These rules, which replaced old legislation in 2006, are designed to help employees retain the conditions of their employment when a business transfer takes place. Both the employees and employers themselves should be mindful of TUPE regulations and we have created this comprehensive guide to ensure you understand your rights and options when a business transfer takes place.

What are TUPE Regulations?

Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) provide protection for employees when the business that they work for is in the process of changing ownership (a business transfer) or there is a change in the service provider for the services that the employees provide (a service provision change). They apply to any relevant transfer, as defined by the TUPE regulations, after the 6th April 2006.

Transferor vs Transferee

As there is a transfer of the employees under TUPE, the terminology that is used for these transactions is different to the normality of Buyers and Sellers.

The Transferor in a TUPE transaction is the seller in the business sale or the client or outgoing contractor on a service provision change.

The Transferee in a TUPE transaction is the buyer in the business sale or the client or incoming contractor in a service provision change.

What Is Relevant Transfer In TUPE Regulations?

For the TUPE regulations to apply, there must first be a relevant transfer under regulations 3.1(a) and 3.1(b):

• 3.1(a) is defined as a transfer of a business undertaking or part of a business where there is a transfer of an economic entity that retains its identity. 
• 3.1(b) is defined as a client engaging a contractor to do work on its behalf, re-assigning such a contract or bringing the work ‘in-house’.

For business acquisitions, TUPE only applies to asset sales rather than share sales. In an asset sale, there is the acquisition by one party of another party’s assets (whether that be a part or whole of the business) and therefore a change in the identity of the employer. However, in a share sale, the employing company is being bought as a whole and therefore retains its identity so TUPE cannot apply.

Automatic Transfer Principle

Where a relevant transfer has taken place, the existing terms of employment remain in force and are transferred over to the Transferee as per TUPE regulations. The Transferee essentially assumes the role that the Transferor was performing under the contract of employment pre-transfer.

The Transferee assumes all the rights, powers, duties and liabilities under the contracts upon the transfer that would have been the responsibility of the Transferor. Any acts or omissions of the Transferor prior to the transfer also become the responsibility of the Transferee and are treated for the purposes of the transfer as if the Transferee had committed them themselves (regulation 4(2)).

Any employee who decides that they do not consent to the transfer of their employment can object and will not become an employee of the Transferee on the transfer. Their employment ceases by operation of law on the same date that the transfer of the other employees is completed.

Changes To Employment Terms Upon The Transfer

The Transferee can only make changes to employment terms in limited circumstances under TUPE regulations. If the sole reason for the change of the terms is the transfer itself then the changes will be void. 

This is unless the Transferee can prove an economic, technical or organisational reason entailing changes in the workforce or the terms of the contract as drafted permit the Transferee to make the change.

Protection From Dismissal

Under TUPE regulations, any dismissal for the sole or principal reason of the transfer itself is deemed to be automatically unfair and the unfair dismissal rules apply.

If the dismissal is for an economical, technical or organisational reason entailing changes in the workforce, then the dismissal could potentially be fair depending on the circumstances surrounding the dismissal.

If the employee has resigned due to a repudiatory breach of the terms of their contract of employment or any substantial change in their working conditions, this is treated as a deemed dismissal and the enhanced protections against dismissals will apply.

Obligations To Inform & Consult

It is also important to note that both parties to the transfer have an obligation to inform the employees who are to be affected by the transfer. They must inform and consult with the appropriate employee elected representatives on the effect the transfer will have on them and any potential measures that will be taken when transferring.

The duty to consult only arises where the Transferee envisages taking measures or making changes to terms of employment, in respect of the transferring employees. 

Since the 1st July 2024, both businesses with fewer than 50 employees and businesses of any size involved in a transfer of less than 10 employees can directly consult with their employees without the need to elect employee representatives.

Failure to comply with the obligations to inform and consult can see employees gain compensation equivalent to 13 weeks uncapped pay. Both the Transferor and Transferee may be held to be jointly and severally liable for this compensation, so would have to pay the employee or group of employees in equal amounts up to 13 weeks uncapped pay.

Obligation To Provide Employee Liability Information

Before the transfer is completed, the Transferor has an obligation to provide the Transferee with certain information regarding the transferring employees, known as the “employee liability information”. 

The information itself follows a factual form around the personal information of the employee themselves and the information that is specific to them regarding their employment. The Transferor must provide the Transferee with this information not less than 28 days before the relevant transfer takes place.

If the Transferor fails to provide the information then the Transferee has the right to bring a claim in the employment tribunal. The tribunal has the power to order the Transferor to pay the Transferee any such amount as they consider just an equitable for failing to provide the information. This amount however is subject to a minimum of £500 per transferring employee.

Settling TUPE Claims

The most common way for TUPE employee claims to be settled is by way of a settlement agreement. This waives all employee claims against the employer and provides a clean break between the employer and employee.

It is common for tri-partite agreements to be entered into with the Transferor, Transferee and employee all being parties to the agreement. This ensures that all parties to the transfer can rely on the terms and effect of the agreement as a result of the settled claims in advance of the transfer. However, it is not possible to waive claims for a failure to inform and consult in a settlement agreement. 

If you need help with any of the issues raised in this article, specifically regarding advice surrounding the TUPE regulations and process, any potential claims as part of the process, or entering into a settlement agreement, then please contact a member of the employment team at Kitson Boyce. Based across our offices in Torquay, Plymouth and Exeter, our expert employment lawyers have years of shared experience assisting employees and employers with TUPE regulations and will provide you with tailored legal advice aimed at finding the best way forward for your desired outcome.