Transfers of business in England and Wales

Introduction

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) implement the European Acquired Rights Directive.

Scope of the law

TUPE applies to a “relevant transfer”.  The definition of a “relevant transfer” covers both transfers of businesses and outsourcing situations.  This note deals only with transfers of businesses. 

In respect of business transfers:

• there must be a transfer from one person to another of an undertaking, and
• that transfer must be of an economic entity which retains its identity.

An economic entity is an organised grouping of resources which has the objective of pursuing an economic activity.

The test is heavily dependent on the facts of each case: it is not straightforward or precise.

Effect of transfer on contracts of employment

On a business transfer contracts of employment are not terminated but have effect as if originally made with the transferee – employment is continuous.

• This applies to the contracts of employment of anyone employed by the transferor and assigned to the organised group of resources or employees being transferred immediately before the transfer.

• It also applies to anyone who would have been so employed if he/she had not been dismissed by reason of the transfer or for a reason connected with the transfer which is not an economic, technical or organisational reason entailing changes in the workforce (ETO reason).

Right of objection

Employees can object to the transfer in which case the transfer terminates their contract of employment.

Occupational pension schemes

The principle of automatic transfer does not apply to occupational pension schemes.

Recognition and collective agreements

Collective agreements, in their application to transferring employees, are preserved.

Employee representatives

If the transferred entity maintains an identity distinct from the remainder of the transferee’s undertaking, if the transferor recognises an independent trade union in respect of the transferring employees, then the transferee will be deemed to recognise that trade union in respect of the transferring employees to the same extent.

Changing terms and conditions following a transfer

The ability of an employer and employee to agree changes to terms and conditions is very limited.  Neither the transferor nor the transferee can vary contracts where the sole or principal reason is:

• the transfer itself, or
• a reason connected with a transfer which is not “an ETO reason entailing changes in the workforce”.

Dismissal because of transfer

A dismissal of an employee will be automatically unfair if the sole or principal reason for the dismissal is:

• the transfer itself, or
• a reason connected with the transfer that is not an ETO reason entailing changes in the workforce.

Transferor’s obligations to inform transferee

The transferor is required to provide the transferee with statutorily prescribed “employee liability information” not less than 14 days before the relevant transfer.

Informing and consulting the workforce

The transferor and/or the transferee must inform and, where measures are envisaged, consult the appropriate representatives of the affected employees.

Notifying employees about change of employer

In addition to obligations noted above (informing and consulting the workforce) the employer must, not more than one month after the transfer, inform the employee of the change of the identity of the employer by means of a written statement.

Contracting out

Any provision of any agreement is void insofar as it purports to exclude or limit the operation of TUPE.

Further detail on business transfers in England and Wales is available here.