Grant Funded Support
A complex legal process which is often underestimated by employers
A transfer of undertakings occurs in one of two situations – either a business transfer or a service provision change. When a business moves to a new owner in one of these ‘relevant transfers’, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) currently protects the entitlement of UK employees to the same terms and conditions, with continuity of employment, as they had before the transfer.
All employees employed in the organisation (or part of the organisation) that is transferring will be entitled to carry on working for the new organisation with their existing terms and conditions of employment; their continuity of service is also preserved.
The transferee also takes over the liability for all statutory rights, claims and liabilities arising from the contract of employment, for example liabilities in tort, unfair dismissal, equal pay and discrimination claims. The exception to this rule is criminal liabilities. It may be possible for a legal representative to negotiate warranties and indemnities which will provide a partial, or total, cushion against the financial impact of any claims resulting from the application of TUPE.
Here at Optimal PBS, we can support this complex process, not only managing the process but by providing the appropriate legal advice through one of our legal partners, ensuring you get a straightforward, streamlined process which is fully compliant and legal.
As a business owner, you may not know how TUPE works and what is legal and what is not, why would you? You’re not a HR professional!
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Key elements that employers fail to review or understand
when going through a TUPE transfer include:
If an employee is dismissed because of the transfer, their dismissal is automatically unfair. However, the dismissal will not be automatically unfair if the employer can show an ‘economic, technical or organisational’ (ETO) reason entailing a change in the workforce. ETO reasons are explained further below.
- that a transfer is to take place
- the reason for the transfer and when it is expected to take place
- the implications for employees
- the measures that the current employer expects to take in relation to the employees
- the measures that the new employer expects to take in relation to the employees.
If the previous employer provided a pension scheme then the new employer has to provide some form of pension arrangement for employees who were eligible for, or members of the former employer’s scheme. It will not have to be exactly the same as the arrangement provided by the previous employer but will have to meet the minimum standard required by the legal provisions relating to pensions.
Strictly speaking, pension rights related to old age, invalidity or survivors’ benefits in employees’ occupational pension schemes do not transfer under TUPE. However, other legislation means that some provisions equivalent to TUPE do apply to pension rights. Where pension arrangements are in place, employers should assess the nature of the scheme and identify any pension benefits that may transfer.
Transferors are obliged to give the transferee written information about the employees who are to transfer and all the associated rights and obligations towards them. This information includes, for example, the identity and age of the employees who will transfer, information contained in the employees’ written particulars of employment (under section 1 of the Employment Rights Act 1996) and details of any tribunal claims that the transferor reasonably believes might be brought.
If the transferor does not provide this information, the transferee may apply to an employment tribunal for such amount as it considers just and equitable. Compensation starts at a minimum of £500 for each employee about whom information was withheld or defective.
The economic, technical or organisational (ETO) reason entailing a change in the workforce is one of the few legitimate factors for a refusal to take on the transferor’s workforce by the prospective transferee. If an ETO is the main cause of a dismissal, then the dismissal may be justifiable provided that the transferee acted reasonably in all circumstances. Examples of ETO reasons may include a severe reduction in output that makes trading unsustainable without dismissing staff (economic) or new technology which means that far less staff are needed (technical). Even if there is an ETO reason, the normal law and practice on redundancies and unfair dismissals will still apply. If there was no real change in the job functions of the employees, nor a change in the number of employees making up the workforce, the economic (or other reasons) may be disputed. If the workforce was not taken on in order to avoid the application of TUPE, the transferee will be liable for potential tribunal claims.
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