The sale or purchase of a business is a hugely complex matter. There are a multitude of considerations, one of which is the effect of a business transfer on the employees.
When a business changes hands there are strict and complex legal requirements surrounding the transaction, in terms of how employees should be dealt with and it is vital that these are observed – failure to deal with employees properly could result in costly legal claims. These rules are set out in the Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”).
TUPE applies to employees of businesses in the UK and the size of the business doesn’t matter.
When TUPE applies:
• Employees’ jobs usually transfer over to the new company – exceptions could be if they’re made redundant or in some cases where the business is insolvent
• Employment terms and conditions transfer
• Continuity of employment is maintained
There are two types of transaction which cause TUPE to apply:
1. The sale or purchase (or “transfer” of a business)
2. A service provision change involving a change in the provider of a service (such as outsourcing, insourcing or the change of a contractor)
In either circumstance, employees are entitled to protection under TUPE and employers are required to follow the rules set out in the TUPE regulations in relation to their employees.
This is where a business or part of a business moves from one employer to another. This can include mergers where 2 companies close and combine to form a new one.
The identity of the employer must change, to be protected under TUPE during a business transfer.
Service provision changes
This is when:
• a service provided in-house (eg cleaning, workplace catering) is awarded to a contractor
• a contract ends and is given to a new contractor
• a contract ends and the work is transferred in-house by the former customer
Only the employees who can be clearly identified as providing the service being transferred are protected.
Under the TUPE regulations there are extensive consultation and information requirements for an employer, therefore we recommend that you obtain legal advice if you find your business in one of the above situations.
How we can help
Our highly experienced team of employment law specialists can offer you all the support and guidance you need to ensure that your business’ interests are protected. We can also provide draft letters and documents to provide to your employees if necessary.
If you would like more information or just want a confidential, no obligation chat about your options, contact our highly experienced team today.