Top TUPE TipsPosted in : HR Updates on 16 December 2015
We have been informed that our readers love a little ‘how to’ list, and some top tips on TUPE, to relieve some of the pain associated with this least favourite of topics.
The Transfer of Undertakings (Protection of Employment) and Service Provision Change Regulations (collectively known as TUPE) may be one of the most complex pieces of legislation to affect HR practitioners and Employment Lawyers alike, but we promise that in our experience this should not mean that they need to be approached with too much anxiety. Like all things, we can make life so much simpler with a bit of planning and some template documents to hand.
We have summarised the key points you need to be aware of when contemplating a sale, purchase or service provision change that comes under TUPE.
1. Does TUPE apply and to whom?
A very simple, but essential starting point is to establish whether TUPE applies and then if it does apply, identifying to whom. Broadly speaking a ‘relevant’ transfer will apply to a service provision change (like in-sourcing, outsourcing or changing of a contractor) or a transfer of an economic entity, e.g. in the sale of a business. An ‘organised grouping’ (even if only one person is transferring) should be assigned to the work which will transfer and as a rule of thumb will spend at least 50/70% of their time on the activity which will transfer. There is usually an indication in the tender request of service provision change documents about whether there is already an understanding that TUPE may apply, but often you will be left to establish that as the potential transferee organisation. If there is any doubt, it is a good idea to seek professional HR or Legal advice on whether the regulations do apply and which employees it will apply to.
2. Follow a plan & prepare documents
There are a number of stages associated with a TUPE transfer, and these require careful planning. ACAS have helpfully provided a process plan in their new TUPE guide which splits each part of the process up for both the outgoing (transferor) and the incoming (transferee) organisation. These stages are set out in a plan which you can follow under the headings of:
- Stage 1. Before committing to a transfer
- Stage 2. Preparing for the transfer
- Stage 3. The transfer
- Stage 4. After the transfer
Early on in the process of communication between organisations a number of questions will be posed. It is a good idea to be on the front foot if you are transferring out employees to prepare anonymous ‘data room’ information which gives enough information to a potential incoming organisation to assess the viability of taking on the identified employees. The template should detail all basic pay and benefit information and include basic terms, without revealing information that would allow an employee to be identified. The data room information can be shared as part of tendering process for service provision changes or during sale negotiations. As an incoming (transferee) organisation it is a good idea to make clear what information you will need to make a reasonable assessment. In addition, you will be entitled to do ‘due diligence’ which is more in depth (once the contract is awarded or purchase agreed) and may request ELI (Employee Liability Information), although the outgoing (transferor) organisation may delay providing this until 14 days prior to a transfer date in NI.
We recommend that a detailed due diligence questionnaire and ELI pro-forma are sent as early as possible so that the incoming (transferee) organisation can establish differences which exist in terms and conditions as early as possible and communicate any ‘measures’ they propose taking for Economic, Technical or Organisational (ETO) reasons as early as possible. The ACAS new guide to TUPE contains good samples of ELI and Due Diligence documents but beware that there are some differences in the TUPE legislation between NI and GB and so the LRA guide should be used for main content.
Employees will automatically transfer to the new employer on the same terms and conditions and related contractual rights. The majority of the liabilities in relation to these will also pass across to the new employer, so it is important that indemnities are included in any sale and purchase or similar agreement to reflect how these risks have been apportioned by agreement between the parties. This process will involve legal input to ensure that financial risk is minimised.
The core purpose of TUPE is to protect employees from losing their jobs or their right to certain terms and conditions in the event of a transfer. Dismissal of staff for a reason connected with a transfer is automatically unfair, unless the dismissal is for an economic, technical or organisational (ETO) reason connected with a change in the workforce in terms of numbers or skills.
This most commonly applies when there is a duplication of skills leading to redundancies. In this case the transferee will communicate to the transferor organisation that ‘measures’ such as redundancy are likely so that these may be communicated and consulted upon at the earliest opportunity. Changing terms and conditions for a reason connected with the transfer is also prohibited and any such changes will be deemed void by the Courts, unless these are for an ETO reason. Redundancies should not be actioned until after the transfer date. It should be noted that separate consultation regulations apply to ‘collective’ redundancy consultation of 20 or more and failure to do so can be very costly (see tip 6). A small word of caution, while ETO reasons are broad, the application of these should be very carefully considered and justifiable.
Both the transferor and the transferee organisations have duties in respect of consulting with affected employees. There is a duty to consult with all staff affected by the transfer and not just those that are transferring. Information is provided in writing to staff representatives and the organisations will consult with staff on any proposed ‘measures’ as a result of the transfer, such as potential term changes or redundancies. If staff do not have elected representatives, they must be given the opportunity to elect representatives. If they choose not to, then the notification and consultation can be carried out individually.
The incoming (transferee) employer is obliged to advise the outgoing (transferor) employer of any ‘measures’ they are proposing in relation to transferring staff, so as to enable the outgoing employer to consult with their staff properly. There is no obligation on either employer to consult with the other employer’s staff, they only have to consult with their own. However, it is often sensible for both employers to get together and draw up a communication and consultation strategy jointly, as, in practice, TUPE transfers go smoothly www.thinkpeople.co.uk when people are kept informed about what is likely to happen to them and when they understand why.
Failure to consult in good time before the transfer can result in hefty tribunal awards per individual affected, not just those transferring, but to all staff affected, so this can give rise to a sizeable liability. Consultation is a critical part of the exercise and it is important to consult properly to avoid liability, as well as to ensure the process is accepted by the affected staff.
Failure to consult now carries joint and several liability, which means that either the old and/or the new employer can be liable, depending who is at fault. If the new employer fails to give information on measures to the old employer, so that the old employer is unable to consult properly, the liability will fall on the new employer. The old employer also has to provide specific Employee Liability Information to the new employer. This will be part of what is normally acquired during any due diligence process in relation to a sale and purchase. Under TUPE this needs to be provided at least 14 days before the transfer or as soon as possible after that. The new employer potentially has a claim against the old employer for failure to do so, although in practice this arises rarely.
Once the employees have come over into the business then the relevant process needs to be carried out, if ETO redundancies need to be made. If 20 or more dismissals are proposed, different collective consultation regulations come into effect. The sanction for failure to consult in these circumstances is up to 90 days pay per person, so this is something that all employers who are embarking on a relatively large TUPE exercise must be aware of.
It is likely in all TUPE scenarios that employees having transferred will have different terms and conditions to a degree and there will be a question about how these can be aligned. Harmonisation for the sake of it is not permissible, whereas changes in terms and conditions for ETO reasons, or for reasons unrelated to the transfer which would have happened anyway for example, a business re-organisation or restructure at some point after the transfer are permissible.
There is no rule as to how long is long enough for changes to be unrelated to the transfer. In practice, individuals may be prepared to agree to terms that they consider more favourable, but an employer must be careful to make it clear in any new contract that if any employee then decides they wish to return to any of their old terms, which they would be entitled to under TUPE, however they would then have to give up all the new terms otherwise employees would be able to cherry pick the more favourable terms from either contract.
8. Cultural Integration
The very best TUPE transfer management takes a whole ‘change management’ approach to transfers. This takes into account the natural resistance to change that employees will feel and the fear that they often can harbour of the unknown. Inevitably there will be cultural differences and changes in expectations and norms that new people may have a hard time adjusting to. A very slick approach involves working with the transferor organisation to allow one to one meetings and group information sessions with the new employer which will aim to strip away any fears about the new organisation and underline the positive aspects to the transfer including, if relevant, training opportunities, personal development and some advantageous terms and benefits. Following transfer it is good practice to have a ‘transition plan’ in place which is supported by training to allow new people to be inducted and begin to ramp up their ability to perform well in the new setting with very clear guidance and expectations set.This article is correct at 18/12/2015
The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.