(1) Outgoing employer must inform and consult with staff
Employers involved in a business transfer must inform appropriate representatives of the affected employees of the transfer and any measures proposed, and must consult on any proposed measures. Certain specified information must be provided to the representatives long enough before the transfer to enable the outgoing employer to consult with them about it.
If there are any changes or proposals for changes following the transfer, these measures will have to be discussed with the representatives of the affected employees The incoming employer is required to provide the outgoing employer with information on proposed measures to allow the outgoing employer to comply with its duty to inform and consult. There is no set timetable for consultation, but the larger the transaction and the more staff affected, the longer the timetable will need to be.
If there is a failure to inform and consult, a complaint can be made to the Employment Tribunal. If successful, the Tribunal can award whatever compensation it considers just and equitable having regard to the seriousness of the employer’s failure up to a maximum of 13 weeks pay per affected employee. Information and consultation failures can result in joint and several liability between the outgoing and incoming employers, although the contract governing the transfer can cater for apportionment of liability here.
(2) Outgoing employer must provide employee liability information to incoming employer
The outgoing employer has a duty to provide the incoming employer with written details of the transferring employees (including identity, age, particulars of employment, disciplinary and grievance records, employee claims and collective agreements) together with all associated rights and liabilities that will transfer. This information must be given not less than 14 days before the transfer, although in practice the incoming employer will aim to attain this information much earlier.
If there is a failure to comply with this duty by the outgoing employer, the incoming employer can apply to the Tribunal for compensation which will be assessed with regard to the losses suffered with a minimum award of £500 per employee.
A failure to comply with TUPE could therefore expose employers to claims large enough to undermine the entire transaction.
What other practical steps can you take to protect your business from the effects of TUPE?
Although there is nothing anyone can do to prevent TUPE applying (it is not possible to contract out of TUPE), there are steps which both the outgoing and incoming employers can take to divide up TUPE liabilities contractually between them. Whilst under TUPE employment liabilities connected to the transferring employees will always transfer to the incoming employer (so employee claims should always be made against the new employer), the parties can still agree contractually to divide up the liabilities between them in a different way. This ought to be done by means of contractual indemnities. If this is something you think would be useful for your business, you should always take specialist legal advice.
TUPE in insolvency
Finally, TUPE is relaxed to protect incoming employers where the exiting employer is insolvent. The liability for redundancy, notice and some other payments to employees will not transfer to the incoming employer. Also, if it is agreed with the trade union or employee representatives, terms and conditions of employment can be changed (without an ETO) if the change is designed to save a failing business. The idea is that companies will be more inclined to ‘rescue’ insolvent businesses, thereby safeguarding employment, where the inherited liabilities are not so onerous.