Changing ownership? Transfer of Undertakings (TUPE)

Employment law advice in Wimbledon, South West London, Epsom and Surrey

Understanding TUPE, the Transfer of Undertakings (TUPE)  regulations for business transfers.

TUPE regulations safeguard employees’ rights when a business changes ownership – whether through merger, acquisition, or outsourcing. This law ensures that employees’ terms and conditions, such as salary, benefits, and holiday entitlements, remain protected even under new management.

Both the original and the new employer are required to consult with employees, either through recognized trade unions or employee representatives before the transfer. Additionally, TUPE prohibits dismissing employees solely because of the transfer, except for specific reasons like economic, technical, or organizational factors, and only if a fair process is followed. Employers involved in a TUPE transfer must be aware of their obligations and potential liabilities, as the new employer inherits responsibility for any employment-related claims, even those pertaining to actions of the original employer before the transfer.

Here are some definitions and examples:

An ‘undertaking;’ is a business or part of a business that amounts to an economic entity which retains its identity after the transfer.  For instance, this would include a café run by the tenant of a property, that will continue to be operated as a café by the new tenant after the transfer or assignment of the lease.

A ‘relevant transfer’ takes place where an undertaking is transferred from seller to buyer.  Employees of that undertaking transfer automatically to the buyer upon completion.  The consequence of the transfer from an employment law perspective is that the buyer inherits all employment liabilities for all transferring employees.  Both seller and buyer must inform, and in some cases consult with, employees affected by the transfer.  So, in the case of the above café, a transfer of the lease of the property and attached café business would be a relevant transfer, and employees of the café would transfer automatically to the buyer who is going to continue operating as a café .

A ‘service provision change’ can also amount to a ‘relevant transfer’, where a contractor takes over a contract to provide services to a client, or where services are contracted out from the client to a new contractor, or vice versa.  For instance, a security company engaged by the landlord of a block of mansion flats to provide a security guard, who is employed to work full time at that mansion block.  If the landlord changes to a different security contractor, the security guard’s employment will transfer to the new contractor.

Whether the assets being transferred constitute an undertaking that retains its identity will depend on factors such as:

• Is goodwill being transferred?
• What activities are carried on before and after the transfer?
• Will those activities be disrupted – for example by time taken to refit premises?
• Will the buyer use the employees?

What transfers?

All employees of the seller who were employed in the undertaking immediately before the transfer will become employed by the buyer with effect from the transfer – i.e. generally from completion.  Employees transfer with all their terms and conditions intact, including length of service.  All rights, powers, duties and liabilities that arise under or in connection with the employees’ contracts of employment will transfer too.

Dismissals will be automatically unfair where the sole or principal reason for the dismissal is the transfer, unless is it for an “economic, technical or organisational reason entailing changes in the workforce”.

Complexities are caused with a sale of a property where employees working in the property are not employed by the seller but by a managing agent, service provider or a tenant.  There might be a service provision change, as well as an “ordinary” transfer as a result of the sale.  There may also be issues with recently dismissed employees where a property is being sold with vacant possession.

Whatever the circumstances, it is important to obtain detailed employment law advice on the employment aspects of the transfer of property, or sale/acquisition of a business or assets with employees, whether or not they appear to be employees of one of the parties to the transaction.

Peacock & Co can provide generalised advice on your obligations under TUPE for a fixed fee.  We can also provide bespoke advice, including advice on the obligations to inform and consult; the terms of the asset purchase agreement and regarding any employment law issues arising, such as redundancies.

Please contact us on 020 8944 5290 and speak to our Employment team for more information.

Here are some of the commonly asked questions about TUPE regulations: