Business Law & Compliance

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Legal Q&A: Selling or buying a business under TUPE

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Businesses often think that TUPE doesn’t apply to them – but it does, to companies, public sector sector organisation and charities of any size.

TUPE is the name commonly used to describe the Transfer of Undertakings (Protection of Employment) Regulations 2006, which protect the employment contracts of individual employees. It applies when the business (or part of it) that employs them transfers to a new employer, or when services are outsourced, assigned to a new contractor or brought in house. The Regulations preserve employees’ rights and protect them from dismissal before or after a transfer.

The most common questions businesses ask during that process, and their answers, are:

Our business is planning to buy part of another business, but we want to run it using our own existing employees. Can we agree with the other business that they keep their employees or make them redundant?

No. You cannot contract out of a TUPE transfer as it happens by operation of law. If the business acquiring part of the other business is a relevant transfer, the employees engaged in that undertaking will automatically transfer to the acquiring business. If the other business makes them redundant, the acquiring business could be liable for unfair dismissal.

Our business is taking over the services that our client currently outsources to another service provider and we plan to provide the services from our existing resources. Can we avoid the outgoing provider’s employees transferring to our business?

No. If the business is taking over the provision of outsourced services from another provider and it is a relevant transfer, the employees engaged in that undertaking will automatically transfer to the acquiring business. You could, however, agree with your client that they will contribute to the cost of these new employees or that they will contribute to any resulting redundancy programme.

The business is going to receive a TUPE transfer of employees from another business. The other business has a poor employee relations record, am I right in assuming that after the transfer the employees would only be able to bring a claim against their old employer?

No. When an employee transfers under TUPE to another business, the new business acquires responsibility for past, present and future liabilities. So, if a transferred employee has a potential claim against their former employer for discrimination, they could bring that claim against the new business. When entering into any transaction that involves (or could involve) a TUPE transfer to the business, it is sensible to secure an indemnity from the other party against liability arising from the former employer’s period of employment.

Related topic: Buying a Business

Julie Sillito is a solicitor at Riverview Solicitors.

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