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TUPE - Transfer of Undertakings Protection of Employment
Protection to employees’ rights following a transfer of a business has been part of UK law since 1981. Whilst TUPE derives from European law, the protection afforded by the UK Government goes further in protecting employee rights.
TUPE is designed is to protect the employees employment rights if a business, in which they work, is sold to another business. Its purpose is, in a legal sense, to move employees along with any benefits and any liabilities associated with them from the original employer to the new employer.
TUPE is relevant when there is a;
- transfer of a business or undertaking Reg 3(1)(a) TUPE; or,
- transfer of part of a business or undertaking Reg 3(1)(b) TUPE
- transfer of an economic entity that retains its identity - a business transfer.
This transfer process involves three elements;
- an economic entity
- a transfer of an economic entity; and
- the economic entity retaining its identity following the transfer
A transfer of an ongoing business entity is a traditional limb A business transfer under Regulation 3 (1) (a) of TUPE. UK legislation also provides for service provision changes which are known as limb B and this situation applies when a client is engaging a contractor to carry out work on its behalf, re-assigning such a contract or bringing the work back “in house”. These circumstances are all defined as service provision changes and fall under Regulation 3 (1) (b), TUPE.
The sole aim of TUPE is to protect employee rights on a transfer of a business or part of a business.
TUPE is procedural in that there are strict rules and regulations which if breached can result in penalties to the party who fails to comply. TUPE requires the seller of the business or the outgoing service provider to provide Employee Liability Information (“ELI”) to the buyer or incoming service provider under Regulation 11 of TUPE. TUPE also requires both parties to the business transaction to either inform the staff if there are to be no changes whatsoever or to consult with staff representatives prior to completion if any changes or measures are envisaged under Regulation 13 of TUPE.
TUPE does not apply to share sales but it would apply to a transfer of assets carried out before a share sale or a transfer to a different part of a business following a share sale.