While the latest data from PwC shows a 20% drop in M&A volumes for the first half of 2024 compared to the same period in 2023, the landscape is changing with a new government that has placed an emphasis on growth.

If your business is undergoing a merger or sale, or if a change is being considered as part of an outsourcing arrangement, it is essential to ensure that you consider the potential implications of the 2006 Regulations on the Transfer of Undertakings (Protection of Employment) (TUPE). . TUPE is a set of regulations designed to ensure that when a business or service changes hands, the employees affected are not left behind.

When does TUPE apply?

TUPE generally applies in one of two scenarios:

• A business sale: when a business, or part of a business, is sold as a going concern; that is, it will continue to operate and employees will be transferred as part of this sale.
• A change in service provision: in the event of a change of service provider; for example, through outsourcing or insourcing – where a previously outsourced service is brought back in-house – or through a change of contractor.

What do you need to know?

Whether you are buying or selling a business or gaining or losing a service, as an employer it is crucial to understand your responsibilities under TUPE. It is also important to maintain open communication with relevant staff to ensure they are informed and consulted if necessary about the proposed transfer. Additionally, employers should be aware of the following rights when applying TUPE:

1. Terms of employment
   One of the main aims of TUPE is to ensure that any existing terms and conditions of employment remain intact upon transfer, either immediately before or after the transfer. After the transfer, the new employer cannot change its terms of employment simply because of the transfer, but it may be permitted if the changes meet legitimate business interests.
2. Protection against unfair dismissal
   An employee is protected against dismissal solely because of the transfer unless there is an economic, technical or organizational reason (ETO) justifying it; for example, if there is a real redundancy situation. However, where the dismissal is not for an ETO reason, employees affected by a dismissal linked to a TUPE transfer may be entitled to redundancy pay and notice pay, and to assert their rights before a court for an action for unfair dismissal, subject to eligibility.
3. Transfer of responsibility
   All responsibilities transfer to the new employer, including any ongoing or potential employment-related conflicts.

The traps

Navigating TUPE can be extremely complex for businesses, but getting it wrong could result in costly employment tribunal proceedings. For example, and apart from potential reputational damage, failure to properly inform and, where necessary, consult staff exposes both the incoming and outgoing employer – on a joint and separable basis – to compensation claims. These “protection allowances” are equivalent to 13 weeks of uncapped salary for each employee concerned.

Furthermore, disagreements are common over the application of TUPE and the management of differing aims and objectives between the parties. For example, when changing service providers, a party may not want a group of employees to transfer or, in an asset sale and purchase, a buyer may insist for the seller to fire staff they don’t want and foot the bill for handling any issues. To fall.

Whether you’re selling, buying, or outsourcing a particular service, it’s essential to know the ins and outs of what’s in store.

TUPE also featured in the Labor Party manifesto. With a government focused on strengthening labor rights and proposing to extend TUPE to workers, it is essential to know the regulations, their potential implications and how to manage the distribution of legal responsibilities, and this should be part of your general policy. commercial discussions.

Omer Simjee is an employment and immigration associate at HCR Law.