they were not dismissed by reasons of redundancy.
If such employees bring a successful claim for
unfair dismissal and/or breach of contract then
the Employment Tribunal will decide on joint and
several liabilities between the transferor and
transferee.
Employees that object to the transfer.
These employees will be paid arrears of wages
and pay for holidays that have already been taken
but not paid from the National Insurance Fund.
Statutory redundancy payments, compensatory
notice pay and pay in lieu of accrued, but untaken
holiday will not be paid, as the employees have not
been made redundant, but left employment of their
own accord.
Where the transfer is before the Insolvency.
No payments will be made for arrears of wages or
holiday pay out of the National Insurance Fund to
employees who transfer or those who are unfairly
dismissed. Such a transfer will be treated as a
normal solvent transfer and Regulation 8 will not
apply.
It is important to note that the Secretary of State
will only assume liability for those debts owed at
the date of the transfer or, if earlier, the date on
which the employee was automatically unfairly
dismissed for a transfer related reason. The
Secretary of State’s liability would differ depending
on whether the employees were dismissed before
or after the transfer.
Summary of when TUPE provisions apply?
Administration, Administrative Receivership
and Voluntary Arrangements are covered by
Regulation 8(6). Employees automatically transfer
to the transferee and have special protection
5
against dismissal (Regulations 4 and 7). Certain
debts do not transfer to the transferee and are
paid out of the National Insurance Fund (Regulation
8(5)) and permitted variations to the contract apply
(Regulation 9).
CRANFIELD
Bankruptcy, Compulsory Liquidation and
Creditors’ Voluntary Liquidation are covered by
Regulation 8(7). Employees do not automatically
transfer to the transferee and do not have special
protection against the dismissal. Regulations
4 and 7 of TUPE do not apply. Employees are
entitled to statutory payments out of the National
Insurance Fund. Permitted variations do not apply
and the transferee is not subject to restrictions on
changing terms pursuant to Regulation 4.
Members’ Voluntary Liquidation and other
types of Receiverships are not deemed to be
insolvency proceedings and therefore Regulation 8
will not apply and normal TUPE rules apply to the
relevant transfer of a business.
TUPE
An overview
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Many directors when facing the insolvency of
their existing company consider starting again
Please contact
Tony Mitchell or Brett Barton at Cranfield
Business Recovery on 024 7655 3700 for
further advice.
Youell House, 1 Hill Top, Coventry CV1 5AB
E-mail: [email protected]
by setting up a new company and employing
some or all of the same people that worked in
the former business. Before setting up a new
company or business however directors need
to be aware of The Transfer of Undertakings
(Protection of Employment) Regulations 2006
(“TUPE”).
This guide gives a brief explanation of some of
This guide outlines the legal provisions relating to the TUPE
regulations and is no substitute for legal advice. Cranfield Business
Recovery Limited accepts no responsibility for the use of the
information set out herein.
the provisions of TUPE, when the Regulations
will apply and the consequences if they are
relevant.
This
document
is
for
guidance
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purposes only and any director considering
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company should seek their own specific legal
6
taking over a business from an insolvent
advice.
When does TUPE apply?
Informing and consulting employees
terminal proceedings under Regulation 8(6).
TUPE applies to a relevant transfer of a business,
undertaking or part of a business or undertaking by
a transferor to a transferee where there is a transfer
of an economic entity that retains its identify (this is
known as a business transfer) (Regulation 3(1)(a)).
Both the transferor and the transferee have an
obligation to inform and (if appropriate) consult
with recognised trade unions or elected employee
representatives (if there is no recognised union) in
relation to any of their own employees who may be
affected by the transfer or any measures taken in
connection with it. Information must be provided
to the appropriate representatives long enough
before the transfer to enable the appropriate
representatives to consult with affected employees
about it.
Terminal proceedings are where the transferor
is the subject of bankruptcy or any analogous
insolvency proceedings which have been instituted
with a view to the liquidation of the assets of the
transferor and which are under the supervision of
an insolvency practitioner (Regulation 8(7)).
A failure to comply with these obligations could lead
to the parties paying each relevant employee 13
weeks uncapped pay, for which the transferor and
the transferee may, in certain circumstances, be
held to be jointly and severally liable.
Such employees will be paid out of the National
Insurance Fund up to the statutory limits and in
respect of the period before the insolvency, for
arrears of wages and pay for holidays that have
already been taken. The employees will not receive
statutory redundancy payments, pay in lieu of
accrued but not taken holiday entitlements or
notice pay, as they have not been dismissed. The
transferee will still be responsible for any residual
contractual debts.
TUPE does not apply to the transfer of shares.
Automatic Transfer of Contracts of Employment
Where there is a relevant transfer, the contracts
of employment of those employees employed
by the transferor who are subject to the relevant
transfer automatically transfer to the transferee
on their existing terms. The principle applies to all
employees who were employed by the transferor
immediately before the transfer, or who would have
been employed if they had not been dismissed.
It is important to note that employees who object to
the transfer do not transfer to the employment of the
transferee. Their contracts of employment terminate
by operation of law on the transfer date.
Can the Transferee change the Terms of
Employment?
As the transferee takes on the transferring
employees on their existing terms, any subsequent
changes to the employees’ terms of employment
will be void if connected with the transfer.
Protection against dismissal
The TUPE Regulations provide enhanced protection
against unfair dismissal. Any dismissal of an
employee with at least one year’s service (for
those employees recruited after the 1 April 2012
the continuity of service will need to be two years)
will be automatically unfair if connected with the
transfer.
2
Insolvent businesses
Regulation 8 covers the position where if at the
time of a relevant transfer the transferor is subject
to relevant insolvency proceedings. Regulation 8
differentiates between non terminal proceedings
(Regulation 8(6)) and terminal proceedings
(Regulation 8(7)).
What are “relevant insolvency
proceedings”?
TUPE defines “relevant insolvency proceedings” as
insolvency proceedings which have been opened
in relation to the transferor not with a view to the
liquidation of the assets of the transferor and
which are under the supervision of an insolvency
practitioner. The Court of Appeal in 2011 in the
case of Key2Law (Surrey) LLP v De’Antiquis held
that Administrations can never be insolvency
proceedings which have been instituted with a view
to the liquidation of the assets of the transferor
and therefore will fall under the provisions of non
3
What payments will be made by the
Secretary of State for pre-existing employee
debts?
Employees that transfer to the transferee
Employees that are dismissed for an economic,
technical or organisational reason
Such employees will be considered to be redundant
and they will be paid redundancy payments, arrears
of wages, holiday pay (including accrued untaken
entitlement) and notice pay out of the National
Insurance Fund.
Employees that are unfairly dismissed because of
the transfer
These employees will be paid arrears of wages
and holiday pay (up to the statutory limits and in
respect of the period before the insolvency) from
the National Insurance Fund. They will not be paid
statutory redundancy payments and notice pay, as
4