Legal Article - Employment Law

What do the Regulations require?

The new employer (transferee) takes over liability in respect of the contracts of employment of all employees who were employed by the previous employer (transferor), or those employed in the part of the company transferred (including “assigned” employees), immediately before the transfer and of any persons who would have been so employed if they had not been unfairly dismissed for a reason connected with the transfer.

Thus, TUPE does not apply to
• Those who do not work in the undertaking (or part)

• Employees lawfully transferred out of the undertaking (or part) prior to the transfer

• The self employed.

The transferee is bound by all the terms and conditions of the contracts of employment of the employees transferred including associated liabilities (e.g. accrued holiday pay, unfair dismissal compensation, liability to pay damages for industrial injury and redundancy pay i.e. if the transferor makes employees redundant because the transferee says it does not want to employ them, the transferee would be responsible for the redundancy payments).

This means that even if prior to the transfer the employees agree with the transferee changes to their terms and conditions of employment when the transfer takes place, they can change their minds immediately after the transfer takes effect and insist on retaining their original terms and conditions of employment.

The only rights and obligations which do not automatically go across are

• Liability for pre-transfer dismissals entirely unconnected with the transfer (e.g. dismissal for misconduct prior to the transfer being completed)

• Criminal liabilities

• Occupational pension rights which relate to benefits for old age, invalidity or survivors.

Thus the exclusions would not apply to provisions in pension schemes dealing with “non-pension matters” such as redundancy payments, or an employer’s obligation to contribute to a personal pension. It is probable that the transferee may have to provide “broadly comparable terms”.

The new employer also takes over any collective agreement made on behalf of the employees, which is in force immediately before the transfer and the recognition of any independent trade union.

However, the new employer will be in exactly the same position as the existing employer in deciding whether they wish to continue to operate such a collective agreement or trade union will automatically lapse if the transferred business does not continue to have an identity distinct from the remainder of the new employer’s business.

Employees in the old employer (transferor) can object to their contracts of employment automatically passing over to the new employer. This will be treated as a resignation and the employee will have no redundancy or unfair dismissal rights.

If this resignation is linked in any way to anything other than the mere change of the identity of the employer, then the employee may be able to claim constructive unfair dismissal.

Published: 27 May 2011


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