Is there really a risk that TUPE might be sailing off into the ‘sunset’?
The Retained EU Law (Revocation & Reform) Bill, which is currently rumbling through the House of Lords, will lead to the removal of EU-derived secondary legislation at the end of this year unless it is specifically preserved – the so-called ‘sunsetting’ provisions. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is one of the significant pieces of employment legislation which would be vulnerable to removal.
Under TUPE, when a business or part of a business is sold, employees assigned to the business (or the part of it) being sold become employees of the new owner on the same contractual terms they had before the transfer and with their continuity of employment preserved.
What would happen to employees on business transfers if TUPE was revoked?
- Employees assigned to the business that had been bought would remain employed by the seller. Their employment would not transfer.
- The seller would have no use for them (having sold the business that they were assigned to) so they would be at risk of redundancy (with the seller being on the hook for full redundancy costs)
- The buyer, by contrast, would have bought a business but with no trained workforce to run it!
The absence of TUPE creates a situation that neither party will want. In practice, what happens to employees would become a matter for negotiation between the parties and would need to be recorded in the corporate documentation. Considerations would include:
- An obligation on the buyer to offer jobs to the seller’s employees and the terms of those offers.
- A plan for dealing with any employees who choose not to take-up the buyer’s offer of employment including any obligation on the seller to redeploy; and
- An agreement for who will bear redundancy costs.
In terms of steps to be taken now, it is probably best to sit tight and wait to see the Government’s position. If a sale or purchase is likely in the coming months, you should advise management of the current uncertainty and the advantages of completing any business sale or purchase before the end of December 2023.
If you are providing HR support on a sale or purchase which may take place after this date you should advise those negotiating the corporate documents that alternative provisions should be included to deal with what will happen to employees if TUPE is revoked and not replaced.
Adrian Fryer, Partner & Head of Employment
t: 0151 224 0539