Help! TUPE applies to my transaction, what next?
What happens next will depend on whether you are the transferee (new provider or purchaser) or the transferor (outgoing provider or seller). Either way, both parties will need to give consideration as to what will happen post-transfer, and how this will affect the transferring employees as well as any other employees employed by either party.
If you are inheriting employees as part of a TUPE transfer, we can assist you in ensuring that appropriate due diligence is carried out so that you know about (and can potentially mitigate) any red flags. Transferors are required to provide “Employee Liability Information” (often referred to as ELI) 28 days before the transfer or where this is not possible, as soon as they can. The information that a transferor has to provide under TUPE is fairly limited, and accordingly, if you are the transferee we can assist you in making further enquiries.
Duty to inform
Whether you are the transferee or transferor, the duty to inform (and in some circumstances, to consult) arises when a TUPE transfer will affect your employees. This includes the employees that will transfer, but also those who will be left behind and/or will be welcoming new colleagues. The fact of the transfer is sometimes commercially sensitive, nevertheless the duty to inform employees still remains. As such, timing can be really important and we can assist you in preparing a communication strategy which allows you to comply with your legal obligations, keep matters confidential, and ensure that employee morale is taken into account.
Duty to consult
You are required to consult with your employees (or specially elected representatives if there are 10 or more affected employees) when there are measures (i.e. changes) proposed as a result of the transfer. For example, a change of premises. Something as fundamental as a change in premises is an obvious example, however you will also need to think about more subtle changes, such as a change to the date that payroll is run, or when the company’s holiday year runs from and to. We can assist you in preparing letters to your employees informing them of the fact of the transfer, to invite them to elect representatives (if relevant) and notifying them of any proposed measures.
One of the most common mistakes that companies make on a TUPE transfer is a failure to give consideration to the practical, day-to-day issues which may arise post-transfer. Examples include informing transferring employees how to access a new premises, or sorting out P45s and payroll in good time. These matters often get lost amongst the exciting corporate aspects of the deal, but can be really important to ensure that a smooth transaction takes place. We can be on hand to ensure that these things are given due consideration in good time before the transfer.
Getting TUPE wrong
The bottom line is that if TUPE is applied incorrectly, it can result in liabilities for both the transferee and transferor. The worst case scenario would be failing to apply TUPE correctly and dismissals were made as a result, which could result in claims of automatically unfair dismissal. An employee who is able to successfully argue that they were unfairly dismissed as a result of TUPE will be eligible to receive a “basic award” (currently capped at £15,750) and potentially a “compensatory award”, which is capped at £86,444 or one years’ gross salary, whichever is lower.
There are also separate and specific penalties imposed by the regulations for failing to inform and consult. A failure to comply with these obligations exposes the parties liable to pay compensation equivalent to up to 13 weeks’ uncapped pay. The transferor and transferee may, in certain circumstances, be held to be jointly and severally liable for this
This note is part of a series of notes on TUPE prepared by solicitors in our employment team. Please see the other notes for more information, or contact Claire, Rachael or Rebecca if you have any queries.