TUPE Transfers and Settlement or Compromise Agreements

Transfer of Undertakings (Protection of Employment): TUPE

Can I be made redundant if my employer changes hands?

TUPE is the acronym for an obscure law called ‘Transfer of Undertakings (Protection of Employment) Regulations 2006’. Don’t worry if you haven’t heard about it;  it’s not exactly dinner table conversation! A TUPE transfer could be, for example, a purchase of one company by another company.  TUPE is designed to protect employees against the buyer company making redundancies just because of the transfer.

Man worrying about TUPE

Top 3 Tips

  1. TUPE is a technical minefield
  2. New management often tries to sidestep the TUPE legislation
  3. Your new contract should be just as beneficial as the old one

TUPE applies not only to simple takeovers, but also to more complex situations for example regarding big clients moving between companies. If a group of employees or contractors are working exclusively for the client at company A, and then that client decides to use company B instead, those contractors can insist on joining company B if they want to. If company B refuses to employ them, the contractors will have a claim for unfair dismissal and a claim under the TUPE legislation.

When a TUPE transfer takes place, the employees of the old company should remain on the same contractual terms as they were on before. Even if the new company makes them sign new contracts, those new contracts are not valid in the eyes of the law if they are less beneficial than the old ones, and, legally, the contracts would carry on as before. The new company can get round this by offering the old employees more money or other ‘consideration’ such as improved benefits. So they can offer to pay everyone a lump sum of money or a pay rise in exchange for accepting the new, less beneficial, contractual terms.

Consultation with the employees should take place where it is a fairly large company. As with normal redundancy, Iit may be possible for the new company to offer the employees alternative employment. This may be on another site far away from where you live, but of course you have grounds to refuse any such offer. Employers often use this loophole to avoid the effects of the TUPE legislation.

Another exception to TUPE protection is where there is an ‘ETO’ reason for dismissals or redundancy. ETO stands for economic, technical or organisational reason. Examples include reasons relating to:

  • The profitability or market performance of the buyer’s business (i.e. an economic reason)
  • The nature of the equipment or production processes which the buyer operates (i.e. a technical reason) or
  • The management or organisational structure of the buyer’s business (i.e. an organisational reason)

So where these ETO reasons apply, the new company can legally make you redundant or offer you less beneficial contract terms. They are actually quite wide reasons which could well apply in a lot of corporate takeovers. As you can probably by now appreciate, TUPE is a bit of a technical minefield.

Read our article on constructive dismissal if you think your situation may give you grounds to claim for this.

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Next steps

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