The Transfer of Undertakings (Protection of Employment) Regulations are often shortened to the acronym TUPE. These rules basically state that an employee’s rights follow a business to any new owner. So even if the business goes into Administration the ‘old’ employees can follow the new business owner even if they use a new separate legal entity.
The TUPE rules are designed to protect employees. If a company goes into Administration and the business is sold then all of the employee rights for the continuing business transfer across to the new owner. This includes rights to redundancy, arrears of pay and unpaid holiday. The new owner automatically takes on this responsibility.
This often blocks the sale of a viable business where the employees have built up long and substantial redundancy rights. Once a buyer assesses the value of the risk of these claims they may be put off buying the business.
A well meaning director of a failed (insolvent) business must be very careful not to start up again and have the employee rights follow them. This can also stop the employees from claiming from the Government Redundancy Payment Service (“RPS”). The RPS will pay arrears of wages, redundancy, holiday and notice pay on an insolvency but not if the business is just transferred to a new owner.
Strangely TUPE does not normally apply in liquidation.
TUPE also applies to solvent business sales or part business sales. TUPE even applies if just a department is moved; for example, if the work of a company department is outsourced to a new contractor the rights of employees can transfer to the new owner.
For business rescue or insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today on 0800 331 7417