TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. These regulations come into play when a business changes hands, whether through a sale, merger, or outsourcing of services. These rules ensure that employees transfer seamlessly to the new employer with all their existing contractual terms intact and with their continuity of service preserved.

When does TUPE apply?

TUPE regulations may apply in two main scenarios:

1. The Sale of a Business (or part of a business)
2. Service Provision Changes (i.e. when outsourcing services)

For anyone interested in buying or selling a business, understanding TUPE is essential, not just to preserve employee rights, but to avoid hefty penalties (up to 13 weeks’ pay per employee) and the potential reputational damage that may arise from non-compliance.

Will TUPE apply to the Sale / Purchase of my business?

When buying or selling a business, it is important to consider the structure of the transaction, as this structure will affect whether or not TUPE regulations will apply.

• Share Sales
  In a share purchase, the buyer acquires the shares of the business. The employer remains the same legal entity, so there’s no TUPE transfer.
• Asset Sales
  TUPE is more likely to apply when the transaction involves the sale of assets, such as premises, contracts, or equipment and those assets amount to an ‘economic entity’ that retains its identity post-transfer.

For more information on Share Sales vs Asset Sales, see Preparing for the Sale of Your Business: Share Sale vs Asset Sale.

Example Scenarios

• A school decides to outsource its in-house catering service to a third-party provider. The kitchen staff currently employed by the school are likely to transfer to the new provider under TUPE. (TUPE Applies).

• A company sells one of its retail branches to another business. That branch continues to operate in the same way, selling the same goods to the same customers. The staff at that location are likely to transfer to the new employer under TUPE. (TUPE Applies).

• An investor buys 100% of the shares in a software company. Although there is a change in ownership, the company itself (as the employer) continues to operate and employ staff. (TUPE does not apply).

I’m selling my business, what does TUPE mean for me?

Once you have determined that TUPE will apply to the sale, it is important to comply with your duties under the regulations.

Until the transfer takes place, you remain as the employer, and will be required to:

• Identify affected employees.
• Inform and consult affected employees, explaining the facts of the transfer, and discussing the employees’ views.
• Share employee information with the buyer. Including:
  • Employee names and ages
  • Disciplinary and grievance history
  • Details of ongoing or potential legal claims

I’m buying a business, what does TUPE mean for me?

If you are buying a business and have determined that TUPE regulations will apply to the sale, you must:

• Accept that employees will transfer over retaining their; contracts, pay, benefits, and length of service.
• Avoid automatic unfair dismissal. Terminating employees because of the transfer (without a fair reason) is unlawful.
• Inherit responsibility for any claims or obligations relating to transferring employees.

Key Takeaway

TUPE is a highly technical area of employment law, but one that can have serious implications for both buyers and sellers. If you’re planning a business transfer and aren’t sure whether TUPE applies, or how to manage it, our HR and legal experts are here to help.

Get in touch with the experts at [email protected] or call 0333 888 1360 for tailored advice.