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TUPE is a more commonly used acronym for the legislation that covers a situation when one organisation transfers a business from one employer to another. This usually happens during an acquisition or merger. Transfer of Undertakings are designed to protect the rights of employees in the event of such a transfer of ownership and establish the responsibilities of both parties.
The legislation covering this area is known as European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 and in this article Derek McKay, Managing Director at Adare Human Resource Management takes an in-depth look at TUPE and answers some questions that employers might have.
What is transfer of undertakings? A Transfer of Undertakings is when a business or part of a business transfers from one owner to another. A transfer means the transfer of an economic entity that continues to retain its identify.
TUPE is applicable to employees, apprentices, agency workers and public servants and is designed to that employees are not treated unfairly or taken advantage of during the transfer of business.
Aims of TUPE
The aims of the legislation are to protect the conditions of employment and contracts of employment of employees involved in the transfer and under some limited circumstances, the protection of employment in a transfer.
The legislation prevents the dismissal of an employee by reason of transfer of undertakings and ensuring an employee’s rights are passed from one employer to the other. It also requires that employees and their representatives are informed of the legal, social, economic implication of the transfer and consult with them as well as protecting continuity of representative rights.
Can employees refuse to TUPE? The regulations in Ireland are silent on the consequences for an employee who refuses to transfer. The employee cannot insist on continuing to work with the transferor if the entirety of the business is transferred or the part of the business in which the employee has been employed transfers.
However, the High Court has held that while an employee is not obliged to transfer, it does not mean that a redundancy situation automatically arises in relation to the Transferor. A consideration for any employer is where an employee objects to a transfer by virtue of a substantial change in working conditions that are to the detriment of the employee, then the employment relationship may be viewed as terminated and redundancy may arise.
What information must be given to employees during TUPE? The legislation requires that employees and/ or their representatives are consulted on the transfer, with a view to reaching agreement, within 30 days of the transfer occurring or in good time. The information and consultation process should cover the date or proposed date of transfer, the reasons for the transfer, any legal implications of the transfer for the relevant employees and a summary of any relevant, economic and social implications of the transfer for them and any measures envisaged in relation to the employee.
What issues underpin whether a Transfer of Undertaking applies or not? In order to determine whether or not there is a transfer of an undertaking, or part of, an examination of whether there is a transfer of an “economic entity” that retains its identity should be undertaken. An economic identity is defined in the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 as “an organised grouping of resources which has the objective of pursuing an economic activity”. Generally speaking, this requires consideration of the type of undertaking or business concerned; whether assets, tangible or intangible, are transferring; whether employees are taken over; whether customers are transferring; and the degree of similarity between activities carried on before and after the transfer, and the period, if any, for which those activities are suspended.
Does a TUPE apply if a business is insolvent? TUPE does not apply to a business transfer where the Transferor employer is subject to bankruptcy or insolvency proceedings on the date of the transfer. There is an anti-avoidance measure, where the reason for instituting bankruptcy or insolvency proceedings is to evade the employer’s legal obligations under TUPE, TUPE will continue to apply.
What happens employee pensions in a TUPE? If there was an existing occupational pension scheme, this will not transfer to the new employer and therefore, they are not obliged to pay any pension contributions on your behalf.
However, the new employer must ensure rights conferring immediate or prospective entitlement to old age benefits, including survivor’s benefit, are protected.
There are numerous other questions around TUPE and employee protections and we are happy to talk through with you at any stage; simply contact the Shannon Chamber team. TUPE is a complex employment law issue and requires the expert advice and guidance that we can provide you with.
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