When Does TUPE Not Apply?

The regulation on transfers of undertakings is meant to help a comparatively easy underlying objective: to guard and protect an worker’s rights if the enterprise that employs them adjustments fingers. The laws itself, nonetheless, is notoriously advanced and technical.

It’s due to this fact essential, particularly for the incoming employer, to know when and why the statutory provisions come into play and, the place relevant, how these work to guard an worker from any unfair drawback when transferring to a brand new employer.

The principles regarding transfers of enterprise could be discovered underneath the Switch of Undertakings (Safety of Employment) Laws 2006 (as amended), in any other case often called TUPE.

Equally, it’s also essential for each the incoming and outgoing employer, previous to any switch going down, to know what obligations underneath TUPE could or could not have been triggered. These can embody an obligation to tell and seek the advice of with their staff or worker representatives, in addition to an obligation on the outgoing employer to provide to the incoming employer what’s often called ‘worker legal responsibility data’.

Under we look at the circumstances by which TUPE is triggered, and what this implies for the incoming and outgoing employers and their staff, on this approach offering an oblique however illustrative reply to the generally requested query: “When does TUPE not apply?”.

What’s the distinction if TUPE does or doesn’t apply?

The distinction between a situation the place TUPE does or doesn’t apply could be important. For the incoming and outgoing employers, the place TUPE applies, this triggers all types of data and session obligations previous to any switch going down. Put up-transfer, the appliance of TUPE will then decide the extent of the worker’s rights transferring ahead.

The online impact of TUPE, the place relevant, is to switch all assigned staff – along with any related rights, powers, duties and liabilities arising underneath or in reference to their employment contracts – from the outgoing employer to the incoming employer by operation of regulation. Basically, this implies the incoming employer will step into the footwear of the outgoing employer, as if the staff’ contracts of employment have been initially made with them.

The authorized penalties of TUPE embody:

• Mechanically transferring on the level of switch all staff who have been employed instantly earlier than the switch by the outgoing employer to the incoming employer;
• Sustaining continuity of employment for these staff, the place they are going to carry with them their steady service from their unique begin date, and luxuriate in the identical phrases and situations of employment, however for sure occupational pension preparations;
• Transferring all current statutory and contractual liabilities, in some instances together with the liabilities of these whose employment was terminated previous to the switch going down;
• Rendering a dismissal robotically unfair the place the only real or principal purpose for the dismissal is the switch;
• Transferring recognised commerce union relationships in relation to these staff coated underneath agreements with the outgoing employer;
• Transferring any collective agreements between the outgoing employer and commerce union that cowl worker’s phrases and situations to the incoming employer;
• Triggering data and session obligations on the a part of each the outgoing and incoming employer towards staff or worker representatives;
• Triggering the provision of worker legal responsibility data by the outgoing employer to the incoming employer.
• What does the regulation say on figuring out whether or not or not TUPE applies?

The start line to establish when the provisions underneath TUPE don’t apply, is to first verify the circumstances by which they do. This might both be, for instance, when an organization is offered, the place actions are outsourced or introduced in-house, or the place a contract for companies is moved from one supplier to a different.

In additional technical phrases, TUPE is simply triggered when a ‘related switch’ takes place. A ‘related switch’ is outlined underneath Regulation 3(1) of the 2006 Laws as both:

A enterprise switch, the place the entire or a part of a enterprise is transferred to a brand new employer as a going concern. This may embody mergers, a change of franchisee, the sale of a sole dealer’s enterprise, the switch of a lease, a administration buyout or an intra-group switch;

A service provision change, the place a shopper engages a contractor to undertake work on its behalf or reassigns a contract, together with bringing the work in-house. This may embody contracts to supply office catering or workplace cleansing and different labour-intensive companies, in addition to skilled enterprise companies corresponding to accountancy and authorized companies.

The TUPE rules can apply whatever the measurement of the transferred enterprise, and whether or not or not the enterprise operates for achieve, corresponding to a charity. How the switch takes place can also be not related, the place it will possibly end result from a single transaction or a collection of transactions.

Nonetheless, the enterprise have to be located within the UK instantly earlier than the switch, and, within the context of a service provision change, the place there may be an organised grouping of staff located in Nice Britain instantly earlier than the change. There are specific {qualifications} to those provisions, for instance, the place staff ordinarily work outdoors the UK, supplied the enterprise itself is located within the UK. There are additionally advanced guidelines regarding what constitutes both a enterprise switch or a service provision change.

Key elements to find out whether or not or not TUPE applies

When figuring out whether or not or not TUPE applies, the foundations regarding what constitutes both a enterprise switch or a service provision change can develop into extraordinarily difficult, the place the appliance of the 2006 Laws will rely on the information of every case. The next abstract due to this fact highlights simply a number of the key elements that have to be taken under consideration.
 

Enterprise transfers

For a enterprise switch to be coated by the 2006 Laws and for assigned staff to benefit from the rights underneath them, the switch should contain the switch of “an financial entity which retains its identification” — see Regulation 3(1)(a).

The financial entity check for enterprise transfers is whether or not the enterprise operation is continuous, in different phrases, the place it’s doing primarily the identical factor because it was earlier than. For instance, if a enterprise or a part of a enterprise both strikes to a brand new proprietor or merges with one other enterprise however continues to supply the identical companies and merchandise to current prospects of the outdated firm, TUPE is prone to apply.

Even when the switch falls inside the similar group of corporations, or the place two corporations shut and mix to kind a brand new third firm, TUPE ought to nonetheless apply. TUPE is not going to, nonetheless, apply to transfers by share take-over as a result of, when an organization’s shares are offered to new shareholders, there is no such thing as a switch of the enterprise itself.

To qualify as a TUPE enterprise switch, the identification of the employer should change. In a share sale, for instance, by which a subsidiary is acquired by a father or mother firm, however the subsidiary continues to function underneath its personal identify and retains management of the day-to-day working of the enterprise, TUPE is unlikely to use. It is because that is an acquisition of shares however no formal switch of employees or belongings, the place the identical firm continues to be the employer.
 

Service provision adjustments

A service provision change can embody the place a contractor takes over the actions from a shopper (outsourcing); the place a brand new contractor takes over actions from a earlier contractor (re-tendering); or the place a shopper takes over actions from a contractor (insourcing).

Nonetheless, for a service provision change to be coated by the 2006 Laws, the actions carried out by the outdated contractor (or shopper) and the brand new contractor (or shopper) have to be “essentially the identical” — see Regulation 3(1)(b).

This primarily signifies that if the service requirement is modified considerably post-transfer, there could be no service provision change underneath TUPE. That stated, minor variations between the character of the duties concerned wouldn’t usually on their very own be ample to imply the actions will not be essentially the identical. For instance, if an organization contracts with a catering enterprise to cook dinner and serve scorching canteen dinners, the place the brand new contractor continues to supply the identical service because the earlier contractor however the elements are sourced from a distinct provider and so they present new utensils, TUPE continues to be prone to apply.

In distinction, if the outdated catering contractor served scorching dinners within the firm canteen, however when the contract expired the contracting firm determined to alter the phrases to supply and inventory self-service fridges containing pre-prepared sandwiches and drinks, TUPE could be unlikely to use the place a brand new catering contractor wins the tender.

Even when the actions are essentially the identical after a change in service provision, for TUPE to use to the switch, the next situations should even be happy — see Regulation 3(3):

• An organised grouping of staff should exist instantly earlier than the switch to supply the supply of a service for a selected shopper, though this could be a single worker;
• Workers ought to be assigned to the group instantly earlier than the switch, the place the roles that switch ought to be linked to the supply of companies for that individual shopper;
• The shopper ought to stay the identical, the place TUPE is not going to apply if the shopper adjustments and the companies are being carried out for a brand new shopper;
• The actions shouldn’t develop into overly fragmented on the level of switch, the place the extra cut up the actions between totally different suppliers the much less probably it’s that TUPE will apply.

Exceptions to TUPE 

Along with the final provisions set out underneath Regulation 3(3), the place there have to be an organised grouping of staff with the principal objective of finishing up the actions on behalf of the shopper, there are additionally particular exceptions which imply TUPE could not apply to some service provision conditions. These embody:

• If the service is for single-event actions, corresponding to a convention or exhibition, or for actions of short-term length, corresponding to remoted repairs to property;
• If the actions consist wholly or primarily of the provision of products for the shopper’s use, the place the switch should additionally embody the provision of companies.

Frequent errors when figuring out if TUPE applies

There are numerous frequent errors to keep away from when deciding if TUPE applies, not least the place the events proceed underneath the misapprehension that they’ll decide out of their statutory obligations, agreeing to one thing fully totally different between themselves. That is strictly not permitted as a matter of regulation. That stated, the incoming and outgoing employer are free to barter contractual warranties and indemnities earlier than continuing with the switch. On this approach, the events can agree who will bear the monetary prices of any pre-existing worker liabilities or in consequence of any failure to adjust to the TUPE Laws.

The place TUPE is a possible consideration, in both a proposed enterprise switch or service provision change — please observe that TUPE can be a consideration in just about all service provision adjustments— specialist authorized recommendation ought to all the time be sought. On this approach, as both the incoming or outgoing employer, you may safely navigate the TUPE course of, the place relevant.

Equally, due to the uncertainty surrounding when TUPE applies in sure eventualities, your professional authorized advisor can assist you to manage any potential dangers and liabilities by contract in order to guard your self and your online business from the consequences of TUPE transferring ahead.

Want help?

DavidsonMorris’ employment legal professionals can assist with all authorized elements of firm reorganistions, together with enterprise transfers and the applicability of the TUPE provisions. Working intently with our specialists in HR, we offer complete steering on the best way to method and implement organisational change initiatives to minimise authorized threat whereas guaranteeing industrial targets are achieved and worker engagement is optimised. For assist and recommendation, converse to our consultants.

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Final up to date: 3 June 2021