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On 6th April 2006 the Transfer of Undertakings (Protection of Employment) Regulations 2006 came in to force. These important regulations are known colloquially as TUPE.
The provisions of TUPE apply whenever there is a Transfer of Business Assets from one party to another.
It also applies when a business engages a contractor to do work on its behalf, reassigns such a contract or brings the work in-house. This is known as a 'Service Provision Change'.
TUPE does not apply to a transfer of shares.
What are the effects of TUPE?
Whenever TUPE applies, the contracts of employment of those employees who are employed by the transferor automatically pass to the transferee pretty much on the same terms. This applies to all employees who worked for the transferor immediately before the Transfer.
The transferee effectively steps into the transferor’s shoes with regard to those employees.
Any changes to their terms of employment will be void if the main reason for the change is either:
- The transfer itself; or
- a reason connected with the transfer which is not an economic, technical or organisational reason entailing changes in the work force ('ETO').
It is, however, possible to make changes to employment terms either before or after a transfer where the main reason is either:
- A reason unconnected with the transfer; or
- A reason connected with the transfer which is an ETO.
Remedies for breach of TUPE
TUPE gives enhanced protection against unfair dismissal over and above the general rules. Any dismissal of an employee with at least two year’s service will be automatically unfair where the main reason for the dismissal is either:
- The transfer itself; or
- A reason connected with the transfer that is not an ETO.
- In addition to this, if an employee resigns in response to a repudiatory breach of contract or to substantial changes in working conditions to the employee’s material detriment, these will be deemed dismissals to which the enhanced protection applies.
Duty to inform and consult
Both the transferor and the transferee are obliged to inform and (in some cases) consult with recognised trade unions or elected employee representatives in relation to any of their own employees who may be affected by the transfer.
A failure to do so could lead to a claim for up to thirteen weeks pay for each employee who commences proceedings. The transferor and the transferee can be held jointly and severally liable for this.
TUPE is a complicated piece of Legislation. Any business which may be affected by it should immediately take expert advice to avoid expensive claims.
For further information and advice, please contact Richard Stephens on 020 8370 2875.