There seems to be a love/hate relationship between employers and the Transfer of Undertakings (Protection of Employment) Regulations 2006, better known as TUPE. Generally, TUPE rules govern what happens to employees when a business is sold or taken over. The TUPE Regulations are complex and fail to offer ‘one size fits all’ solutions, but it can also be regarded as a shape-shifting piece of legislation; as the application of TUPE is based on the facts of the individual transfer. One might argue that the Regulations take more than it gives to the relationship.

There may be a balance to this by way of the rarely used Regulations 11 and 12 of TUPE, which could provide a huge benefit to small businesses facing difficulty upon inheriting staff without the benefit of full disclosure of the terms of their employment. Given that TUPE primarily allows employees to transfer under their current contracts, it is important to know what to do if information is not disclosed prior to the transfer, as it’s likely to cause you to be liable for unforeseen expenses, or cause you difficulty in honouring the terms of employment contracts, (for instance holiday entitlement).

What should be disclosed?

Regulation 11 concerns the ‘Notification of Employee Liability Information’ prior to a transfer. In short, it requires the out-going employer (the transferor) to notify the in-coming employer (transferee) of the identity of all staff being transferred, their length of service, their ages and whether they have a disciplinary or grievance record. In addition, the transferor must inform the transferee of any unusual terms of employment - for instance, if the employee is entitled to certain benefits like an equipment allowance, or is in receipt of extra holiday entitlement. If such information is not provided prior to the transfer taking place, or the information provided is misleading, the in-coming employer can recover those losses against the out-going employer, by way of an employment tribunal claim under Regulation 12 of TUPE.

What can the employer-claimant recover?

This scenario provides a very rare opportunity for an employer to be a claimant in the employment tribunal. If the employment tribunal agrees that there has been a breach of Regulation 11, the employer-claimant can recover compensation of no less than £500 per employee in respect of who the transferor has failed to provide relevant or accurate information for. However, this can be extended if (a) the transferee has used reasonable efforts to ‘mitigate’ its losses; and (b) the loss or additional costs are reasonably foreseeable. The window to bring the claim is three months, less one day from the date of the breach; thereafter, the transferee may have to take their chances in the civil courts.

What does this mean?

On a practical level, out-going employers subject to TUPE must use all reasonable efforts to ensure that employee liability information is accurate, provided promptly and updated within 14 days before the transfer happens if there are any changes - whether this is because an employee has raised a grievance, become subject to disciplinary proceedings, resigned or been dismissed; or has simply had a pay rise. For in-coming employers, Regulation 12 is a useful threat to put forward if employee liability information appears incomplete, or has not been received at all.

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