Employees’ Rights in Case of a Transfer of Undertaking
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE“) applies to employees when either: a business or asset is transferred from one entity to another; or there is a change of identity in an entity providing a service (e.g. outsourcing). The effect of TUPE is that all employees “assigned” to the economic entity or activity will transfer to the transferee (i.e. the successor). In addition, the transferor’s (i.e. the original employer’s) rights, powers, duties and liabilities under the employment contracts of those employees who are transferring, transfer to the transferee.
The transferor and transferee have a duty to inform and consult with “appropriate representatives” (generally trade union representatives or representatives elected from the affected employees) of “affected employees” about the facts and implications of the transfer. Employers that breach this duty may be liable for up to 90 days’ pay for each “affected employee”. Finally, subject to certain exceptions, dismissals are automatically unfair if the sole or principal reason for dismissal is the TUPE transfer unless there is an economic, technical or organisational reason entailing changes in the workforce.
Requirements for Predecessor and Successor Parties
Both the transferor and the transferee (predecessor and successor) have an obligation to inform and, if appropriate, consult with appropriate representatives in relation to any of their own employees who may be affected by the transfer or any “measures” (any step, action or arrangement) taken in connection with the transfer. The duty to consult only arises if the employer envisages taking measures in relation to the affected employees. Certain information must be provided to the appropriate representatives long enough before the transfer to enable consultation to take place.