A ‘relevant transfer’ – ie a transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply – occurs when:
- an economic identity is transferred from one business to another- ie is sold as a going concern and retains its identity after the transfer – this is known as a business transfer
- a client engages a contractor to do work on its behalf or reassigns such a contract, including bringing the work in house – this is known as a service provision change
An economic entity is defined as an organised grouping of resources, eg a grouping of employees and assets, such as premises and computer equipment, that pursues an economic activity. Some transfers will qualify as both a business transfer and as a service provision change, eg outsourcing a service will often meet both definitions.
TUPE applies equally to relevant transfers of large and small businesses, and to public and private undertakings. This means there would be a relevant transfer if you sold your business or partnership or if your business bought and operated another business.
Note that TUPE generally applies to second and subsequent transfers of the same undertaking. This means that, if you sell a business or part of a business that you previously bought or relinquish a contract that you previously took over, the employees you took over will now transfer to the new employer.
Not all transfers are relevant transfers. TUPE does apply when:
- A client buys in services from a contractor on a one-off basis – rather than the two parties entering into an ongoing relationship for the provision of the service.
- There is a transfer by share takeover. When a company’s shares are sold to new shareholders, there is no transfer of the business – the same company continues to be the employer.
- A business transfers assets only, eg if equipment is sold.
- There is a transfer of an undertaking situated outside the UK – although similar provisions apply in the European Union.
- There is a change of business identity, eg if the work or organisational structure changes radically.
Whether TUPE applies in any particular case depends on all relevant circumstances. In the event of a dispute, only an employment tribunal or a higher court can decide this.
Where TUPE applies, existing employees of the undertaking transferred automatically become employees of the person who takes it over.
If you think you may become involved in a transfer situation to which TUPE applies, you should consider obtaining legal advice, as the legislation in this area can be complex.