TUPE or not TUPE

During the due diligence process TUPE transfers from the transferor (‘seller’) to the transferee (‘buyer’) all employees assigned to the business and in doing so, protects their terms and conditions of employment as well ensuring the continuation of a job.

Regulation 4 of TUPE states that after a transfer an employee’s contract of employment is the same as the original contract created, this means all rights, powers, duties and liabilities are transferred. The only provision in a contract which does not have this effect are occupational pension schemes, reg.10.

The difficulty here is if the ‘new’ employer wishes to alter any contractual arrangements agreed initially can pose a problem. It may seem like logic at the time to dismiss the employees and re-engage them with a proposal of new terms and conditions. However reg.7 prevents this and confirms that such conduct would automatically result in unfair dismissal. The only reason with which this would be valid is where there is an economic, technical or organisational reason, otherwise known as the ETO defense. The moral of the story here is don’t attempt it unless you know what you are doing.

When transferring employees, the solicitor and/or buyer will need to consider the following in order not to fall foul of TUPE. Another way of looking at the ‘checklist’ is to see where you may get around TUPE.

1. Ensure they are an employee. An employee is someone who provides a contract of service or an apprentice. The distinction here are those who provide a contract for service are not employees, e.g. agency workers.

2. Check their contracts of employment and circumstances. Are they under a temporary assignment, on secondment from a subsidiary or have they recently brought an action against the employer through the Tribunal, the above are indications that an employee may not automatically transfer under TUPE.

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