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Top ten tips on staying on the right side of employment law for employers who are merging, acquiring or winning new business

Consolidation is a hot topic as businesses strive for growth and competitive edge. Employers should ensure however, that they stay on the right side of TUPE Regulations which govern how employees are transferred to avoid the risk of a tribunal being brought against them.

1. Be clear on when TUPE applies

TUPE – the Transfer of Undertakings (Protection of Employment) Regulations apply when one business acquires another (usually a transfer of assets and goodwill) or there is a “service provision change” (typically where one contractor wins a contract from another or a business outsources or brings work back in-house). It is vital to be clear from the outset whether TUPE applies.

2. Be aware of significant penalties

If you fail to comply with TUPE Regulations you can face “protective awards” of up to 13 weeks’ wages (uncapped) per affected employee, together with the prospect of claims for automatic unfair dismissal.

3. Elect employee representatives

If you are employing staff who will transfer to another business pursuant to TUPE, assuming there is no recognised Trade Union or elected representatives in place, you are obligated to arrange an election of representatives in order to provide them with certain information regarding the transfer and, in certain circumstances, consult with them.

4. Micro businesses

There have been a number of significant changes to TUPE this year. Perhaps the most significant is the exclusion of SMEs with fewer than 10 employees from the requirement to elect employee representatives, with effect from 31 July 2014.  However, if this applies to you, you will still be under a duty to provide information and, if appropriate, consult with employees directly.

5. Time is of the essence

Information should be provided to employee representatives and any consultation process should commence in good time prior to the proposed transfer.  Failure to do this early enough can lead to exposing your business to significant compensation claims.

6. Exchange information

Businesses subject to acquisition or those who lose a contract in a competitive pitch are legally obliged to provide full information about their employees to the acquiring company or incoming contractor at least 28 days before the transfer.  In turn, any acquiring business is obliged to provide details of any proposed “measures” in respect of the employees they will be acquiring, such as redundancies.

7. T&Cs of transferring employees

TUPE means that all transferring employees transfer to the buyers/incoming contractor’s employment on their existing terms and conditions.  In most cases, a business will be stuck with those terms and will not be able to change them without facing the risk of breach of contract or unfair constructive dismissal claims.

8. Changing T&Cs

There are limited circumstances in which you can change the T&Cs of inherited employees on a TUPE transfer.  You can however, make changes if existing terms allow this and the reasons are ‘economic’, ‘technical’ or due to ‘organisational’ reasons (ETO).  Changes can also be made, over time, if they are no longer connected to the business transfer itself.  Be aware that employees can however, choose to enforce any beneficial terms offered but subsequently claim that any detrimental variations should be declared unlawful – even if they agreed to them at the time.

9. Don’t dismiss staff for the wrong reason

You cannot dismiss an employee if the main reason is the transfer as this will be regarded as an automatically unfair dismissal if challenged. If a genuine redundancy situation arises for ETO reasons, then you  will be able to dismiss an employee fairly, provided the correct process is followed, including appropriate consultation and the fair application of reasonable selection criteria (if appropriate).

10. Seek specialist advice

The law can be a minefield to navigate with small technicalities often making the difference between winning or losing if a dispute escalates into legal action so it is recommended that you seek advice from a specialist employment lawyer to protect your business from any risks.

Ends

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