HR Advice Hub

What Happens If You Get TUPE Wrong?

TUPE can be one of the more complicated areas of employment law for employers to navigate.

Sometimes it is obvious that TUPE applies. A business is sold, employees move with it and everyone involved knows from the outset that a transfer is taking place. Other situations are much less straightforward.

A contract might move from one provider to another. A service could be brought back in-house. Only part of an activity might transfer. Employees may work across several contracts. Or the outgoing and incoming employers may simply have different views about whether TUPE applies at all. Getting the answer wrong can have significant consequences for both sides of the transfer.

An outgoing employer could incorrectly assume its employees will transfer and find that it remains responsible for them. An incoming employer could incorrectly assume TUPE doesn't apply and recruit a new workforce, only to discover that existing employees should have transferred. And TUPE problems don't only arise from getting the initial question wrong. Employers can correctly identify a TUPE transfer but still make mistakes around which employees transfer, consultation, employee information, redundancies or changes to terms and conditions. So, how can incoming and outgoing employers get TUPE wrong, and what can happen when they do?

What Is TUPE?

TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations. Broadly, the regulations protect employees when the business or service they work for transfers from one employer to another in circumstances covered by TUPE.

Where TUPE applies, affected employees will generally transfer automatically from the outgoing employer to the incoming employer with their existing employment contracts, continuity of employment and associated employment rights preserved.

TUPE can also potentially apply to a service provision change. This might happen when a service is outsourced for the first time, brought back in-house or moves from one contractor to another. However, there are specific conditions that need to be satisfied. The fact that a contract or piece of work has moved from one organisation to another doesn't automatically mean TUPE applies. The circumstances of the transfer matter.

How Can The Outgoing Employer Get TUPE Wrong?

The outgoing employer – sometimes referred to as the transferor – has its own risks to consider.

Assuming Employees Will Transfer Automatically: An outgoing employer might lose a contract and assume that the employees working on it will simply move to the new provider. That isn't necessarily the case. The employer first needs to establish whether TUPE applies and, if it does, which employees are assigned to the transferring business or organised grouping. If TUPE doesn't apply, or particular employees aren't within scope, the outgoing employer may remain responsible for those employees. That could mean needing to consider redeployment, redundancy or other appropriate options rather than simply removing them from the payroll on the transfer date.

Assuming TUPE Doesn't Apply: The opposite mistake can also happen. An outgoing employer might treat the loss of work as a redundancy situation without properly considering whether employees should instead transfer to an incoming provider. That can create significant risk if the employees were entitled to transfer under TUPE.

Identifying The Wrong Employees For Transfer: It isn't always obvious who is assigned to a transferring service. Employees may work across several contracts, provide support to multiple teams or only spend part of their working week on the activity being transferred. There isn't necessarily a simple percentage of working time that automatically determines whether somebody transfers. Employers need to look at the reality of how the employee works and how the service or activity is organised.

Failing To Provide The Right Employee Information: Outgoing employers also have responsibilities around providing the incoming employer with required employee liability information about transferring employees. Incomplete, inaccurate or late information can create problems for the incoming employer and potentially expose the outgoing employer to claims.

Failing To Inform And Consult: The outgoing employer also needs to consider its obligations to inform and, where required, consult affected employees or their representatives. Employees shouldn't simply discover at the last minute that their employment is moving to another organisation.

How Can The Incoming Employer Get TUPE Wrong?

The incoming employer – sometimes referred to as the transferee – faces a different set of risks.

Assuming TUPE Doesn't Apply Because It Will Run The Service Differently: An organisation may win a contract and intend to deliver the service in a different way. That doesn't automatically mean TUPE won't apply. The incoming employer needs to understand what is actually transferring and assess the circumstances rather than assuming a new operating model removes any TUPE obligations.

Recruiting Before Establishing The TUPE Position: This can create a particularly difficult situation. An incoming employer might assume there are no transferring employees and recruit people into the roles needed to deliver the new service. If it is subsequently established that employees should transfer under TUPE, the employer could find itself with both transferring employees and newly recruited employees. The fact that new employees have already been recruited doesn't make the transferring employees' rights disappear. The employer may then have to consider its staffing structure after the transfer, potentially creating redundancy or restructuring issues that could have been avoided if the TUPE position had been established earlier.

Assuming It Can Choose Which Employees To Take: Where TUPE applies, the incoming employer generally can't simply select the employees it would prefer to employ. The question is which employees are legally assigned to the transferring undertaking or organised grouping. This is particularly important where an incoming employer believes some employees are unsuitable, expensive or unnecessary. Those concerns may need to be dealt with appropriately after the transfer rather than by simply refusing to accept the employees.

Trying To Put Transferring Employees Onto Its Standard Contracts: An incoming employer may understandably want everyone doing similar work to have the same terms and conditions. TUPE makes this much more complicated. Changes to employment terms where the sole or principal reason is the transfer are subject to significant restrictions. Employers should therefore be very careful about assuming they can simply issue transferring employees with their standard employment contracts.

TUPE Applying And An Employee Transferring Are Two Different Questions

This is an important distinction that can sometimes get missed. Establishing that a TUPE transfer exists doesn't necessarily answer the separate question of which employees transfer. There may still be a need to determine whether individual employees are assigned to the transferring undertaking or, in a service provision change, the relevant organised grouping of employees.

For example, somebody may carry out some work connected with a transferring contract but also work extensively across other parts of the outgoing employer's business. Employers shouldn't assume that everybody who has performed some work relating to the contract automatically transfers. Equally, looking only at the percentage of an employee's working time spent on a particular contract may not provide the complete answer. The actual working arrangements and organisation of the workforce need to be considered.

What If The Incoming And Outgoing Employers Disagree About TUPE?

This is where TUPE situations can become particularly difficult. The outgoing employer may say: "These employees transfer to you". The incoming employer may say: "We don't believe TUPE applies". Neither organisation determines the legal position simply by saying it does or doesn't apply. Whether TUPE applies ultimately depends on the facts and the relevant legal tests. That means both sides should engage with the issue rather than simply passing responsibility back and forth. They may need to look at:

• what activities are currently being undertaken

• how the existing service is organised

• which employees carry out the work

• whether there is an organised grouping of employees

• what the purpose of that grouping is

• what activities will be carried out after the change

• how the incoming organisation intends to deliver the service

Where the position remains unclear or disputed, specialist legal advice may be appropriate before either employer makes significant employment decisions.

Who Decides Whether TUPE Applies?

The outgoing and incoming employers will usually need to assess the circumstances and reach a view about whether TUPE applies. However, simply agreeing between themselves that TUPE does or doesn't apply doesn't necessarily determine an employee's statutory rights. Similarly, one employer cannot necessarily avoid TUPE simply by telling the other organisation that it doesn't believe the regulations apply.

If there is ultimately a legal dispute about whether a relevant transfer took place, the question can be determined by an Employment Tribunal. This is one of the reasons employers should avoid making significant workforce decisions based purely on assumptions about TUPE. Where there is genuine uncertainty, getting appropriate legal advice before making decisions can help both organisations understand their potential risks.

What Happens To Employees While Employers Argue About TUPE?

This is another reason TUPE disputes need to be addressed early. From the employee's perspective, they may have one employer telling them their employment is transferring while another says it isn't accepting them. That uncertainty can quickly damage employee relations and create practical problems around who is responsible for pay, work, communication and employment decisions. It can also result in litigation to establish what should have happened and which employer is responsible for any resulting liabilities.

What Could Happen If The Outgoing Employer Gets TUPE Wrong?

Depending on the circumstances, an outgoing employer could face:

• employees remaining employed when the business expected them to transfer

• unexpected redundancy costs

• unfair dismissal claims

• claims relating to failures to inform and consult

• claims relating to employee liability information

• disputes with the incoming employer over responsibility and costs

• employee relations issues

• significant management time and legal expense.

TUPE therefore shouldn't be treated simply as something for the incoming employer to worry about.

What Could Happen If The Incoming Employer Gets TUPE Wrong?

An incoming employer could potentially find itself:

• responsible for employees it hadn't planned to employ

• inheriting existing contractual terms and continuity of service

• responsible for certain employment liabilities associated with transferring employees

• facing automatic unfair dismissal or other claims if employees are dismissed because of the transfer

• dealing with an unexpected redundancy or restructuring situation

• facing claims relating to failures to inform and consult

• dealing with significant legal costs and employee relations problems

This is why understanding the potential workforce implications should form part of planning for a new contract or service – not something considered after the commercial arrangements have already been finalised.

Can Employees Be Dismissed Because Of A TUPE Transfer?

Employers need to be particularly cautious here. A dismissal where the sole or principal reason is the TUPE transfer itself can be automatically unfair. There are circumstances where dismissals connected with a transfer may potentially be fair, including where there is an economic, technical or organisational reason entailing changes in the workforce, commonly referred to as an ETO reason. But having an ETO reason doesn't automatically make a dismissal fair. The employer would still need an appropriate reason for dismissal and would need to follow a fair process. This can become particularly relevant where an incoming employer discovers after the transfer that it has more employees than it requires.

TUPE Isn't Just An Incoming Employer Problem

One of the biggest mistakes businesses can make is thinking TUPE responsibility sits entirely with the organisation taking over the work. Both employers have decisions and obligations to manage. The outgoing employer needs to understand whether its employees are transferring, identify the correct employees, provide the required information and manage its information and consultation obligations.

The incoming employer needs to understand who it may inherit, what employment terms and liabilities may transfer, what measures it proposes to take and how the transfer fits into its future workforce plans. And both sides need to communicate. TUPE becomes much harder to manage when organisations make assumptions independently and only discover shortly before the transfer that they have reached completely different conclusions.

What Should Employers Do When They're Unsure Whether TUPE Applies?

Start asking the question early. Ideally, potential TUPE implications should be considered as part of the planning for a contract change, outsourcing arrangement, insourcing exercise or business transfer. Establish what is actually happening, understand the employees involved and avoid making irreversible workforce decisions before the position is reasonably clear. That is particularly important before:

• making redundancies

• issuing dismissal notices

• recruiting replacement employees

• promising employees that they will transfer

• telling employees they won't transfer

• changing contractual arrangements

Where the legal position is uncertain, getting specialist employment law advice early can be considerably easier than trying to untangle the situation once decisions have already been implemented.

Getting TUPE Support Early Can Prevent Bigger Problems Later

TUPE doesn't need to become a crisis, but it can quickly become one when either the outgoing or incoming employer makes assumptions, takes action and only investigates the TUPE position afterwards. For both sides, the safest approach is to identify potential TUPE implications early, establish the facts, communicate with the other organisation and take appropriate HR and legal advice where the position isn't clear.

At BloomHR, we can support small businesses with the people side of TUPE, whether you're taking on a service or transferring one elsewhere. This can include identifying affected employees, planning employee communications and consultation, supporting managers through the transfer, managing workforce changes and helping you coordinate the HR process with the other organisation.

If you're taking on or losing a contract, outsourcing or bringing a service in-house, getting HR support early can help you manage the people side properly and reduce the risk of much more complicated problems later. Contact us for more information.