The Transfer of Undertakings (Protection of Employment) regulations are often shortened to the acronym TUPE. These rules basically state an employee’s rights follow a business to any new owner.
TUPE in detail
The TUPE rules are designed to protect employees. If a company goes into Administration and business the sells all the employee rights for the continuing business transfer to the new owner. This includes rights to redundancy, arrears of pay an unpaid holiday. The new owner takes on this responsibility automatically.
This often blocks the sale of a business where employee have built up long term substantial redundancy rights.
A well meaning director of a failed business must be very careful not to start up again and have the employee rights move with them – stopping the employees from claiming from the Government Redundancy Payment Service (“RPS”). The RPS will pay arrears of wages, redundancy, holiday and notice pay on insolvency but not if the business is just transferred.
Strangely TUPE does not normally apply in a liquation.
TUPE also applies to solvent business sales or part business sales. TUPE even applies if just a department is moved; for example, if the work of a County Council department is outsourced the rights of employees transfer and follow to the new owner.
We always recommend taking legal advice when buying a business to make sure that TUPE is clearly understood.