This article is based upon the TUPE - Transfer of Undertakings (protection of employment) Regulations 1981. Changes were to be effective from October 2005, however, they will now be effective from 6 April 2006.
This article will be useful to you if you are an employer or employee. However, we have a document just for employees. The law of course, is the same, however, the article for employees, deals with employees rights and redress. This article concentrates on what the law states, why it has been changed, your responsibilities and what to do now.
If, when you have read this document, you have any questions about the Regulations, you should contact the Advisory, Conciliation and Arbitration Service (ACAS).
The Government considers that the TUPE Regulations are based on a positive principle the coupling of flexibility for business with fairness for employees. Everyone should know where they stand, so employers can plan effectively in a climate of fair competition and affected employees are appropriately protected.
What is TUPE?
TUPE Transfer of Undertakings (protection of Employment) Regulations preserve employees' terms and conditions when a business, undertaking, or part of one, is transferred to a new employer.
Which transfers are covered by the regulations?
A transfer is an undertaking or part of an undertaking which is transferred from one employer to another.
Examples:
- where all or part of a sole trader's business or partnership is sold or otherwise transferred;
- where a company, or part of it, is bought or acquired by another, provided this is done by the second company buying or acquiring the assets and then running the business and not acquiring the shares only;
- where two companies cease to exist and combine to form a third;
- where a contract to provide goods or services is transferred in circumstances which amount to the transfer of a business or undertaking to a new employer.
Small or large, one employee or ten thousand, public or private, the regulations apply.
The TUPE regulations do not apply in the following instances:
- Transfer by share takeover - When a company's shares are sold to new shareholders, there is no transfer of the business - the same company continues to be the employer.
- When a business transfers assets only, e.g. if equipment is sold.
- When a business transfers a contract to provide goods or services that doesn't involve the transfer of a business or part of a business.
- Transfers of undertakings situated outside the UK - although similar provisions apply in the EU.
- Change of business identity, e.g. if the work or organisational structure changes radically.
What the regulations state
- All employees pass between employers with the same terms and conditions as their first contract. It is as if their contracts of employment had originally been made with the second employer. Exceptions are for criminal liabilities and rights and obligations relating to provisions about benefits for old age, invalidity or survivors in employees' occupational pension schemes.
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- The employer taking over cannot choose which employees take all must be transferred.
- Employees affected have a right to be informed about the transfer. They must also be consulted about differences in the running of the business which will affect them.
- The new employer takes over any collective agreements made on behalf of the employees and in force immediately before the transfer. This includes union memberships, pension schemes etc.
- Neither employer may dismiss an employee because of the transfer or a reason connected with it, unless the reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce.
- The new employer may not worsen the terms and conditions of employment of any transferred employee.
- Both employers must inform and consult representatives of the employees, who shall inform employees affected.
What rights do my employees have?
- An employee claiming to have been unfairly dismissed because of a transfer has the right to complain to an employment tribunal.
- Transferred employees who find that there has been a fundamental change for the worse in their terms and conditions of employment as a result of the transfer generally have the right to terminate their contract and claim unfair dismissal before an employment tribunal.
- Their period of employment is not broken by a transfer.
- The only conditions that change are that the previous employer's rights and obligations relating to benefits for old age, invalidity or survivors under any employees' occupational pension schemes are not transferred. The new employer must provide similar terms, including pensions. If not, the employee has a case for unfair dismissal.
- Occupational pension rights earned up to the time of the transfer are protected by social security legislation and pension trust arrangements.
What action should I take?
· Do not change conditions of an employees employment
· Transferring employees from one business to another, affects morale. The result is often discontentment, not just in those transferred but also in staff left behind in the old business and workmates they join in the new business.
· You should be especially careful to emphasize the positive benefits of the sale or purchase and try to show how the prospects for all will be improved by the changes.
Redundancy
· Dismissed employees are entitled to redundancy payments.
· If an employee makes an unsuccessful claim for unfair dismissal, redundancy payments will not be affected.
Who must be informed of the transfer?
All employees who will be affected by the transfer must be informed. If they are represented by a trade union, a representative from the union should inform them. However, if they have no union representative, a representative position will be created and that person will be told the details. This person will then inform affected employees.
The employer must inform representatives of:
- When and why the transfer is going to take place
- the legal, economic and social implications of the transfer for the affected employees;
- whether the employer will take any action (reorganisation for example) in connection with the transfer which will affect the employees, and if so, what;
- The new employer must give the previous employer the necessary information so that the previous employer is able to meet this requirement. The information must be provided long enough before the transfer to give adequate time for consultation.
Complaints to an employment tribunal
- An employee who has been dismissed or who has resigned in circumstances in which they consider they were entitled to resign because of the consequences of the transfer may claim in an employment tribunal against you. An employee must complain within three months of the date when their employment ended.
- It may be unclear whether claims should be made against the previous or the new employer. In such cases, employees should consider whether to claim against both employers.
· An employee who wishes to claim a redundancy payment. The application should normally be made within six months of the dismissal
Employers liability compulsory insurance
Liabilities automatically pass from the transferor to the transferee in a TUPE transfer, as does insurance. Where there is a transfer from public sector to private sector, public sector employers are generally exempted from the requirement to effect insurance cover and, other than in exceptional cases where they have insured themselves on a voluntary basis, there is no cover to transfer.
Pensions
Occupational pension rights earned up to the sale are protected by social security law and pension trust arrangements. From 6 April 2005, new employers are required to offer pension provision to transferred employees on transfer. This applies where the employees had access to an occupational pension scheme with an employer contribution before the transfer.
As an employer, you can opt to provide an occupational pension scheme or a stakeholder pension scheme. If you choose a stakeholder or a defined contribution scheme, you will have to match the employee's contributions up to 6 per cent. This can be increased if both parties agree.
If you don't take control over the previous business' shares, you won't be able to provide such shares to your staff. If the previous employer had share or share option schemes, you must provide schemes of substantial equivalence.
Now you know what the facts are, you might like to buy a document to help you get started.
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