The previous employer is called the 'transferor'. TUPE can affect the ability of the new employer to reduce to the number of staff or modify their terms and conditions of employment.
This is a complex area of law – seek advice if you are thinking of bidding to deliver a service that another organisation is already running.
When TUPE applies
TUPE applies to 'relevant transfers', which include:
- selling a business or part of a business
- outsourcing from a client to a contractor
- transferring outsourced services from an original contractor to another contractor
- bringing outsourced services back in-house.
What transfers under TUPE
In general terms, any employees who are dedicated to carrying out the activities under the contract in question, will transfer from the transferor to the new employer.
A new employer steps into the shoes of the transferor – the new employer assumes liability for any previous acts or omissions by the transferor.
Terms of employment
Employees transfer to new employers on their existing terms of employment and with all related employment rights, powers, duties and liabilities (apart from old age, invalidity and survivors' benefits under occupational pension schemes).
The right to object
Employees who will be subject transfer under TUPE have the right to object to the transfer.
Employees who object will not automatically transfer – their contracts of employment will terminate on the transfer date.
Relevant information about transferring employees
New employers should receive employee liability information 28 days before the transfer date. It should include:
- terms and conditions
- disciplinary issues
- grievances raised
- employment tribunal claims
How TUPE protects transferring employees
Employees who transfer under TUPE are provided additional protection against:
- changing terms and conditions
- some kinds of dismissal.
Changing terms and conditions
New employers can only make changes to the existing terms and conditions of the transferring if:
- the reason for any changes is an economical, technical, or organisational reason entailing changes in the workforce (ETO), and both the new employer and the employee agree to those changes, or
- the terms of the contract of employment permit the new employer to make the change, eg a mobility clause permitting you to change the employee's place of work.
Harmonising the terms and conditions of transferring employees with those of the new employer does not on its own constitute an ETO reason.
Separate provisions apply when the terms and conditions being varied are incorporated into the employee's contract of employment by collective agreement. In such circumstances, the restriction to changing terms and conditions does not apply provided:
- any changes take effect more than 12 months after the date of the transfer, and
- following any changes the employee's terms and conditions when considered together as a package are not less favourable to the employee than those which applied before any changes were made.
Protection against dismissal
TUPE provides enhanced protection against dismissal, over and above general unfair dismissal law, for employees with the qualifying period of service (currently two years). A dismissal where the reason for the dismissal is the transfer will be automatically unfair.
However, a dismissal which takes place because of an ETO reason can potentially be fair on the grounds of:
- redundancy or
- 'some other substantial reason'.
This enhanced protection also applies if an employee resigns in response to a serious breach of their contract, or the new employer makes a substantial change in the employee's working conditions which is detrimental to them.
Obligations under TUPE
Both parties involved in a TUPE transfer are obliged to inform, and if appropriate, consult with recognised trade unions or elected employee representatives in relation to any employees who may be affected by the transfer. If there are no existing representatives then they will need to be elected.
New employers should be involved in the process to help resolve as many issues as they can before the transfer.
The duty to consult will arise if any measuresare going to be taken in relation to employees affected by the transfer. A failure to comply with these obligations can result in a protective award against the old and/or new employer of up to 13 weeks' uncapped pay.
Public sector transfers are different
There are additional factors which need to be considered in transfers that involve a public sector body.
Central government departments and agencies
The Cabinet Office Statement of Practice on Staff Transfers in the Public Sector ('COSOP') applies principally to central government departments and agencies – where a public sector body is outsourcing, in all but exceptional circumstances, employees should transfer on the basis that TUPE will apply even where TUPE does not strictly apply as a matter of law.
Other public sector transfers
Even if the transfer does not involve a central government department or agency, similar provisions used to apply as a result of the Code of Practice on Workforce Matters in Public Sector Service Contracts (2005) and the Code of Practice on Workforce Matters in Local Authority Service Contracts(2003). These have been withdrawn in England. In their place are the six Principles of Good Employment Practice published in December 2010 which provide that:
- Contracting public bodies and suppliers should be encouraged to promote good workforce practices in the delivery of public services and use outcome-based commissioning wherever possible instead of prescribing how services are delivered.
- Contracting public bodies and suppliers should recognise the importance of basic skills and appropriate training, qualifications and development and recognised unions should be consulted on workforce training and development issues.
- New recruits engaged by suppliers to work alongside former public sector staff should have fair and reasonable pay, terms and conditions and suppliers should consult with recognised unions on the terms to be offered.
- Contracting public bodies should ensure supplier policies and processes are compliant with the Equality Act 2010 including regarding the public equality duty. Suppliers should be able to demonstrate how working practices support their responsibilities as good employers.
- Suppliers should have regard legal requirements and good industrial relations practice in relation to union membership, representation and dispute resolution.
- Suppliers should be encouraged to develop effective staff engagement strategies.
In October 2013 revised guidance in relation to the Fair Deal for Staff Pensions was published stipulating that staff transferring from central government departments and agencies, the NHS, maintained schools and academies, should be offered continued pension protection by enabling employees to remain in their legacy schemes.
Local authorities are currently obliged to ensure that transferring employees have the right to acquired pension benefits which are the same as, or broadly comparable to those the employee had.
The Welsh government has indicated its intention to replace its Code of Practice on Workforce Matters in Local Authority Services Contracts and its equivalent code for the rest of the public sector and is currently consulting on a revised combined code of practice.
If you are tendering for any public sector related contract then these additional obligations will need to be considered particularly the requirement to engage new recruits on fair and reasonably pay, terms and conditions and the obligations in relation to pensions under Fair Deal.