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What You Need to Know If You're Thinking of Buying or Selling an Existing Business

  • Thread starter EmployEasily Legal Services
  • Start date
EmployEasily Legal Services

EmployEasily Legal Services

EmployEasily Legal Services
Here in the UK, Regulation 13 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) imposes two distinct duties on employers:

1) There is a duty to give certain specified information about the proposed transfer to the “appropriate representatives” of the affected employees (the Information Duty).

2) If the employer proposes measures in connection with the TUPE transfer there is a quite separate legal duty to consult with those appropriate representatives (the Consultation Duty).

In the first of two articles on TUPE, we will cover basic staff rights, an Employers' duty to inform and consult and the potential risks if you fail to consult.
TUPE - Your Duty to Inform & Consult

TUPE does not specify a clear timetable for employers to comply with these duties, it simply states that information under the Information Duty must be given, “long enough before a relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees,…”
TUPE - Basic Staff Rights

If you sell the business and there is a new owner, it does not mean that your employees will be obliged to work for the new owner. The employee will have the right to inform you or the new owner that they object to becoming employed by the new owner.
If the employee is prepared to accept employment with the new owner, they are not entitled to anything more than they enjoyed under the previous employer.

However, if they refuse to work for the new employer, they will be considered to have resigned as opposed to being dismissed. This means that they will not be entitled to a statutory redundancy payment. If the employee resigned because the transfer to the new job would have resulted in a substantial and detrimental change to their working conditions, they may have a claim for constructive/wrongful dismissal.
TUPE - Information & Consultation

Where you elect to dispose of your business to some other party and TUPE applies, there is a duty on you and the new owner of your business to provide information to, and to consult with your employees should the transfer affect them.

The duty to consult comes from the TUPE regulations and you have an obligation to inform all appropriate employees of the following:

1) The fact that a relevant transfer is to take place
2) When it is to take place (approximately)
3) The reason for it
4) The legal, economic and social implications of the transfer for the affected employees
5) The measures which you envisage taking in relation to those employees (and if no measures are envisaged, then that fact)
6) If you are the transferor (i.e. the seller),the measures which the new owner envisages that they will take in relation to those employees who are to be automatically assigned to them on the transfer (or if no measures are envisaged, then that fact)

* An example of measures in a TUPE could be changes to tax and/or payroll arrangements.

You must inform the employees long enough before the transfer to enable consultation to take place between you and those employees.

You are also under a duty to enter into consultation with all employees in an attempt to seek agreement of any measures to be taken. At all times, consultation should be carried out by all parties in good faith.
TUPE - Failure to consult

Should you or a new owner fail to inform and consult with employees’ representatives, the remedy is for your employee’s representative (or the individual employees if they do not have one) to make a complaint (not later than three months after the date of the transfer) to the employment tribunal. If the complaint is upheld, the tribunal must make a declaration in those terms and has discretion to award compensation of up to 13 weeks' pay in respect of each affected employee.
In considering how much compensation to award, the tribunal will have regard to the seriousness of the breach.

The liability for the payment rests on both the seller and new owner of the business.

Are you buying a new business? Are you selling your business? Not sure if TUPE applies or simply want to make sure you comply with employment law?

Give us a call today on 0800 612 4772 or 0141 314 3947 or request a Free HR Services Quote and we'll be happy to help.

Coming Soon........Our second article on TUPE - Employee Liability Information.