The Transfer of Undertakings (Protection of Employment) Regulations 2006, known as the TUPE Regulations, exist to protect employees if the business they work for changes hands.
The regulations also apply if the commercial contract they work on, or part of the business they work for, is transferred from one employer to another.
But what does this actually mean?
From an employment law perspective, the main premise of TUPE is that the new employer steps into the shoes of the old employer. As such, the outgoing employer’s rights, powers, duties and liabilities under or in connection with the employees’ contracts are legally transferred to the incoming employer. The parties are commonly referred to as the “transferor” and “transferee” respectively.
In effect, this means that employees will retain their employment terms and conditions, including those set out in their Contract of Employment and the Employee Handbook.
Does TUPE apply to workers?
For a long time, it was widely understood that the TUPE regulations apply only to employees. This is because the regulations refer to those engaged “under a contract of service of service or apprenticeship or otherwise, but does not include anyone who provides services under a contract for services”, i.e. employees in the traditional sense and not workers or agency staff.
However, in 2019, three cycle couriers classified as “workers” brought a number of claims against their employer, including a a claim for failure to inform and consult under TUPE. They argued that the wording “and otherwise” within the regulations extended the scope of the regulations to workers too. They also highlighted that similiarities between the definition of a worker according to the Employment Rights Act 1996 and the definition of an employee under TUPE.
Changes to contracts after TUPE
Often, the transferee will want to harmonise contracts after acquiring the business, but can the new employer decide to make changes to employees’ contracts after TUPE if they wish?
The general rule is that any change to the employee’s contract will be considered void if the sole or principal reason for the variation to the contract is the transfer.
Typically, employers cannot change employees’ terms and conditions unless this is expressly allowed in the contract or where there are economic, technical or organisational (ETO) reasons for the change that involve changes in the workforce. Economic reasons involve company performance, technical reasons relate to company equipment and processes, and organisational reasons concern the company’s structure.
How long is TUPE valid for?
There is no time limit on how long TUPE is valid for. In theory, the terms and conditions someone transfers in with will apply indefinitely. Like any scenario in which an employer wishes to change a contractual term, terms transferred under TUPE can only really be changed by agreement, in accordance with existing terms or by dismissal and re-engagement. This is not recommended for bringing about changes just after a TUPE, though.
There are limited circumstances under which terms and conditions can be changed, one of which is where terms are incorporated from a collective agreement (i.e. negotiated via a trade union), provided that the variation takes effect more than one year after the date of the transfer and the varied terms “when considered together” are no less favourable to the employees. However, this is pretty rare in practice.
Manage TUPE with help from an Employment Law professional
Making changes to employees’ contracts after a TUPE transfer can be extremely complex and these situations should handled with extreme care. If you would benefit from experienced support, our Employment Law specialists can offer expert legal advice on your TUPE challenges, help you to understand and apply the legislation, and guide you every step of the way through a transfer situation.