Transfers - the law

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 employer’s identity. 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 and contract terms of employees of the transferring organisation. TUPE also protects anyone who is dismissed because of the transfer immediately before it takes place. There are special rules about pensions.

• Important changes have been made to TUPE, affecting all transfers on or after 31 January 2014. These changes reduce the protection that TUPE provides to employees. They make it easier and quicker for transferees to change terms and to carry out dismissals for transfer-related reasons. For more information about these changes, see LRD’s booklet, TUPE — a guide to using the law for union reps, published in February 2014 (www.lrdpublications.org.uk/publications.php?pub=BK&iss=1706).

Key developments

• On the transfer of an insolvent business after an insolvency practitioner has been appointed, the state guarantee of key employment debts (up to the statutory cap) will only cover debts that were already owed by the insolvent business on or before the transfer date. Any new debts incurred after the transfer date are owed by the owner of the new business (case 3).