When a business is bought, or a new contract starts, often employees transfer across. This transfer is governed by the TUPE regulations (Transfer of Undertakings (Protection of Employment) Regulations) and there are a number of legal requirements that must be met. Amanda Lennon explains.
When does TUPE arise?
The most common situations where TUPE will arise in the construction sector are when a client outsources services to a contractor for the first time; where a new contractor wins the work for a client from an existing contractor; and where a client brings the services back ‘in-house’ from a contractor. These situations are known as ‘service provision changes’.
TUPE will also apply where one company buys some or all of another company, and the employees in that entity or business unit transfer from one employer to another.
Our company has won a contract to provide maintenance services to a client. 50 employees are employed on this contract by the current provider. What are the employees’ rights in this situation?
It is likely the employees are covered by TUPE, so they will have the right to transfer to your company on their existing terms and conditions, with their continuity of service intact. They have the right to continue in their current roles when they join your company, unless you can demonstrate there are economic, technical or organisational reasons for making changes to that population (mainly redundancies). If you dismiss an employee because they’ve transferred to your company under TUPE, their dismissal is automatically unfair.
It is therefore crucial for contractors tendering for contracts involving employees providing the service to do their due diligence in advance and understand their potential liabilities, including the employment costs transferring.
“As well as protecting employment rights, TUPE requires both the outgoing and incoming employers to meaningfully consult with the employees on what’s happening.”
What information should my company provide in this situation?
As well as protecting employment rights, TUPE requires both the outgoing and incoming employers to meaningfully consult with the employees on what’s happening. As the incoming employer this means working with the outgoing employer to ensure the employees receive any information they will need to continue their employment with your company, such as how you will honour their terms post-transfer, any changes in arrangements such as pay dates, new line managers and non-contractual policies, and if you’re intending to reorganise their work.
You should also arrange training and inductions for them as you would for any new joiners. If you can build a good relationship with the outgoing employer or client, you should be able to start these preparations before the contract transfers to your company.
You will also need to provide a ‘measures’ letter to the outgoing employer in good time before the transfer (to enable the outgoing employer to properly consult the impacted employees). This should explain any changes your organisation proposes to make to the employees’ terms, ways of working, place of work, pay dates, hours of work, redundancy proposals for any impacted employees, and anything else that will affect the employees because of the transfer.
My company has been unsuccessful in retendering for a contract we have with a client and a new contractor has been appointed to provide the service instead. What happens to the employees?
Those employees will likely be covered by TUPE, such that they are entitled to transfer to the new contractor on their existing terms and conditions, with their continuity of service preserved. As the outgoing employer in this situation, your organisation has some specific obligations to comply with under TUPE.
You will need to inform and consult the employees in good time before the transfer date (ie the date the new contractor takes on the service) about the fact the transfer is taking place, when it will happen and why, how the transfer will impact the employees (eg changes in location, pay date, hours, any redundancies proposed by the incoming employer), the number of agency workers you employ in the service and the type of work they do (if you use agency workers).
“If your company does not properly consult, the employee representatives can make a claim for up to 13 weeks’ actual pay per employee, which either the outgoing or incoming employer could be liable to pay.”
Your obligation is to inform and consult staff representatives of the impacted employees – they will either be a recognised trade union or existing employee representatives. If there are none, you will need to arrange an election to elect employee representatives to consult with. If no representatives are elected during that process, you should consult the employees individually.
‘Inform’ means explaining the facts of the transfer and providing the above information to the employees. ‘Consult’ means requesting, considering and responding to feedback from the impacted employees/their representatives on the arrangements and effect of the transfer, with a view to reaching agreement.
If your company does not properly consult, the employee representatives can make a claim for up to 13 weeks’ actual pay per employee, which either the outgoing or incoming employer could be liable to pay.
You must also send the incoming employer ‘employee liability information’ at least 14 days before the transfer date. This includes the employees’ employment contracts, details of disciplinaries and grievances, tribunal claims and other matters which the incoming employer will be responsible for post-transfer, to enable them to assess their liabilities.
Amanda Lennon is employment partner at Spencer West.
