Steven McGrath, partner at Rudlings Wakelam Solicitors, demystifies the topic of TUPE
For many practitioners, they have often acquired the practice by what is known as an ‘Asset Transfer’ whereby one practice owner transfers the entire business to another as a going concern.
In such circumstances, all of the existing employees automatically transfer over to the new owner on the same employment terms following the legislation in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Service Provision Change
TUPE can also apply in the circumstances of a change in service provider, i.e. a practice taking over an NHS contract. In such instance, the staff of the original practice could be automatically transferred to the new practice (as outlined in the bullet points below) who has won the contract. However, this is not always the case and the position is not clear cut, particularly in practices providing a mix of private and NHS work.
In order for TUPE to apply in this situation certain conditions need to be fulfilled. There must be an organised group of employees before the change whose principal purpose is to carry out the relevant activities on behalf of the client. A single employee can be an organised grouping. In this context, this would be a group of staff performing only the NHS contract work.
There is no need for the entity (the practice) to retain its identity; it is merely necessary for one practice to cease to provide the activities and for another to take them over. This means that it is not possible for the incoming provider to avoid TUPE by performing the services in a different way or by not taking over the workforce.
If TUPE does apply:
- Anyone employed by the original practice, an ‘organised grouping of resources or employees’, immediately before the transfer automatically becomes the employee of the new practice incorporating all of their existing terms of employment (including their existing rate of pay) and without a break in their period of employment
- The automatic transfer of employees to the new practice will also catch any employees who are dismissed before the transfer for the reason of the transfer and not for an ‘economic, technical or organisational reason entailing changes in the workforce’
- All rights, powers, duties and liabilities under the employment contracts pass to the new employer. This could even include trade union recognition in some circumstances
- Any changes to employees’ terms will be void if the sole or principal reason for the change is the transfer itself and is not an economical technical or organisational reason
- Any dismissal will be automatically unfair where the sole or principal reason for the dismissal is the transfer itself and is not economical technical or organisational reason
- Employees may refuse to transfer (known as objecting), but the effect is to terminate their employment without any right to compensation.
- Both the current employer and transferee must inform and (if it is proposed to take any ‘measures’ in relation to the employees) consult representatives of their own affected employees in relation to the transfer. If they fail to do so, an employment tribunal can award up to 13 weeks’ actual pay for each affected employee. An employer with fewer than 10 employees is entitled to inform and consult affected employees directly in certain circumstances
As a solicitors’ practice, we have come across a whole spectrum of problems for practices arising out of the transfers of the NHS contracts in recent months.
For example, practices who relied upon the NHS contract for the majority of their revenue stream could lose the majority of their employees and the contract.
Alternatively, a mixed practice who has lost the NHS contract, and the income that comes with it, may assume that the staff will automatically be transferred to the new practice. It has come as a shock to some when this has not happened. Disputes have arisen as to whether TUPE applies and whether the ‘organised grouping’ condition has been fulfilled. In such instances when it has not applied, the original practice is left in a situation where they have lost the income stream and still retain all of the liabilities for the staff. If the practice cannot source alternative work they may find they have to then make the employees redundant and face the cost that comes with that.
This is a particularly complex area and each case will turn on its own facts. It is important that a practice faced with such a situation takes advice early on and plans ahead to look to achieve the best possible outcome or have a plan to restructure.
We as a firm support CODE and will provide our legal services to the member to guide them through such a complex process.