Following the confirmation that sale terms have been agreed, all the staff will automatically transfer to the buyer under the provisions of the Transfers of Undertakings (Protection of Employment) Regulations 2006 (Tupe).
Tupe implements European laws designed to protect employees whose contracts of employment are in effect transferred to a new employer who takes over all or part of the business of the old employer.
In the UK, the Tupe provisions have been enhanced even further than the original European (EU) laws so that UK employees have even greater protection than in many EU member states. That means protection will apply not only where there is a business transfer but also where there is a service provision change that might involve no assets being purchased. Brexit has made no difference to this protection.
Tupe preserves most of the rights of the employee and duties of the employer as they were under the contract with the original employer. This includes the obligation to continue all the contractual benefits, with the one notable exception being in relation to occupational pensions, which is subject to other statutory protection.
Generally, Tupe provides that the employees have the right to retain their existing terms and conditions of employment and any changes to contractual benefits will be void if the reason is the transfer. Certain changes can be made though, where an insolvent business is transferred that would otherwise have been prohibited.
However, even where this greater flexibility applies there are conditions when making such changes and agreement must be reached with representatives before contractual benefits are removed.
In relation to the benefits that are not contractual – while changing these might not normally give an employee grounds for a breach of contract claim – in a Tupe situation special protection applies and the employees might have the right to resign and claim constructive dismissal on the grounds that the changes are a detriment to their working conditions.
There is also enhanced protection against dismissal as any dismissal of an employee with two years’ service or more will be automatically unfair where the sole or principal reason for the dismissal is the transfer.
However, where the sole or principal reason for the dismissal is an ‘economic, technical or organisational’ (ETO) reason, the dismissal will be only potentially unfair. While there is no statutory definition of this term, it has been held that it must be concerned with the day-to-day running of the business.
In order to be able to rely on an ETO reason the employer must also show that it entails changes in the workforce. This could include a change in the location, the number of employees or the functions performed by the employee.
In the event that an ETO reason did lead to a dismissal it is likely that the employee will be entitled to redundancy pay, and as the terms of any contractual redundancy scheme will have been transferred across to the new employer, the employee should be entitled to the same payment as dismissed by the original employer, so they should be in no worse a position.
Avril England is an employment partner at Gateley Legal