TUPE: commonly asked questions

When considering TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006), there are no daft questions. There are, however, some frequently asked questions which crop up repeatedly. In this article, we explore some questions on TUPE we are asked on a regular basis.

1. What percentage of time does an employee have to spend on an activity which will transfer in order for TUPE to apply to them?

Anyone ‘assigned’ to an organised grouping of resources or employees that is subject to a transfer will do so  under TUPE. There is no specific percentage of time an employee must spend on the activities before they will be regarded as ‘assigned’. In one case, an employee who spent 100% of his time working on a contract for a client was found not to have transferred under TUPE because there had been no specific decision to organise his work in this way. Something more than the fact that an employee spends most of their time working for a specific client must be shown, such as a specific decision to organise employees to work for a specific client.

Factors that are often relevant when considering assignment are:

• the amount of time spent respectively in the transferred undertaking and in other parts of the business
• the amount of value given to each part by the employee
• the terms of the employee’s contract of employment insofar as they establish what the employee could be required to do
• how the cost of the employee’s services has been allocated between different parts of the business.

2. The business is only selling its shares. TUPE doesn’t apply, does it?

A share sale occurs where a new owner buys the share capital in a company, but the identity of the company does not change, and the employer stays the same.

TUPE does not usually apply where there is a sale of shares, but in some cases transfers of assets pre- or post-sale could result in a TUPE transfer. In one such case, following a share acquisition by its subsidiary, the parent company sent in its own integration team and took over the day-to-day management of the newly acquired company. This company was so fully integrated into its business after the acquisition that a TUPE transfer to the parent company was found to have taken place. TUPE should always be a consideration in post-acquisition integration plans as it cannot automatically be assumed that it will not apply.

3. The employee will be redundant if they TUPE transfer to us, so can the original employer make them redundant?

As its name suggests, TUPE is designed to protect employees from losing their jobs because the organisation they work for changes hands. Under TUPE, any dismissal connected with a transfer will be automatically unfair, unless it is for an economic, technical or organisational (‘ETO’) reason entailing changes in the workforce. The ETO reason must belong to the employer who is carrying out the dismissal. In such a situation, the employee should transfer to the new employer who could (following a fair process) make the employee redundant.

However, changes were made in 2014 which allow a transferee to commence consultation pre-transfer (with the transferor’s permission) if post-transfer, they are proposing to dismiss as redundant 20+ employees at one establishment within 90 days and this will affect transferring employees.

4. How long must a TUPE consultation take place for, prior to a transfer?

Unlike in collective redundancy situations, there is no fixed period of time which employers must consult with employees affected by a TUPE transfer. TUPE states that certain information must be provided to appropriate representatives of employees affected by the transfer “long enough before the transfer” to enable the outgoing employer to consult with them about it. This means that a plan should be put in place prior to the transfer that takes into account how long the information and consultation process will take, including, where necessary, the election of employee representatives. 

5. Can changes be made to contracts of employment after a certain period of time following TUPE?

The new employer takes on transferring employees on their existing terms of employment and changes can only be made in very limited circumstances – even if the employees agree to them. There is no time limit on this protection. Contractual changes may, however, be permitted if:

• the reason for the change is nothing to do with the transfer itself, or 
• there is an ETO reason for the contractual change entailing changes in the workforce and the employees agree, or 
• where a contractual right of variation exists.

6. Can I consult with individual employees about a TUPE transfer? There are only two employees affected, is it necessary to appoint representatives?” 

The transferor and transferee have a duty to inform and consult (if appropriate) with appropriate representatives of employees affected by TUPE. This is regardless of the number of employees affected by TUPE. The only exemption is that since 2014, where TUPE applies to a micro-business (a business with less than 10 employees), such companies can inform and consult with affected employees directly.

Accordingly, employers should invite affected employees to elect appropriate representatives (where there are none already in place). However, if the employees fail to elect representatives within a reasonable time, TUPE confirms that the employer must then give the necessary information direct to the affected employees.

7. What benefits will transfer under TUPE?

The transferor’s rights, powers, duties and liabilities under or in connection with the transferring employees’ contracts pass to the transferee. Whether a benefit transfers therefore depends on the contractual nature of the benefit.

For example, if the employee has a right to company sick-pay with the original employer and this right is deemed to be contractual, that would transfer to the new employer. However, any non-contractual benefit (such as many discretional benefits) would not transfer. 

8. What are the rules in relation to pensions and TUPE?

There is an exemption in respect of rights under occupational pension schemes, meaning that such rights under these schemes do not transfer under TUPE. However, any provisions of an occupational pension scheme which do not relate to benefits for “old age, invalidity or survivors” are not caught by this exclusion, for example early retirement benefits triggered by redundancy can transfer as they may not be “old age” benefits.

Whether or not a pension scheme is an occupational pension scheme will require the transferee to conduct due diligence. Examples of occupational pension schemes are many defined benefit schemes, and auto-enrolment schemes such as NEST. Personal pension plans and group pensions are not excluded under TUPE. The terms of the scheme and liabilities under it will have to be investigated in each case.

9. Am I (the transferor) allowed to provide a new employer (the transferee) with details about our employees before the transfer? Is that a data protection breach?

Under the Data Protection Act 2018, it is lawful for an employer to process data where the processing is necessary to comply with a legal obligation. Under Regulation 11 of TUPE, a transferor is required to notify a transferee of employee liability information of any employee who will be the subject of a relevant transfer. It therefore will not be a breach of data protection to provide the relevant employee liability information as required by TUPE. 

However, this is limited to employee liability information. If further information is to be provided, usual data protection rules apply and businesses should consider whether the provision of further information would be lawful.

Employee liability information is detailed as:

• the identity and age of the employees;
• particulars of employment;
• information relating to any disciplinary procedure taken against an employee within the previous two years;
• information relating to any grievance procedure taken by an employee, within the previous two years;
• information of any court or tribunal case, claim or action brought by an employee against the transferor, within the previous two years; 
• information of any court or tribunal case, claim or action that the transferor has reasonable grounds to believe that an employee may bring against the transferee, arising out of the employee’s employment with the transferor; and
• information of any collective agreement which will have effect after the transfer.

10. What if an employee doesn’t want to TUPE? Have they resigned? Do we pay notice pay?

If an employee does not want to transfer, they must object. If they object, their employment with the transferor terminates by operation of law on the TUPE transfer date. Importantly, there is no dismissal. This means there is no right to notice pay or any other compensation. 

However, it may be that an employee is objecting due to an employer’s repudiatory breach of contract or because of a substantial change to their working conditions to their material detriment (both provided for under TUPE) which means when an employee objects, they may subsequently bring a claim for unfair dismissal against the transferor and/ or transferee.