All your current TUPE questions answered

As part of our series of webinars to support our clients during the current pandemic, on 25 June 2020 we hosted a webinar looking at the impact of COVID-19 on TUPE transfers.

Whilst the COVID-19 crisis is ongoing, businesses are now beginning to re-open workplaces and think about their needs both on a short, medium and longer term basis.

In anticipation of this and in order to continue supporting our clients during this difficult time, we are running a series of webinars to offer practical advice for those now contemplating the next phase of managing their businesses during the current situation.

This was our third session in this series and focused on the impact which COVID-19 is having on TUPE transfers. The key takeaway points are set out below:

Key principles of TUPE

• The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) apply where there is a relevant transfer being the transfer of a business (whole or part) and/or a service provision change.
• Where TUPE applies, it has the effect of automatically transferring the employment of those employees assigned to the business or service which transfers on their existing terms and conditions of employment with all the rights, liabilities and obligations in relation to them.
• There are restrictions on the new employer’s ability to change the contractual terms of employees who have transferred to them under TUPE.
• Transferred employees also have enhanced protection from dismissal in connection with a TUPE transfer. In particular, dismissals will be automatically unfair if the sole or principal reason for the dismissal is the transfer itself. If, however, there is an ETO reason then the dismissal will only be potentially unfair.
• There are information and, in some situations, consultation obligations on employers in respect of any of their own employees who may be affected by the TUPE transfer. In particular, certain information must be provided to appropriate representatives long enough before the transfer to enable the outgoing employer to consult with those representatives. However, the duty to consult will only arise where the employer envisages taking measures in respect of the affected employees. A failure to comply with these obligations exposes the parties liable to pay compensation up to 13 weeks’ uncapped pay.
• An outgoing employer is required to provide certain employee liability information to a new employer not less than 28 days before the relevant transfer takes place.

TUPE and furlough

• From 1 July 2020 employers can only claim from the Job Retention Scheme (“scheme”) in respect of employees who were first furloughed on or before 10 June 2020. This could present difficulties for a new employer which inherits employees under TUPE after 10 June.
• However, the HMRC guidance on the scheme confirms that it is possible for a new employer to place employees who have transferred across to them in the context of a business transfer onto furlough leave and to claim for them under the scheme, provided that the outgoing employer has previously placed them on furlough leave prior to 10 June 2020 and claimed for them under the scheme. Confusingly, it does not seem as though this is possible in the context of a service provision change.
• However, just because the outgoing employer placed employees onto furlough leave, this does not prevent a new employer from ending that furlough leave and bringing the employees back to work where there is a business need to do so. The new employer should follow any agreed notice provisions, or provide reasonable notice where there are no agreed provisions, when asking employees to return to work.
•  Where an outgoing employer has previously “topped up” the grant received under the scheme so that employees on furlough leave have received their full pay, the new employer will have to check how any such arrangement was agreed and whether it is contractual in nature. If the agreement is contractual then the new employer will have to honour those terms following the transfer.
• Consultation on a potential TUPE transfer can take place with union or employee representatives even if they are on furlough leave. It would seem logical to assume that consultation with individual employees on furlough leave is also permitted although the HMRC guidance does not explicitly deal with this issue.

The impact of insolvency on TUPE transfers

• Some of the fundamental TUPE employment protections are relaxed where the outgoing employer is insolvent. The extent of this is different depending on whether the insolvency is terminal (designed to liquidate the assets) or non-terminal (designed to rescue the business).
• For example, with a non-terminal insolvency some of the outgoing employer’s debts in respect of the employees will not transfer and there is some flexibility for the new employer to make changes to terms and conditions following the transfer but only where the changes are agreed in writing with employee representatives and affected employees receive an advance copy of what is proposed.
• In addition, in the context of terminal proceedings the normal TUPE rules do not apply so that employees will not automatically transfer to the new employer and dismissals by reason of the transfer will not be automatically unfair.
• Where a company is in administration, it is possible for the administrators to place employees on furlough leave and claim for the grant under the scheme. However, it is expected that an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers in light of, for example, an anticipated sale of the business. It is worth noting that making an application under the scheme or paying the grant to employees, will result in the administrators adopting the contracts of employment.