The European Communities (Protection of Employees on Transfer of Undertakings), 2003 (commonly referred to as TUPE) protects the rights of employees where a business (or part of a business) transfers ownership to another business. Typically, you will see TUPE triggered in situations such as: an acquisition, a merger, a change in an outsourced or service contract etc. The regulation allows for those impacted employees to transfer to the new entity on the same terms and conditions (with the exception of pensions).
What should be considered?
The list of items to be considered is extensive, both from a legal and commercial perspective. I have listed below my top 5 tips for any TUPE situation:
- Firstly, determine which employees may have a right of transfer. A full due diligence of the activities and contract terms of these individuals will assist this. It is important to ensure that all employees are considered, including those on extended leave and any former employees who have an employment claim submitted to the Workplace Relations Commission
- Consider the future structure of the organisation. Will there be a cross over in job responsibilities that need to be reviewed? The post-transfer company should be viewed as one entity and may need re-organisation, which could lead to changed roles, redeployment or redundancy
- Both companies should agree who funds any potential future redundancies. By way of example, a receiving company may decide to re-organise post transfer which could lead to redundancies. If an employee has 20 years’ service pre-transfer and 5 years’ service post transfer, their redundancy will be calculated based on the full 25 years’ service. In the absence of an agreement, the new employer will be liable for the full cost of this redundancy
- Under the regulation, both employers are required to consult with their respective employees (or representatives) at least 30 days prior to transfer. This requires careful planning as naturally there will be staff queries from both sides. Failure to have comprehensive responses may lead to suspicions which will make the transfer more difficult
- Review any implied contract terms of those who are due to transfer. Many terms and conditions of employment may not be written down, but may have become custom and practice (implied terms). Employees have a right to maintain such terms upon transfer
Point 5 above is an interesting one and is where I have seen significant costs and disruptions post-transfer. This is highlighted in a recent case presented at the Workplace Relations Commission:
The complainant maintained that his previous terms and conditions were not maintained following a transfer in January 2019. The complainant’s contract of employment stated a working week of 39 hours. Despite often not working his full contracted hours, his former employer always paid him for 39 hours per week. Prior to transfer, his representatives (SIPTU) contacted his new employer to advise of this arrangement.
The respondent company advised that they only had 32 hours work available for the respondent each week and were unaware of the contracted hours. They did not dispute that SIPTU raised the matter prior to transfer.
Adjudication Officer’s Decision:
The appointed adjudicator commented that it was not disputed that prior to transfer the employee received remuneration based on 39 hours per week. Equally, that the employee’s pay had been reduced by 7 hours per week since the date of transfer. This represented a shortfall of €1,668.45 for a 21 week period and a further €2,691.15 following a pay increase in June 2019.
Therefore, the respondent was required to pay the complainant €4,359.60 and was ordered to maintain the employee’s pay of 39 hours from the date of the hearing. In addition, the respondent was ordered to pay a compensation amount of €250 for breach of regulations.
This case highlights some of the complexities of TUPE, which as mentioned are extensive.
By Steven Drew