TUPE is the term that usually strikes fear into the hearts of even the most experienced of HR professionals and business people. Truth be told, the same can be said for a lot of employment lawyers. However, TUPE need not be that tricky. If you understand the basics then that gives you a good basis for most TUPE issues going forward.
Over the next 3 weeks I want to set out TUPE in a nutshell to give you as an employer some valuable nuggets of information about what TUPE is, when it applies and what it actually does.
Over the next 3 weeks I will focus on 3 key areas of TUPE:
- Introduction to TUPE, including when it does and does not apply and to whom.
- Explanation of the ETO exception, when are dismissals and changes to terms and conditions really justified.
- Informing and consulting affected employees, practical tips and guidance for a seamless process.
Episode one – introduction to TUPE…
What is TUPE?
TUPE is an abbreviation for the Transfer of Undertakings (Protection of Employment) Regulations 2006 as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 in January of this year.
When does TUPE apply?
TUPE applies to a “relevant transfer”. This is one of the following:
- A business transfer
This is when there is a sale or all or part of a business. This can occur when some or all of a business moves to a new owner or if there is a merger between 2 businesses.
- A service provision change (SPC)
This is where there is a transfer of a service from one provider to another. For example, if a company out-source or bring a service back in house. There will also be a SPC when a service goes from one contractor to another (also known as re-tendering).
What does it do?
If TUPE applies (see above) then it basically means that if you are an employee who will transfer (see more below) you should see no changes to your terms and conditions of employment.
Employees will automatically transfer from the old employer to the new employer seamlessly.
Any changes made to employees’ terms and conditions will be void.
Any employees who are dismissed where the sole or principal reason is the transfer itself then the dismissal will be automatically unfair provided the employee concerned has the required 2 years’ service in order to bring an unfair dismissal claim.
It is possible to make changes to terms and conditions and/or dismiss employees for an economical, technical or organisational reason entailing changes to the workforce, provided an employer acts reasonably in the circumstances. This is called the ETO exception.
Who does it apply to?
TUPE applies only to existing employees of the old employer who are “assigned to the organised grouping of resources”.
Whether or not an employee is “assigned to an organised grouping” has always been one of those annoying grey areas in employment law, that is mainly based on the facts of each situation. However we have recently had some guidance on this.
This question is easy where all employees spend all their time doing one thing and that is the one thing that is transferring i.e. if a firm of solicitors transferred their employment law department, then everyone engaged in the employment department would transfer.
However, if we have a situation where employees do more than one function or work on more than one contract the position becomes more complex i.e. if you had a solicitor who did both employment and personal injury and the firm transferred the employment department only. Here, the question of whether that employee transferred or not would depend on whether that employee would be considered as being “assigned to the organised grouping” that is transferring.
So, the question is whether that employee is assigned to the service that is being transferred. One factor is often relied on quite heavily is a breakdown in terms of a % of time spent at work on the transferring service. The general rule has been that if that % is more than 50% then that employee will transfer. If it is 50% or less then they won’t. This % must be taken from a period before the transfer, not just the day before. I would suggest 6 – 12 months as an accurate snapshot in time. However this is not the only important consideration.
The simple % of time spent is not enough in itself. There must also be an “organised grouping” of employees who are assigned to the service that is transferring. This means that there must be a conscious plan that this employee spends his time on that work, not just a development over time.
For example, as an employment solicitor I may spend some time advising on civil litigation (I don’t thank goodness!). However that is not what I am employed for. That is not a part of our organised grouping. What if my firm decided to transfer civil litigation to another firm? In this example, even if I was spending more than 50% of my time doing civil litigation on the day before the transfer I would not transfer. This is because I am not a part of the organised grouping doing civil litigation. It was not planned that I should be doing civil litigation, that just “happened”.
How do I know if someone transfers or not?
What you should be looking at when deciding if someone transfers is:
- What is the conscious organisation of employees? Are the employees in question consciously organised to the service or part of the business that is being transferred? If the answer is no, then it is likely that they won’t transfer.
- If the answer is yes, then you will have to do a breakdown of %s of work done by the employees on the service that is transferring.
- If the employee in question spends 50%+ of their time on the service that is transferring then they will likely transfer. If not then chances are they won’t.
The above sets out, in plain English, when TUPE does and doesn’t apply. It is a fact specific area and so I would urge you to seek advice if you are unsure. The above should give you a solid basic understanding of what TUPE is, what it does and who it applies to…It isn’t really that complicated! If you need any further advice or guidance on any area of employment law, TUPE in particular then contact the team for a confidential chat.
Cliff-hanger – what is the ETO exception?… .watch out for next week’s thrilling instalment of TUPE – in a nutshell, to find out!