The underlying purpose of the regulations is to protect the employment of the employees when all or part of the business they work for changes hands or where the employees are engaged in providing a service, and there is a change of service provider.
The regulations are complex, and every process will differ depending on your business and the specific transaction. This note provides general advice only. You must take professional legal advice from a qualified employment lawyer to ensure you can comply with TUPE if it applies to your transaction.
What you need to know about TUPE
- Does TUPE apply to your transaction?
- What are the implications of TUPE applying?
- What do you need to do to comply?
- What are the penalties for non-compliance?
When does TUPE apply?
In the first instance, it is important to understand to what transactions TUPE could apply. TUPE applies when a “relevant transfer” takes place. A “relevant transfer” can take either of two forms:
A business transfer: In basic terms, A Ltd is sold to B Ltd as a going concern. In this scenario, there must be a transfer of an economic entity that retains its identity following the transfer (for example, a merger or acquisition). This applies whether all or only part of the entity is being transferred.
There are several factors that the courts will take into account when determining whether a business transfer falls under the TUPE regulations, including, but not limited to:
- the type of undertaking being transferred;
- whether customers have been transferred;
- whether the new employer takes on the majority of employees;
- the degree of similarity between the activities that take place before/after the transfer;
- whether any assets, tangible or intangible, have been transferred.
For this guide: A Ltd will be known as the transferor. B Ltd will be known as the transferee.
A service provision change:
This occurs where a business:
- outsources a service by engaging a contractor to do work on its behalf (initial/first-generation outsourcing);
- re-assigns a contract from one external contractor to another (a subsequent/second-generation transfer); or
- brings the service back in-house from an external contractor (in-sourcing).
The transferor or incumbent is the outgoing contractor on a service provision change, and the transferee is the incoming contractor.
It is worth noting that a one-off buying-in of services are excluded from the TUPE regulations, as it is a transaction for the supply of goods for the end-user; it is services that are covered and not goods.
Further, to be covered by the TUPE regulations, the activities carried on after the service provision change must be “fundamentally or essentially the same” as those carried out before the change.
Some transactions can amount to both a business transfer and a service provision change when applying TUPE.
Seek professional advice to determine if TUPE may apply to your transaction.