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30.10.2019

TUPE or not TUPE?

If you’re looking at buying or selling a business that employs workers, you’ll probably have heard of TUPE or the TUPE Regulations.

TUPE is the acronym by which the EC Protection of Employees on Transfer of Undertakings, Regulations 2003 are better known.

When are the TUPE Regulations applicable?

When a business that employs people is transferred from one employer to another, the TUPE Regulations apply.

How do the TUPE Regulations affect the purchase of a business?

If you plan to buy a business, the TUPE Regulations impose a legal obligation on you to take any employees that are in the seller’s business.

Under the TUPE Regulations, the employees you acquire as part of the purchase will automatically take their accrued service with them. This is along with the terms and conditions of employment they enjoyed with their previous employer.

If your existing employees work under very different terms and conditions of employment, you will need to assess the viability of having two separate employment contracts in place across your new workforce.

The terms and conditions these employees work under must also be factored into your purchase price. If you don’t intend to continue to employ all members of staff in the business you’re buying post-acquisition, the cost of making them redundant must be taken into account.

How do the TUPE Regulations affect the sale of a business?

The other principal compliance requirement under the TUPE Regulations is the obligation of the seller. They must inform and consult employees about the sale to a new owner no later than 30 days before the date of the transfer.

The seller must inform employees of:

  • The date or proposed date of the transfer.
  • The reasons for the transfer.
  • The legal, economic and social implications of the transfer for employees.

Terminating employment

The TUPE Regulations make it illegal to terminate employment as a result of a transfer. Any dismissals linked to the transfer of a business are automatically void.

Employees can only be dismissed for ‘economic, technical or organisational reasons’. Any such dismissals stand a better chance of being justifiable if they are made subsequent to the transfer. The buyer must also have taken time to assess the viability of the new combined workforce of both existing and acquired employees.

As discussed above, any such economic, technical or organisational dismissals will be deemed to be redundancies and the associated costs could be significant for the buyer.

Changing terms and conditions of employment

Under the TUPE Regulations, the buyer of a business will only be in a position to change terms and conditions of employment if the transferred employees agree to the proposed changes.

Again seeking the new employees’ agreement to new terms and conditions of employment should only take place after the transfer has completed.

Conclusion

If you are buying a business with employees, it’s vital to make sure you have made a full enquiry into the status of employees in the selling business before deciding to complete the purchase.

If you don’t make a full enquiry into the employee situation, you could be landed with the seller’s employee liabilities under the TUPE Regulations.

Buying or selling a business? Speak with an expert on 01 886 0350 to see how the TUPE Regulations influence the transfer. You can also complete a contact form to receive a callback.

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