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When times get tough, companies will do anything to
save costs and consolidate their order books,
through outsourcing or acquisition of weaker
competitors. If this describes you, be careful. As
Robin Williams explains, there is a very unpleasant
trap awaiting the unwary.
If ever there was an embodiment of the law of unintended
consequences, then the TUPE Regulations are it. TUPE is the snappy
acronym for the Transfer of Undertakings (Protection of Employment)
Regulations 2006 (and its predecessor, the 1981 Regulations). The
objective of this legislation is the very laudable one of safeguarding
employees’ rights when there is a change of ownership of the business
in which they work, and of encouraging employee participation and
communication when these changes occur.
In reality, the way this legislation works in practice makes it a gold
and catering which were envisaged as the beneficiaries of the
medal winner in the Business Prevention event.
protection of TUPE when service providers were changed, businesses in
sectors such as IT, engineering, law, accountancy and advertising are
Thankfully, a detailed account of the birth and breadth of TUPE is
of course also caught. In earlier versions of the draft 2006 legislation,
beyond my remit here, as well as most people’s attention spans.
there was to be an exception for professional firms whereby TUPE
But at its most basic, TUPE works like this: the employees of Company A
protection would not extend to their employees, but in reality, such an
transfer to Company B when B purchases the assets of A as a going
exception would have not been fair or logical, and was scrapped. So
concern (note that TUPE does not apply to share sales). The terms of
it is now entirely reasonable to believe that the objective of protecting
their contracts of employment stay the same and the employees
vulnerable employees’ rights could now herald the demise of
retain their continuity of employment, as if there had been no sale at
outsourcing as we know it.
all. There are statutory requirements that the vendor and purchaser
consult with affected staff as to the impending transfer and any
If the prospect of gaining staff from another company when you’ve
planned changes, and the transferring employees have the right to
successfully tendered for a contract doesn’t make you flinch, then
object to being transferred. The new employer inherits all of the
how about this: taking on employees after a merger or buyout and
previous employer’s rights and responsibilities to staff, save for criminal
being liable for up to six years of unequal pay claims?
liabilities and occupational pensions, which have special rules.
A very recent Employment Appeal Tribunal decision (Sodexho v
Guteridge and others) held that employers taking on staff who have
That all sounds pretty reasonable and fairly simple on paper. But if you
TUPE’d across to them are liable for the unequal pay practices of the
have ever been involved in a sale or purchase of business assets, or
previous employer. As a result of this decision, I can see due diligence
the outsourcing of service provision contracts, then you have
procedures becoming more complicated, time consuming and
undoubtedly had the pleasure of waking up in the middle of the night
expensive than they already are, and still there is no guarantee that
in a cold sweat wondering if the entire transaction would be derailed
liability will not attach to the new employer.
because of the employment protection provisions of TUPE, and you
may wish to turn the page rather than stir up painful memories. I shouldn’t really complain about legislation which, in my view, is
seemingly designed to keep the pots of lawyers on the boil as much
What makes TUPE such a nightmare is that the regulations have such a as to protect employees, but I have seen many transactions
far reaching and, at times, illogical effect in practice, especially now scuppered over disputes relating to TUPE issues. In the current
that the 2006 Regulations provide for ‘service provision changes’ to be economic climate, it’s a pity that many viable but struggling
caught in its net. ‘Service provision changes’ include outsourcing, re- businesses will go to the wall due to the reluctance of would-be
tendering and even bringing work back in house. So we are left with purchasers to accept such wide ranging employment liabilities.
the bizarre situation whereby a company who is dissatisfied with the
work of, say, their contract cleaners, and re-tenders the work can end Source:
up with the same lousy cleaning crew they had before, as the staff will Robin Williams heads the Employment Law department
have transferred under TUPE from their old employer to the successful at PDT Solicitors of Horsham
new tenderer. Although it was mainly areas such as security, cleaning
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