I am taking on a Pub. Am I responsible for taking on the employment of existing employees at the pub?
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protects employees when a business or service transfers.
TUPE can apply in either one of the following two situations:
- When a business or undertaking is transferred to a new employer; or
- When a service provision change takes place (for example – catering services are outsourced to a new provider).
Does TUPE apply to the transfer of a pub?
TUPE is likely to apply in a situation where a pub is transferred either by purchase or transfer of tenancy or if the pub business transfers from a new owner or tenant. Therefore, it is important for the owner/tenant to be aware of what the possible effects of TUPE may be.
Effects of TUPE
Where TUPE applies:
- Existing employees will automatically transfer to the incoming owner/retailer under their existing terms and conditions of employment;
- The incoming and outgoing owner/retailer must meet strict requirements to inform and consult with existing employees about the TUPE transfer;
- Any changes to the terms of the existing employees’ terms will be void (unless specific circumstances exist);
- A dismissal of an employee connected to the transfer will be automatically unfair (unless specific circumstances exist);
- TUPE gives employees who would otherwise have transferred a new right to resign if the transfer involves a substantial change in their working conditions which is to their material detriment.
Dismissing an employee that has transferred under TUPE
Any dismissal of an employee for reason of the transfer or reason connected with the transfer will be automatically unfair.
An employer is able to rely on economic, technical or organisational (ETO) reasons to justify dismissing an employee or changing their terms of employment, for a reason connected to the transfer. ETO reasons are reasons in connection with the day to day running of the business and may fall into one of the following categories:
- A reason relating to the profitability or market performance of the employer’s business;
- A reason relating to the nature of the equipment of production processes of the employer; or
- A reason relating to the management or organisational structure of the employer’s business.
If an employer decides to dismiss an employee for a reason unconnected with the transferor has an ETO reason to justify dismissal for a reason connected to the transfer, the employer must rely on one of the potentially fair grounds for dismissal (conduct, capability, redundancy, breach of statute or SOSR) and follow a fair procedure, in line with the ACAS code of practice.
If an employee does not meet the requisite service requirements to pursue an unfair dismissal claim, it is still advisable for a fair reason to be given and a fair procedure to be followed when dismissing the employee.
A practical example of TUPE implications for tenants/retailers
The following example demonstrates the application of TUPE and highlights the main rights that employees acquire under TUPE:
The tenancy of The Queen Victoria (London) is being transferred to a new retailer, Mr Moon. The Queen Victoria employs staff who work in its kitchen and on the bar. Mr Moon would like to know whether he needs to keep these employees after he has taken over the pub.
The transfer of the pub is likely to be caught by TUPE and therefore the existing employees are likely to transfer over to Mr Moon.
Having taken over The Queen Victoria, Mr Moon quickly realises that the pub’s kitchen isn’t generating a profit. He thinks the kitchen is over-staffed and wishes to dismiss some of them.
If Mr Moon dismisses any of the existing employees, this is likely to be considered automatically unfair.
Mr Moon wants to dismiss employees as the kitchen is not proving to be profitable and therefore he may justify dismissing the existing employees on economic grounds, that is by reason of redundancy. Mr Moon must be able to establish that he had a fair reason to dismiss and that he followed a fair procedure.
Mr Moon dismisses the kitchen workers on the grounds of redundancy due to non-profitability. He then brings his attention to the bar staff at the pub, Donna and Kat. Donna has been at the pub for the past 8 years and is very good at her role. However, Kat started employment 3 months ago and only works part-time. Mr Moon would like to increase Kat’s hours so that there is extra cover in the evenings.
If Mr Moon requested Kat to increase her hours, to include unsociable hours, this will be a change in her terms of employment. The change may be seen as a substantial change which puts Kat at a detriment. This could entitle Kat to resign and pursue a claim under TUPE. Also, any such change may be void, unless Mr Moon can justify it by an ETO reason (see above).
Mr Moon may nevertheless choose to go ahead with his intentions, or even choose to dismiss, as Kat does not have the requisite service to pursue an unfair dismissal claim.
Kat is unable to work the evening shifts and therefore Mr Moon decides to dismiss her.
If the employees at The Queen Victoria were not consulted with before the transfer then it is open to Kat to pursue a claim for failure to inform and consult. There is no qualifying service required for this claim. A Tribunal could award up to a maximum of 13 weeks gross pay for each affected employee where there has been such a failure.
If you are considering purchasing or taking over a lease for an existing pub, it is likely that TUPE will apply to the existing employees. It may not be possible to simply dismiss or change the employment terms of these employees. If you find yourself in this situation, it is highly advisable to obtain legal advice as there are strict penalties in the Employment Tribunal for non-compliance with the TUPE regulations.
For more information, please contact our Employment & HR team or our Alcohol & Entertainment Licensing team on 01332 340 211.