TUPE and Business Sales

Employers involved in a business sale, merger, outsourcing or service provider change must consider whether the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply. TUPE protects employees’ rights during these transitions and imposes specific duties on both outgoing and incoming employers.

What Is TUPE?

‘TUPE’ stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. It is UK employment law that protects employees when a business or service they work in transfers to a new employer. TUPE automatically moves employees to the new employer (the transferee) on their existing terms and preserves continuity of employment.

Under TUPE:

  • employees assigned to the transferring business automatically transfer
  • their terms and conditions remain unchanged
  • their length of continuous service is preserved
  • any rights, powers and liabilities under their contract pass to the new employer.

TUPE applies by operation of law, it does not depend on agreement between parties.

When Does TUPE Apply?

TUPE can arise in two main scenarios:

1. Business Transfers

When a business (or part of one) is sold or changes hands, and:

  • the identity of the employer changes, and
  • the business retains its activity (or very similar activities) after the transfer.

A business transfer can include:

  • sale of a company or division
  • mergers
  • corporate reorganisations involving a change of employer
  • asset sales where the business functions continue.

2. Service Provision Changes

When the performance of a service:

  • is outsourced to a new contractor
  • changes from one contractor to another
  • is brought back “in-house”

and the work is carried out by an organised grouping of employees.

TUPE does not usually apply where only the shares of a company change hands without a change in employer identity.

Employer Obligations Before a TUPE Transfer

Both the outgoing employer (transferor) and the incoming employer (transferee) have key legal duties:

Information and Consultation

Employers must:

  • inform affected employees about the transfer and its proposed date
  • provide certain employee liability information in advance to the transferee
  • consult employees or their representatives about measures the transferee envisages affecting the workforce (e.g., redundancies or workplace changes) where applicable.

Effective consultation helps manage expectations and reduces legal risk.

Employee Liability Information

The transferor must provide details about:

  • identities of affected employees
  • terms and conditions of employment
  • any disciplinary or grievance matters
  • any anticipated changes to employment contracts.

Failure to provide this information can lead to penalties and liability for both parties.

What Happens to Employees on Transfer

When TUPE applies:

  • employees automatically transfer to the new employer
  • their terms and conditions cannot be changed if the reason is the transfer itself
  • continuity of service is preserved as though uninterrupted
  • pending rights, liabilities and claims continue with the transferee.

Employees may object to the transfer; their contract will then end as if they had resigned and they generally cannot claim unfair dismissal in such cases.

Changing Terms and Conditions

Under TUPE, employers cannot change employees’ terms and conditions if the sole or principal reason for the change is the transfer itself.

Post-transfer changes are only lawful if:

  • the change improves terms, or
  • there is a legitimate economic, technical or organisational (ETO) reason involving changes in the workforce, or
  • the contract itself allows for that change and employees agree.

ETO reasons might include restructuring or redundancies that are genuinely required for the new business.

Employers should take legal advice before attempting to harmonise terms across a workforce after a transfer to avoid unlawful changes that could trigger claims.

Redundancy and Restructuring Under TUPE

Employees can be made redundant after a TUPE transfer if there is a genuine redundancy situation unrelated to the transfer, such as changes in operational needs. However, dismissals or redundancies where the sole or principal reason is the transfer are likely to be automatically unfair unless a valid ETO reason exists.

If redundancy is necessary, employers must:

  • follow a fair selection process
  • consult meaningfully with employees and representatives
  • explore suitable alternative roles

Failing to do so can lead to tribunal claims.

Practical Steps for Employers

To comply with TUPE and reduce risk:

  1. Identify whether TUPE applies early in a sale or service change process.
  2. Carry out due diligence on employee liabilities and obligations.
  3. Provide accurate employee liability information to the transferee in a timely way.
  4. Inform and consult employees or representatives as required.
  5. Develop a clear communication plan for affected employees.
  6. Seek legal advice before changing terms or implementing redundancies post-transfer.

Legal Risks of Non-Compliance

Failing to comply with TUPE obligations can expose employers to:

  • Claims for automatic unfair dismissal
  • Compensation awards for breach of contract
  • Penalties for failures to inform and consult
  • Reputational and operational disruption

How We Can Help

TUPE and business sales are legally complex and fact-sensitive. Our employment solicitors advise employers on:

  • assessing whether TUPE applies to business sales or restructures
  • preparing and reviewing information and consultation strategies
  • managing communications with employees and representatives
  • advising on contract changes, redundancy and harmonisation
  • defending claims relating to TUPE transfers

Early specialist advice helps avoid costly disputes and ensures compliance with TUPE obligations.