How is the employee affected?

Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

These are regulations that protect employment when an employer transfers their employees to a new employer.

The most typical situation where TUPE applies is the sale of the whole of a business as a going concern. However, it's not been restricted to such a typical transaction and can be applied to a variety of situations, such as contracting out and the grant of franchises. It would not usually apply when the transfer involves selling shares to the new owner, but this is not always the case.

The position is not always clear and difficult legal issues arise from time to time.

Where a business is transferred to a new owner using TUPE and it keeps its identity, the contract of employment of the existing employees transfers automatically to the new employer on the same terms and conditions.

This also applies when services are outsourced, in-sourced or assigned by a client to a new contractor (known as a 'service provision change').

Contract of employment

Once it has been established that TUPE applies to the transfer, the employee's contract will be transferred from the old employer to the new. The employees will have the same rights against the new owner as they had against the old employer and the transfer does not affect the number of years of service they already have with the old employer.

The transfer of the contract of employment (and rights and duties under it) will not occur if the employee informs either the old or the new owner that they object to becoming employed by the new owner. In that event, the transfer will terminate the contract of employment with the old employer. The employee will not be treated for any purpose as having been dismissed by either of the old or new employers.

The new employer will not be able to make changes to employment contracts unless the sole or main reason for the change is an 'economic, technical or organisational reason entailing changes in the workforce'. Employees have the right to claim constructive dismissal if they resign because the changes are substantial and make their working conditions worse.

Dismissal and TUPE

If the employee is dismissed because of the transfer, the dismissal is automatically unfair unless it was done for economic, technological or organisational reasons causing a change in the workforce. If you can show that this, the dismissal may not be automatically unfair but will be judged by an Employment Tribunal on the ordinary principles of fairness.

Employees can start a claim against either the previous or the new employer but must have at least 2 years' service (one year in Northern Ireland) before making it. Whether the reason for a dismissal is due to the transfer is a question of fact, based on the circumstances of each case.

Further information is available from the Department for Business, Energy & Industrial Strategy guidance 'Employment rights on the transfer of an undertaking' or the similar guidance for Northern Ireland.