The TUPE Regulations are a highly complicated set of regulations which serve a fundamentally simple concept, when a business or a part of a business is sold, the employees engaged in that business transfer with it as if there had been no change in ownership.
Unfortunately the complicated nature of the business world means that the TUPE Regulations themselves become extremely complicated when put into practice. Below we set out some of the key implications for you in buying your business and what to look out for.
When is there a TUPE Transfer?
A TUPE transfer occurs where there is a sale of a business assets or a part of a business (for example a division or a team). Importantly TUPE does not apply to a share sale.
What Does TUPE Do?
When there is such a transfer the TUPE Regulations operate so as to transfer all of those employees ‘assigned’ to the business which is transferring.
Whether an individual is ‘assigned’ is ultimately a factual question based on multiple factors such as their duties and how they complete their role. We are often asked what percentage of time a person must spent working in a part of a business for TUPE to apply? Unfortunately there is no set answer other than when someone spends 100% of their time working within that part of the business (in which case TUPE will invariably apply) or 0% (in which case it wont apply).
For any assigned employee their employment will transfer to the buyer in it’s totality. They will be entitled to receive the same salary, the same benefits, the same level of seniority, the same holiday entitlement etc. They are to be treated as if they have always been your employee.
TUPE then provides additional protection in that it prohibits you from treating the employees less favourably because of the transfer, from dismissing them because of the transfer and from adjusting or amending their terms and conditions other than for an ‘economic technical or organisational’ (ETO) reason – see below.
Can I stop a TUPE transfer happening?
Generally no you cannot.
The employee themselves is entitled to be informed and consulted about the proposed transfer and may then sign an ‘objection letter’. This confirms that they do not wish to transfer to your business. The effect though of this is that the employee’s employment ends at the point of the transfer and they forfeit any right to notice pay or redundancy pay etc. Very few employees object as a result.
Once the transfer has occurred you may potentially be able to dismiss the employee if there is an ETO reason for the dismissal. This would usually be because of a duplication in roles and there being a need for a redundancy (for example if you are the Managing Director and buy another business with another Managing Director you probably would not want 2 Managing Directors). You are though required to comply with the general unfair dismissal rules such as a requirement to undertake full redundancy consultation. This may require consultation with your own staff as well as the incoming staff.
What information am I entitled to?
Under TUPE the seller is required to provide you with ‘employee liability information’. This includes details such as the employee name, their job title and duties, their notice entitlements, holiday entitlements and other key information about their role. You are not entitled to see copies of their employment contracts, although these are often provided by the seller.
This information must be provided at least 28 days prior to the transfer.
If the seller fails to do so or provides information which turns out to be inaccurate you may be able to sue them for any losses which you suffer as a result.
Once you have this information you are required to write to the seller and confirm any ‘measures’ which you envisage requiring after the transfer. This may be proposed redundancies, changes to payroll dates etc. This should be provided as soon as practicable to allow for meaningful consultation about the proposed changes.
Integration of staff
One of the biggest challenges most buyers face is with the integration of the staff once the transfer has taken place. It is a critical step if you are to fully maximise the opportunities open to you now that you have purchased the business and is often overlooked or left to HR staff who are still struggling to get the basics in place such as payroll etc.
It is vital therefore that in planning the purchase you prepare a plan for integrating the staff and your processes and procedures once you have bought the business and take advice accordingly to ensure that it is a success.
Summary
Buying a business is a big step for anyone and it is vital that you get the staffing situation correct as it can have significant financial implications, both in terms of potential penalties and claims but also the degradation of the business you are buying if the key people leave and take their skills, knowledge and contacts with them.
Nockolds’ team of Employment Lawyers and HR Consultants specialise in helping buyers make a success not only of the transaction but also the integration of staff once the purchase is completed. Please do contact our team on 0345 646 0406 or fill in our online enquiry form to discuss how we might help.