TUPE and the automatic transfer principle – what transfers upon a relevant transfer?
In the latest post in our series on TUPE, we take a further look at the automatic transfer principle that applies to relevant transfers in a TUPE context. As we explored in a previous post, the automatic transfer principle states that upon a relevant transfer (defined in this post) all of the transferor’s (the business being bought) rights, powers, duties, and liabilities under or in connection with the employees’ contracts of service transfer over to the transferee (the business doing the buying).
This post will examine what rights, powers, duties and liabilities transfer upon a relevant transfer and look at a couple of examples to illustrate the application of particular facts to the law.
So, what is included within the scope of rights, powers, duties and liabilities? The post below takes a (limited) look at what does and does not transfers.
- Employment contracts (as above)
- Normal retirement age
- Unfair dismissal rights
- Accrued liabilities
The definition and consequent scope of the “rights, power, duties and liabilities” that transfer from the transferor to the transferee in any given situation under an employment contract is not certain. It depends on the existing employment relationships that subsist at the time of the TUPE transfer. The scope of these rights, powers, duties, and liabilities isn’t entirely defined by the nature of the particular contracts that the transferor has entered in to with parties but can include non-contractual obligations and rights.
However, all rights and benefits (such as holiday pay, a company car, wages, maternity schemes, redundancy schemes, bonuses etc.) will generally transfer.
Normal retirement age
Although, as above, generally all rights and liabilities relating to the contract of employment transfer, the rights of an employee relating to their retirement age at the transferor will not.
Unfair dismissal rights
The employee’s right to claim unfair dismissal is preserved when a relevant transfer takes place under TUPE. The right can extend to automatic unfair dismissal in some circumstances (for example, if the reason for the dismissal is because of or connected to the relevant transfer).
Liability for the employee’s right to claim unfair dismissal generally passes to the transferee upon a relevant TUPE transfer. However, as above, the transferor may in some circumstances remain liable for unfair dismissal
The transferee should be aware of the possibility of accrued (and non-transparent) liabilities passing from the transferor to the transferee. These accrued liabilities include acts and omissions by employees of the transferor that could constitute claims for discrimination, constructive dismissal, personal injury, and/or debts owing to employees.
- Inform yourselves of your contractual rights and liabilities. Make sure that these are honoured upon the relevant TUPE transfer
- Be aware that your right to claim unfair dismissal (as well as other claims, depending on the facts) are preserved
- Your retirement age may vary upon transfer to the transferee, depending upon the transferee’s retirement policy
For employers (transferees):
- Ensure that thorough and accurate due diligence is carried out on the transferee
- Make sure that the appropriate warranties and indemnities are in place upon the transfer