The Transfer of Undertakings (Protection of Employment) Regulations 2006 came into force on 6 April 2006, replacing the Transfer of Undertakings (Protection of Employment) Regulations 1981. Bridget Wood from Tarlo Lyons explains the implications.

TUPE was originally designed to protect the jobs of employees on the sale of a business, but with time came to apply to outsourcing. TUPE is one of the most complex areas of employment law, and so it will be a challenge for employers to get to grips with the changes to TUPE.

Six months on from the implementation of the new TUPE Regulations, this article is a reminder of the effect and implications of the key changes the new Regulations introduced and provides tips on how to protect your company's interests in TUPE situations.

The key changes

• New provisions extending the scope of TUPE to service provision changes: it is now clear that TUPE covers situations where services are outsourced, taken back in-house or passed to a replacement service provider.

• A new obligation on the outgoing employer to supply information about transferring employees to the incoming employer by providing "employee liability information" at least two weeks before the transfer occurs.

• A new joint liability for failure to inform and consult employee representatives about a TUPE transfer.

• Clarification of how employers may lawfully dismiss employees or change terms and conditions of employment in connection with a TUPE transfer.

• New special provisions that make it easier for insolvent businesses to be transferred to new owners:
  • some of the outgoing employer's pre-existing debts to transferring employees will not pass to the incoming employer; and
• the waiver of restrictions on varying terms and conditions of employment (subject to certain conditions) when a business is insolvent.

Practical tips

• Make sure that the application of TUPE is anticipated in outsourcing agreements and that you cover not only what happens on commencement of the service provision, but also what happens when the services are taken back in-house or taken over by a replacement service provider.

• Include appropriate, specially drafted indemnities in outsourcing and asset sale agreements, including:
  • indemnities from the outgoing employer to the incoming employer against pre-transfer liabilities;
  • indemnities from the incoming employer to the outgoing employer against post-transfer liabilities and relevant pre-transfer liabilities such as failure to provide information on measures envisaged; and
  • a warranty from the outgoing employer that the information supplied about transferring employees is complete and accurate or an indemnity for any loss suffered by the incoming employer as a result of such information not being complete and accurate. Make sure you have considered carefully which contingent workers and temps may be deemed to be covered by TUPE.

• Make sure, if you are the incoming employer, that you provide information to the outgoing employer about any measures you envisage taking in relation to the transferring employees to try and avoid being joined in any action for failure to inform and consult. If you are a replacement service provider, think carefully about the practicalities of ensuring that the outgoing supplier receives this information and ask the client to help.

• Where necessary, deal with who carries out any resulting dismissals of employees and the apportionment of the associated risks and costs and add suitable provisions to your agreement.

• Avoid claims arising by making sure that dismissals are fair by being for an "economic, technical or organisational reason entailing changes in the workforce" (an "ETO reason") and after following fair procedures including redundancy procedures if the dismissals are by reason of redundancy.

• If you are the outgoing service provider and you do not want to lose valued employees like key project managers to the customer or replacement service provider because they will transfer under TUPE when your contract comes to an end, remind valued employees that they can object to transferring under TUPE and can then be redeployed within your business. If you are the customer who is taking the services back in-house or replacing the service provider, the potential loss of key staff who are vital to the successful running of services can be dealt with by ensuring that your agreement contains provisions that tie in key personnel in the last few months of a contract and oblige them to assist in a handover. So this could be a win-win situation, although customers should guard against suppliers cherry-picking star performers and dumping in poor ones during the notice period and build safeguards into the outsourcing agreement to prevent or restrict this type of practice.

• Harmonisation of terms and conditions of employment of transferred employees with those of your existing workforce is not permitted. Only change terms and conditions of employment of transferring or transferred employees if this is for a reason not connected with the transfer, an ETO reason or where you are making changes to the terms and conditions of other members of the workforce, although remember the special provisions for insolvent businesses.

• If you have standard business sale or outsourcing agreements, make sure that the TUPE provisions, particularly those relating to what happens on termination of an outsourcing agreement, are reviewed in light of the new Regulations.

• If you are a party to an existing outsourcing agreement, consider whether the TUPE provisions relating to exit need amending or even whether provisions need to be added. This is an area which is often overlooked.

• Remember that since April 2005 the incoming employer has been obliged, to a certain extent, to match the occupational pension scheme arrangements of the outgoing employer.
  

Bridget Wood, Tarlo Lyons

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