TUPE

What is TUPE?

The term “TUPE” is commonly used in Ireland to refer to the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003.

The Purpose of TUPE

The purpose of TUPE is to protect the rights of employees in the event of a transfer of an undertaking to another employer as a result of a legal transfer or merger.

TUPE provides that when an undertaking, or part of an undertaking, is being transferred, the employees who attach to that undertaking or part of the undertaking automatically transfer with the undertaking. These employees transfer with their accrued service, their existing terms and conditions of employment, subject to certain exceptions for pensions, and the benefit of any collective agreement which may apply to them.

When does TUPE apply?

More often than not, the question is not about what happens if TUPE applies, but whether TUPE applies at all.

TUPE applies when an undertaking, or part of that undertaking, is being transferred from one employer, referred to as the transferor, to another employer, referred to as the transferee. A “transfer” is defined by TUPE as the transfer of an economic entity which retains its identity. Therefore, an undertaking must retain its identity after the transfer and pursue the same economic activity for TUPE to apply.

An undertaking means an organisation, business, charity, or service. TUPE does not precisely define the sorts of activities which constitute an undertaking. However, case law makes clear that an undertaking can be anything ranging from an entire company down to the functions of an individual employee, depending on the economic activity that individual carries out.

A number of factors are taken into account when considering whether an undertaking has retained its identity following a transfer. These factors include:

• The type of undertaking
• The assets which are being transferred
• The proportion of the employees, if any, being taken on by the new employer
• The similarity between the activities carried on before and after the transfer, and
• Whether the activities will be suspended for any amount of time following the transfer

Application of TUPE to outsourcing

In Ireland, TUPE can apply in an outsourcing, insourcing or on changeover of contractors, where the transferring services retain their identity post-transfer. Importantly, however, TUPE will not automatically apply in these circumstances.

In order to trigger TUPE in these cases, not only must there be a transfer of an economic entity which retains its identity, there must also be a transfer of either significant tangible or intangible assets, or a transfer of a major part of the workforce in terms of numbers or skills. In the absence of any transfer of assets or employees, TUPE will not apply.

A distinction has been drawn between labour intensive businesses and asset-reliant businesses when it comes to outsourcing.

In a labour-intensive business, such as cleaning, security, maintenance, call centre, customer service and sometimes finance or human resources, the application of TUPE will depend on whether the new incumbent or service provider accepts into its employment a major part of the workforce, in terms of the numbers or skills. If a major part of the workforce does not transfer, TUPE will not apply.

However, in an asset-reliant business, where the assets are the predominant requirement in the services, for example a bus service which cannot operate without buses, the determining factor is whether there is a transfer of the core assets, or of the use of the core assets, required for the business. In the absence of any transfer of assets, TUPE will not arise.

Ultimately, every case will depend on its specific facts. Where a business in question is neither neatly asset-reliant nor labour-intensive, one must look at the situation as a whole.

Modifying terms and conditions

If TUPE is triggered, then the employees of the transferor who are wholly or mainly assigned to the undertaking or part of the undertaking being transferred will automatically transfer into the employment of the transferee, by operation of law. They transfer on their existing terms and conditions of employment, with certain limited exceptions for pensions, with their accrued service and with the benefit of any collective agreement to which they may be subject.

Any changes to the terms and conditions of employees in connection with the transfer is a breach of TUPE.

Non-contractual terms, such as policies and procedures, do not transfer. However, employers must ensure custom and practice has not resulted in an apparent non-contractual term becoming a contractual term.

Impact of TUPE on pensions

Most rights under occupational pension schemes do not transfer under TUPE. However, this carve-out does not necessarily apply where the pensions benefit is a contractual entitlement, whether express or implied. This can give rise to significant costs to the new employer who may have to continue to honour the employees’ remuneration entitlements post-transfer.

Employer responsibilities regarding TUPE transfers

The transferor and transferee must each engage in a statutory information and consultation process with representatives of their respective affected employees. This process must take place, where reasonably practicable, not later than 30 days before the transfer is carried out and, in any event, in good time before the transfer.

The transferee has a vested interest in ensuring the consultation process is carried out properly as it will be stepping into the shoes of the transferor post-transfer.

The transferee does not have any obligations under TUPE regarding its existing employees unless they will be affected by the transfer.

Transfer-related dismissals are prohibited by TUPE. A transfer-related dismissal will automatically be an unfair dismissal unless it can be justified by economic, technical or organisational reasons which require changes in the workforce. This is frequently referred to as the ‘ETO Defence’ and may, in certain circumstances, be used to justify dismissals arising from the transfer, which are normally in the form of redundancies.

Preparing for TUPE transfers in Ireland

If TUPE is triggered, the transferee is advised to initiate an extensive due diligence process which would seek to include all relevant employee data.

The transferee and transferor should consider any indemnities and warranties they wish to obtain from the other party.

The transferee should also carry out a review of its existing insurance arrangements and what insurance may be required in the future as a result of the transfer of responsibilities and liabilities that come with the transferring employees.

Both parties should take account of their statutory information and consultation obligations when setting timelines for the transfer.

For further information, please contact a member of our Employment & Benefits team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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