As a small-to-medium-sized enterprise, there are two main ways to grow in size. The first is to expand by increased sales or productivity, the second is buy another company’s assets.
Companies planning on the second option need to be aware of the obligations of The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).
What is TUPE?
TUPE covers the employment rights of all employees affected by a transfer/acquisition of a business referred to in the regulations as an "undertaking". The Transfer of Undertakings (Protection of Employment) Regulations protect the rights of employees when an organisation or "going concern", is transferred to a new owner. The legislation is very complex so it is always it is advisable to seek legal advice. There are, however, a few general guidelines to consider.
The effect of the legislation
Everyone employed within the business being bought at the time of the transfer is protected. The new employer will not be able to choose whom to take on, nor will it be able to alter employees’ terms and conditions without creating a liability. All of the rights and obligations on the business being bought will also transfer, apart from criminal liability and some occupational pension scheme rights and obligations. Dismissal of an employee due to the transfer would be automatically unfair unless it can be argued that the dismissal was due to economic, technical and organisational reasons.
Economic, Technical and Organisational (ETO) defence
Dismissing an employee by can only be justified if it is a proper redundancy, which is not in connection with the transfer itself. An economic defence could include a reduction in demand for the organisation’s services/products therefore jeopardising the sustainability of the organisation. Technology in the new organisation could require skills that the transferred employees do not possess. But it is vital that training is considered to reduce the impact of the potential knowledge gap.
Lastly, organisational reasons could include a new location that is not practical for the transferred staff. Even if an ETO defence can be reasonably justified, the implementation of the dismissal must be fairly and reasonably carried out. Always seek professional advice in these circumstances.
The need to consult
This regulation also demands that the original employer consults and informs its staff and their union representatives or employees’ representatives about the transfer. There is no set period for the consultation but the sooner it is completed the better.
Issues that must be conveyed to the workforce include:
The existing workforce must also be informed about the transfer and how it might affect them.
Harmonisation of benefits
It is understandable that an organisation would want to harmonise all of the benefits that it provides in order to reduce the administration costs. But this is a very sensitive area and can only be done is through negotiation with the individuals involved.
Regardless of the type and size of the transfer, it is crucial to involve the workforce. They are the key to a successful integration.
Mike Grasar is consultant at Kingston Smith's HR consultancy
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