Transfer of Undertakings
TUPE

Employee representatives must be notified of the transfer in advance and must be consulted with respect to any proposals which may affect employees. Failure to consult entitles those employees concerned to compensation of up to 13 weeks pay each. Where an employee is not represented by a union, then should no other representative be available, a representative will have to be elected. However, businesses with fewer than 10 employees are not required to invite the election of representatives for consultation purposes if no existing arrangements are in place.

An employee who is dismissed, if the sole or principal reason is the transfer, may bring an employment tribunal claim for unfair dismissal. The claim must be brought within 3 months of the date of dismissal. The dismissal will be deemed automatically unfair if the sole or principal reason for the dismissal is the transfer, unless the employer can show that it pertained to a genuine economic, technical, or organisational (ETO) reason.

Under TUPE, an employee has the right to resign and claim constructive dismissal should the transfer involve a substantial change to their terms and conditions of employment to their material detriment, if the sole or principal reason for the changes is the transfer. What amounts to ‘substantial change’ and ‘material detriment’ is a matter for the tribunal to determine given the facts of the case.

Terms and conditions from collective agreements may be renegotiated after one year provided that overall the contract is no less favourable to employees, and in certain situations contractual changes arising from new collective agreements agreed by the outgoing employer are not required to be incorporated after a transfer.

Where the previous employer had an occupational pension scheme, the new employer must provide pension provision post transfer. They can choose whether this is a money purchase scheme, a final salary scheme, or a stakeholder scheme. Should they opt for a money purchase or a stakeholder scheme, then the new employer must match employee contributions up to a maximum of 6%. However, where they opt for a final salary scheme, then the scheme must either comply with the statutory reference scheme test as set out in the Pensions Scheme Act 1993 (s.12A) or provide identical benefits to those provided by the previous employers scheme.