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TUPE: What happens when you sell your business?

So, you’re selling your business, or thinking about it? Do you have employees and if so, what
happens to them?
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There are many reasons why a business owner may want to sell up. Maybe they’re retiring, or they have grown the business and it’s time to cash in.

Either way, if you have staff, something will need to be done with those employees. As an employer, you can face a lot of uncertainty and potential litigation when getting this wrong.

Employment Law in the UK has its foundation in employee rights and what you need to determine is, DOES TUPE APPLY?

TUPE is something that gets mentioned a lot, but what is it and who does it cover? A lot of employers miss their opportunity to deal with a TUPE transfer and expose themselves to costly litigation as a result.

Just because the business is changing hands it does not mean your employees lose their jobs.

Transfer of Undertakings and Protection of Employment or, TUPE, is there to protect employees’ contractual terms and keep them doing the work they were employed to do.

Let’s tackle a couple of misconceptions:

• If the employer is changing, surely the work is changing?

• If the business is purchased, then is it not up to the new employer to sort out how they allocate work or who they employ?

Well, yes and no.

The initial headache that can come with TUPE is determining whether it applies, and, in some situations, even legal professionals must give an opinion and see if that opinion is shared by a tribunal.

TUPE transfers can include service provision changes and standard transfers which cover a wide range of scenarios. The key question to ask is, will the work the employees do continue?

If so, in what manner will it continue? In its simplest form, TUPE can be determined by “The Window Test”.

Take a business on the high street. They make pizzas and sell them over the counter. The owner is selling, and a new owner is going to take over the business. If you were looking through the window and could see no difference in what the employees do from one owner to the next, then it is likely TUPE applies.

What matters is the economic output. It may be the new owner changes the name, updates the uniform, refits the shop, changes the type of cheese or crust type. But if there is a collection of people that are going to produce the same economic output, in this case making pizzas, from one day to the next, then those employees are protected and so are their contractual rights.

 So, what do you do?

Like in most HR situations, your employees have the right to some form of process. Failing to get this right with a TUPE can cost you 13 weeks’ pay, per employee involved. This consultation includes electing reps, providing statutory information, and dealing with employee concerns.

Your battle could be that the new owners do not want to take on your employees or disagree that TUPE applies. Or maybe you are unsure if the business will sell. What if your employees are reluctant to transfer and request to be made redundant?

The best advice you can get, is to seek legal support.

There are a lot of moving parts in TUPE. You need to have determined if TUPE applies correctly, and then show you have adhered to your employees’ rights. You may need to demonstrate to a tribunal why you made the decisions you did. In that situation your process is key, and that is what legal support can give you.

Issues with TUPE transfers are common and there may be an option or risks you have not considered.

As a member of TMA you can benefit from award-winning business compliance services from Croner.

Whether you’re a business with just a couple of staff or a large organisation, Croner’s service is there to support you with any employment law issues, giving you commercially focused advice to protect your business interests.

Call today on 0844 561 8133 quoting 917442 for free legal advice.