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I Wonder What TUPE Is and Why It Matters: Part 1 of Our TUPE Series for Employers

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Welcome to Part 1 of our Wednesday Wonders 2-part series, where we explore a key area of UK employment law: the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE.

This week, we'll explain:

  • What TUPE stands for and why it's so important;
  • The origins and purpose of the TUPE regulations;
  • How TUPE has evolved to cover a broader range of scenarios.

In Part 2 next week, we'll explore how TUPE operates in practice, including your legal obligations as an employer and how to manage TUPE-related disputes.

What is TUPE?

If you've ever been involved in selling or purchasing a business or outsourcing or re-tending services, you've likely come across the term TUPE.

Pronounced "chew-pee", TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. These regulations play a vital role in protecting employees' rights when a business or service changes hands.

For employers, understanding TUPE is crucial when navigating any type of business or service transfer. Failure to comply can result in significant legal and financial consequences.

TUPE has roots in European law since the early 1980s and has since been shaped by successive UK regulations. Its core aim is to protect employees whose roles might otherwise be at risk when their employer changes due to a business transaction.

Under TUPE:

  • Employees employed immediately before the transfer automatically become employees of the new employer.
  • Their existing employment terms and continuity of service are preserved.
  • If an employee is dismissed because of the transfer, the dismissal is considered automatically unfair - unless it can be justified by an economic, technical, or organisational (ETO) reason involving changes to the workforce.

This protection applies whether the transfer involves a business sale, an outsourcing agreement, or a contract reallocation - all referred to as "relevant transfers".

How Has TUPE Developed Over Time?

Originally, TUPE only applied to the transfer of what was termed an economic entity - typically when a business was bought or sold as a going concern.

Before TUPE came into force, such transactions often resulted in employees having their contracts terminated, leaving them without job security. TUPE was designed to preserve employment rights, even when the business ownership changed.

What is an 'Economic Entity'?

The term was defined as: "An organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary."

This broad definition allowed TUPE to be applied to a wide range of situations, including:

  • The transfer of a lease;
  • The sale of equipment with attached customer relationships;
  • Changes involving goodwill, business premises, or customer contracts.

Each of these could constitute a TUPE transfer, depending on how the transaction was structured.

The Concept of 'Service Provision Change'

One of the most significant developments in TUPE was the introduction of the Service Provision Change (SPC) concept. This applies when:

  • An organisation outsources a service to a third-party contractor;
  • A previously outsourced service is brought back in-house;
  • A service is transferred from one contractor to another.

In any of these scenarios, if employees are ordinarily assigned to the service being transferred, they will typically be protected under TUPE. They transfer to the new employer with their rights and terms of employment intact.

This extension has brought greater clarity and protection in situations that weren't always clearly covered by the original regulations.

Why TUPE Matters for UK Employers

TUPE isn't just a legal technicality - it's a critical consideration for employers involved in:

  • Business acquisitions or disposals;
  • Contracting out or insourcing services;
  • Re-tendering service contracts.

Ignoring or misunderstanding your TUPE obligations can lead to claims for:

  • Automatic unfair dismissal;
  • Failure to inform or consult affected staff;
  • Breach of contract or employment rights.

For employers, understanding the scope of TUPE (and when it applies) is essential to managing risk and maintaining compliance.

Conclusion

In summary, TUPE protects employees during changes to business ownership or service delivery, ensuring their continuity of employment and preventing unfair dismissal linked to the transfer.

Over time, the broad definition of an economic entity, combined with the introduction of Service Provision Change, has expanded TUPE's reach significantly. Today, it applies to many types of business and service transitions.

Next week in Part 2: We'll explore TUPE in practice - including the steps employers must take during a transfer, common pitfalls, and how to avoid disputes.

Need Expert TUPE Advice?

At Warner Goodman LLP, our Peace of Mind Employment Team provides employers with tailored advice on TUPE and other areas of employment law. Whether you're planning a business transfer, managing an outsourcing project, or dealing with a TUPE-related query, we're here to help.

Our Document Audit Team can also assist with updating employment contracts and workplace policies to ensure TUPE compliance.


Prepare for the Future with Our Make Work Pay Programme

With the Employment Rights Bill approaching, now is the time to prepare. Our Make Work Pay Programme is a structured, fixed-price solution designed to help UK employers navigate upcoming employment law changes.

Find out more about the Make Work Pay Programme here.