by John Page, Hackney TUC Secretary

Business takeovers: your employment rights (TUPE)

This article aims to explain the legal protection afforded to employees when their employment is transferred to a new company.

What protection exists?

The relevant law is contained within the Transfer of Undertakings (Protection of Employment) Regulations, also known as TUPE. The broad aim of TUPE is to prevent contrived ‘redundancies’ and arbitrary changes in terms and conditions when ownership of a business (or part of it) transfers. However, the law is complicated and this guidance is therefore designed to give a broad overview only.

As a trade union member, if you are subject to a business transfer, you will have the benefit of a representative to negotiate on your behalf and in circumstances where members do transfer, it is usual to seek to negotiate protection over and above the statutory minimum.

Objectives of TUPE

Broadly speaking, the TUPE Regulations have the effect of transferring the contract of employment, unchanged, from one employer to the other. The employee maintains continuity of service and all statutory employment protection rights. However, the protection is not comprehensive, and in particular, pension rights are excluded. As a trade union member, your union will seek to protect your interest through applying its experience in this field to supplement the protection of TUPE through consultation with the prospective employer.

The terms and conditions covered by TUPE will generally comprise contractual rights and collective agreements.

Contractual items

These include, for example: hours of work, rates of pay, holiday entitlement, and individual flexible and home working arrangements at the time of transfer.

Collective agreements

Where there is a collective agreement between the current employer and the employees’ trade union, covering negotiations on pay and other conditions of service, representation rights and disputes procedure, it will transfer to the new employer.

Any variation of collective agreements following the transfer is subject to collective bargaining in the normal way. However, it is only when the content of a collective agreement is incorporated into an individual contract that it becomes legally enforceable. Collective agreements which are incorporated into individual contracts vary from company to company. However, these will typically include: discipline and grievance procedure, equal opportunities policies, poor performance procedure, maternity and sick pay.

Some employment policies, which are not expressly incorporated into the contract, may not be covered by TUPE. This is a grey area, and whether a policy transfers or not will depend on the circumstances of each case. This ambiguity often occurs where the policy is not expressly written into the contract, but is a long-standing practice which could reasonably be assumed to be contractual. To prevent uncertainty, trade union negotiators will seeks to reach agreement, in advance of any transfer, as to which terms and conditions are considered contractual.

Policies that may not be contractual and therefore may not be covered by TUPE can include: conduct rules, travel policies, share/stock purchase, long service recognition and subsidised restaurants.

Pensions

Pension arrangements are not protected by TUPE. However, precisely because TUPE provides a framework for consultation, most companies will share information about what is proposed in terms of future provision. This is an area of huge concern for trade unions and their members, and trade unions will often negotiate pension provisions which are equivalent to the pension benefits prior to transfer.

When does TUPE apply?

Broadly speaking, TUPE applies when ownership of the whole or a part of a business transfers and as a consequence of that transfer, the workforce find that they have a new employer. For example, TUPE can apply when there is a merger, where catering or IT services are ‘outsourced’, or where one part of a business is sold off to another company.

Most changes of ownership of a business, which occur within the UK, will give rise to a TUPE transfer of employees. However: ‘Offshoring’ will not give rise to a TUPE transfer.

The legal duty on information and consultation

TUPE places certain legal obligations on employers. It is within this framework of obligations that trade unions seek to reach agreements that will secure the future wellbeing of their members. Obligations on the employer include requirements to:

(a) provide information on
• the fact that a transfer will take place
• when it is likely to happen
• the reason for it
• the legal, social and economic implications for employees
• whether the employer intends to take measures in relation to staff and, if so, what these are

(b) consult the union about any measures to be taken in relation to the employees. Consultation must be ‘with a view to reaching agreement’, and the employer must consider and respond to any representations put forward by the union. This legal framework places trades unions in a strong bargaining position in relation to those issues covered by TUPE, but also allows us to raise wider concerns, for example over long-term job security, business viability, and most crucially, pension rights.

Duration of TUPE Protection of Terms and Conditions

There is no stipulated timeframe on the protection of TUPE terms. An employer can for ‘economic technical or organisational’ (ETO) reasons legitimately seek to change otherwise protected contracts of employment. An ETO means the reason must be connected with future conduct of the business as a going concern. Case law has demonstrated that it is particularly hard for an employer to ‘harmonise’ terms and conditions in a way that undermines the transferring employees.

TUPE aims to protect employees from adverse changes resulting directly from the transfer, but does not seek to give them protection over and above that which would have existed if there had not been a transfer.

Any proposed changes in terms post-transfer will be subject to the usual process of collective bargaining. The most effective strategy to protect and enhance existing terms is through building an effective union presence. This involves developing a relationship of trust with the new employer where possible, and concentrating on old-fashioned recruitment and organisation.

Protection of Terms and Conditions – Variation of Contract

An employer cannot post-transfer waive an employee’s TUPE rights and employees cannot agree to vary their own contract terms, if the effect is to deprive them of TUPE rights.

However the situation is more complicated when individuals are induced to sign contract variations on the basis that the benefits appear to them to outweigh the loss of TUPE rights. This sometimes happens at the instigation of the receiving employer, who may offer tangible (eg increase in salary) or speculative (eg share options in the new company) benefits in lieu of terms surrendered.

If such offers are made (for example to harmonise terms and conditions with other employees in the new company), employees should not sign up without clear advice from their union. This advice should be formulated after consideration of the legal issues and in the light of your union’s experience of TUPE situations.

TUPE: in summary

We can see from the above that TUPE offers workers some protection when they are transferred to a new employer. TUPE protects employment rights indefinitely against a transfer-related change. In particular, harmonisation downwards - ie. reducing workers’ pay or conditions to those of the worst-off – cannot be lawful.

But the law is complicated, and workers’ rights are limited. The employer can simply wait and then institute a 'reorganisation' for a business, technical or organisational reason and argue that it was not related to the transfer (although there are obstacles to them doing that).

Often, an employer (or the government if your transfer is privatisation arising from a government policy) will tell you that you have nothing to worry about because TUPE will protect your rights. Do not believe them!

Often, transferring to a new employer is bad news for workers. This is particularly the case when the ‘transfer’ is in fact privatisation. When you are moved from a public employer to a private one, your job becomes part of a company which operates for profit rather than for public service, meaning that your new employer has a fundamental interest in making you work harder for less reward. Privatisation also usually means that the workforce is divided up, so your former workmates no longer work for the same employer, which in turn makes it harder to organise collectively to defend your rights, pay and conditions.

Many workers who have been privatised have subsequently been transferred again and again. We know of railway workers who spent decades working for British Rail, who have worked for six different employers since privatisation, and have lost rights – especially pension rights – at every transfer.

That is why campaigning against privatisation is a priority for trade unions. And why the best protection for any worker being transferred to a new employer – whether through privatisation, or private-to-private takeovers – is to be a member of a strong and effective trade union.

For reports of campaigns against privatisation, click on ‘against cuts and privatisation’ in the ‘Issues and campaigns’ box on the right-hand side of this page.

PS. There is a special government policy document in relation to public sector transfers. You can link to it here. This provides significant but not complete pensions protection.