
No. It is not possible to exclude an employee’s rights under TUPE. However it is possible and indeed advisable for a transferor and a transferee to indemnify one another in relation to any liabilities arising under TUPE.
What are the practicalities I need to know if I am transferring employees from or into my employment?
Determine who will transfer
In determining the extent of the liabilities imposed under TUPE it is crucial to have all the relevant information in order to make an informed decision. You will therefore need to know who will transfer under TUPE and you will therefore need to know which workers are in fact employees, and which employees:
- work partly in the undertaking and partly elsewhere - only those working wholly or mainly in the part transferred are covered;
- work in the undertaking but are not employed by the transferor e.g.: those working through another contractor;
- have informed the transferor that they object to being employed by the transferee - such employees are deemed to have resigned and cannot claim against the transferee;
- have been dismissed by the transferor in advance of the transfer - the transferee will need to know the reasons for and circumstances surrounding such dismissal in case it has to defend a claim under TUPE.
Having identified those employees liable to be transferred, the transferee will need to determine:
- the total number of employees;
- details of the employees’ grade, pay conditions, whether part-time or full-time etc.;
- the age of each employee and the date continuous employment began.
What information must the transferor provide to the transferee?
The transferor is required to provide information to the transferee about the transferring employees before the relevant transfer takes place and it must be provided at least 28 days before the completion of the transfer. The parties cannot contract out of the duty to supply employee liability information.
If the transferor does not comply with the supply of employee liability information, an employment tribunal may award compensation to the transferee for any loss which the transferee has incurred because the information was not provided.
The information that must be included is:
- length of service of employees, hours of work, etc.;
- wages or salary (including review dates and details of any agreed future increases);
- details of grading schemes, including arrangements for automatic salary progression;
- bonus, commission, profit share schemes;
- holiday entitlement, sick pay, private medical insurance, season ticket loans and any other benefits;
- notice periods and any contractual rights to receive payments or benefits on termination of employment e.g. enhanced redundancy payments;
- contractual mobility and flexibility arrangements;
- disciplinary rules and procedures.
Consideration should be given to obtaining information on benefits that do not transfer, such as stock option arrangements and pension benefits In terms of potential liability for the transferor’s pre-transfer actions, the transferee should request the following:
- details of any dispute, claim or litigation which is outstanding or threatened;
- details of any disciplinary action which has been taken against any employee preceding the transfer;
- sufficient details of the transferor’s handling of redundancies in order to determine if there are established selection criteria for redundancy;
- details of equal opportunities policies and records to determine whether there are potential claims for sex or race discrimination;
- details of health and safety records to determine whether there could be potential personal injury claims;
- details of collective agreements and union recognition arrangements, density of union membership in the workforce and any industrial disputes.
It has been suggested that in general the details above should go back over a period of two to five years preceding the transfer.
In the public sector, a local authority refusing to supply detailed workforce information to prospective contractors may be guilty of anti-competitive behaviour under section 7 of the Local Government Act 1988.
It is normal, in second-round tenders, for the outgoing contractor to be required to supply workforce information. This might be addressed originally in the tender documents before a contract is actually awarded.
Agree Warranties and Indemnities
In establishing how liabilities will be divided between the transferor and the transferee it will be necessary to use express warranties and indemnities.
In the absence of express warranties, a transferee who has been given inaccurate information will only have a remedy against the transferor if it can establish a claim for misrepresentation or an implied warranty. The transferee should ask the transferor to warrant that the information which has been disclosed is accurate and complete.
In most cases it is normal for agreements involving TUPE to contain mirror indemnities from the transferor for any liabilities relating to non-transferring employees and any relevant recognised union concerned.
Where the parties proceed on the basis that the transaction does not amount to a TUPE transfer, but they recognise potential risk that TUPE could be held to apply, consideration should be given to who is liable for any consequential liabilities and any appropriate indemnities.
Is a client still liable to pay a transfer fee to the outgoing employment business if its employees are transferred under TUPE?
TUPE contains no provisions that render an agreement by the client to pay a transfer fee unenforceable. Therefore if the terms between the outgoing employment business and the client contain a transfer fee clause, this does not become unenforceable because of the TUPE transfer.
The issue will be determined by the terms of the contract; specifically whether the contract excludes the charging of a transfer fee in the event of a TUPE transfer. As is the case when determining the enforceability of a transfer fee clause, the requirements of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 must also be complied with.
Note that when negotiating new client terms, some clients may seek to specifically exclude the right to charge a transfer fee in the case of a TUPE transfer.
Will a worker on long term absence be 'assigned' for TUPE purposes?
The Employment Appeal Tribunal (EAT) held in BT Managed Services Ltd v Edwards, that an employee who had been off sick from work for six years (with no prospect of returning) was not assigned to an organised grouping for the purposes. This is because the employee's only connection with the company in question was administrative. He was only on the company file to continue receiving permanent health insurance.
Disclaimer
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