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TUPE and Outsourcing

The purpose of TUPE (short for the Transfer of Undertakings (Protection of Employment) Regulations 2006), is to protect the rights of employees if the business they are employed by transfers ownership. 

The effect of TUPE is to transfer the rights and liabilities of employees from the old employer to the new employer by operation of law. 

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When Does TUPE Apply?

TUPE applies where there is a “relevant transfer” which is usually where employers:

  • sell our buy part or all of a business as a going concern (known as a “business transfer”); or
  • outsource a service (e.g. where services transfer from the company to an external contractor); or a subsequent outsourcing event (e.g. where services transfer from the first external contractor to a different external contractor); or insourcing (e.g. where services transfer from an external contractor back in house). These three scenarios are known as a “service provision change”.

The question of exactly when TUPE does and does not apply can be very complex. If you think a transaction you are involved in might be covered by TUPE you should always take specialist legal advice.

Obligations Under TUPE

Depending on whether you are ‘losing’ or ‘receiving’ employees under a TUPE process, the obligations under TUPE will differ greatly.  TUPE imposes strict legal obligations on the parties to provide information and consult with any affected employees about the transfer.  Failure to comply with TUPE obligations can result in significant liabilities such as an award of up to 13 weeks' pay for each affected employee and compensation for any unfair dismissal, unpaid wages, bonuses or holiday pay (amongst other claims).

Navigating your way through applying TUPE and moving through the process can be complex, and the cost of getting it wrong can be significant. if you are involved in a TUPE process, please speak to one of our team of expert employment lawyers who would be delighted to help.

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