The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) exist to protect employees when a business is sold to a new owner.
Whether you are buying or selling a business, you will have obligations towards the employees, including a duty to inform and consult them.
Does TUPE apply to small businesses?
TUPE applies to all sizes of business where there is a ‘relevant transfer’, defined as the transfer of a business where it retains its identity.
In deciding whether TUPE applies, a court will consider the type of business, what assets are being transferred, to include property, whether most of the employees will be kept on by the new owner, whether the customers will remain the same and how similar the activities of the new business are to the old business.
TUPE regulations also apply to service provision changes, such as the transfer of a service contract to a new contractor.
Where TUPE applies, the employees are transferred to the new business which must continue to give them the rights they had previously. There is also protection against dismissal in connection with the transfer and a need to inform and consult with employee representatives.
Does TUPE apply when a business is sold?
The seller of a business is required to consult employees or their representatives before the transfer takes place. They must be told when and why the transfer is happening, in what way it will affect them, whether the business will be reorganised and how many agency workers will be used as well as what work they will be carrying out.
An employee representative could be a trade union representative or someone who is elected especially for the transfer. The employer should make sure that the election is fair and the representative must be someone who will be affected by the transfer.
Where there are less than ten employees, no representative is necessary and the employer can consult directly with the employees.
What are the TUPE requirements when a business is bought?
The buyer of a business will take over the existing employment contracts and other liabilities, rights and powers in respect of the employees. This includes any collective agreements that may have been made by the previous employer before the transfer.
Employment contracts can be modified so that they are similar to those of any existing employees that the new owner may have but the terms and conditions cannot be altered unless the employment contract allows for this or there are economic, technical or organisational reasons that require a change in the workforce.
What rights do employees have under TUPE?
Employees should be transferred to the new employer immediately upon the transfer of the business and should not suffer detriment because of the transfer.
They are protected from changes being made to the terms and conditions of their employment contract. Even if there is an economic, technical or organisational reason, employees must be asked to consent to the change.
If an employee is dismissed or made redundant because of the transfer they may be able to claim automatic unfair dismissal. The employer would need to show that there is a clear economic, technical or organisational reason for a dismissal or redundancy and that a fair and proper dismissal process was followed.
Dealing with the transfer of employees in the sale or purchase of a business
The TUPE process is complex and penalties may be imposed for failure to comply. It can also be a stressful time for all of those involved. Managing the transfer properly will help to minimise problems and disruption and give the business the best chance of a smooth changeover.
How Springhouse Employment Solicitors can help with TUPE
At Springhouse Employment Solicitors we can work with you to ensure that your sale or purchase is compliant with the TUPE regulations and that you can make the changes you need without breaching employee rights.
If you are selling a business, we will advise you on whether TUPE applies and, if it does, help to make sure that you navigate the rules and fulfil all the necessary requirements so that you avoid unfair dismissal or any other claims.
And if you are buying, we will make sure that you have ticked every box and that the contract terms are favourable to you. We can carry out due diligence checks on the business you are buying and ensure that you are fully aware of what you are acquiring.
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