Transfers — the basic legal rules

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are intended to protect the rights of employees on the transfer of the business that employs them where that transfer results in a change in the identity of their employer.

TUPE is likely to be triggered by business sales, mergers, inter-company reorganisations, outsourcing, insourcing (taking business back in-house) and changes in contractor.

The regulations are designed to preserve the continuity of employment of employees of the transferring organisation as well as their contract terms. This protection extends to those who would have been employed had they not been dismissed immediately before the transfer for a reason connected to the transfer. There are special rules relating to pensions.

Changes to contract terms connected to the transfer can be agreed, as long as they are for an economic, technical or organisational reason (often referred to as an ETO reason) “entailing changes in the workforce”. It is worth noting that courts have interpreted this wording restrictively, to cover only changes to the numbers employed or to the functions performed by employees. In particular, “harmonisation” — the practice of changing contracts simply to bring them into line with those of the existing workforce — is unlawful.

There is no time limit beyond which TUPE protection no longer applies. However, in practice, the more time that passes, the greater the likelihood of an employer being able to show that a change was unrelated to the transfer.