Business transfers, takeovers and TUPE
Transfers of employment contracts
Under TUPE, the new employer takes over employees’ employment contracts, including:
- all the previous terms and conditions of employment
- any failures of the previous employer to observe employees’ rights (so employees could make a claim for discrimination against the new employer, even if it took place before the transfer)
- holiday entitlement
- period of continuous employment - an employee’s start date is the same as before the transfer, so continuous employment is not broken
- any collective agreements previously made
It’s a breach of contract if the new employer does not meet the terms of the employment contract.
If an employee does not want to work for the new employer
Employees can refuse to work for the new employer. This is the same as resigning - they will not normally be able to claim unfair dismissal or redundancy pay.
Notice is not required. The employee simply tells the employer, or the new employer, before the transfer happens. Employment then ends at the time of transfer.
If an employee’s working conditions are significantly worse because of the transfer, they can object to the transfer, or resign and claim unfair dismissal.
Changing an employment contract
TUPE regulations mean employees should not lose their existing employment rights.
Before the transfer
If the employer knows an employee is transferring to another company, they cannot normally change the employee’s terms and conditions to make them the same as those of the new company - even if the employee agrees to the change.
After the transfer
The new employer cannot change an employee’s terms and conditions if the reason is the transfer itself.
The new employer can change an employee’s terms and conditions if the reason is an ‘economic, technical or organisational reason’ (ETO) involving changes in the workforce or workplace, such as a result of redundancies or a move from a managerial to a non-managerial position. The employee needs to agree to this change.
‘Economic’ reasons are to do with how the company is performing.
‘Technical’ reasons are to do with the equipment or processes the company uses.
‘Organisational’ reasons are to do with the structure of the company.
Employers can make changes if the employee’s existing contract allows for those changes. But the transfer itself cannot be the reason for change.
Positive changes
Employers can improve employees’ terms and conditions if they agree. For example, they might want to increase the amount of holiday so that it’s the same for everyone.
An employer cannot normally impose changes - they have to be agreed by the employees or their representatives.
Dismissals
Employers can dismiss employees for an ETO reason involving changes in the workforce, for example redundancies. The normal rules around fair dismissals will still apply.
Collective agreements
Collective agreements in place before the date of the transfer will apply.
Collective agreements from the date of transfer will not apply if the new employer has not taken part in the process.
Employers can renegotiate terms and conditions in collective agreements after 1 year if the change is not less favourable to the employee.
Pension rights
Employees’ company pension rights earned up to the time of a transfer are protected, but the new employer does not have to continue an identical pension.
After the transfer
When the transfer is complete, employees should make sure they get an up-to-date written statement of employment, giving the name of the new employer and saying that their terms and conditions have not changed.
Employees might get a P45 if their tax records are being updated.