TUPE in mergers and acquisitions
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Do you know your legal obligations for TUPE in mergers and acquisitions?
The HR aspects of TUPE mergers and acquisitions can take a back seat behind the financial implications but the failure of such a venture is often due to people related issues – with many mergers failing to deliver the desired outcomes.
For the incoming employer, it’s imperative to undertake HR due diligence before a final decision is made on a purchase or bid for services. This means understanding the structure and composition of the roles and employees who are likely to transfer, with all associated costs and liabilities. Employment legislation, for example, on TUPE and redundancy may restrict what you can do … and what you can afford. So this needs to be factored into your overall strategy and post-transfer operational plan.
The impact for TUPE in mergers and acquisitions
The impact on existing and transferring staff cannot be under-estimated. While TUPE protects employees’ rights when the business transfers to a new employer, the personal impact will vary for each employee. Communicating, consulting and involving people in the process will help alleviate any concerns and, hopefully, avoid any serious employee relations problems.
Whether or not your managers are dealing with a transfer for the first time, employees will be looking to them for answers. Management involvement and support is critical as it’s a lynch-pin between staff and senior management – helping to ensure a smooth transition and a more positive attitude from staff towards the change.
When embarking on a business or service transfer, it’s important to identify (as early as possible) if TUPE will apply and then follow the necessary steps to cover TUPE regulations and ensure that other employment legislation requirements are met.
What should you be doing?
Stage 1: Before committing to the transfer
There is no minimum period for TUPE consultation; but it should start as early as is feasible. The outgoing employer should decide when it’s appropriate to inform employees of the potential sale or expiry of the business. The incoming employer should also be planning when to tell employees of the potential purchase or bid. Both employers should weigh up the pros and cons of committing to the transfer and begin to build a TUPE process plan.
Stage 2: Preparing for the TUPE transfer
Where possible, it’s helpful if the two employers can work together (or at least liaise) on a TUPE transfer; although they each need to be aware of their statutory obligations in relation to employee consultation (in other words, they can’t just leave it to the other to consult with staff).
The outgoing employer must consult employees about the transfer and any measures that the incoming employer plans to implement following the transfer (if known); they should identify who will transfer; and provide employee liability information to the incoming employer (not less than 28 days before the transfer).
The incoming employer must consult about the transfer and any measures that they plan to introduce; also identify who will transfer and discuss any anomalies with the outgoing employer.
Stage 3: The TUPE transfer occurs
The outgoing employer loses the transferring staff and the incoming employer gains them, but that’s not the end of the process. Both employers must consult with their respective employees about the transfer; ensuring all staff are managed, settled and clear about their duties. It’s worth considering ‘welcome’ and induction information and activities, depending on the circumstances.
Stage 4: After the transfer
Both employers should continue to communicate with employees to preserve morale and avoid a drop in performance or quality of work; and to ensure reasonable allowances are made while employees adjust to their new situation.
There are strict laws on redundancies relating to a TUPE transfer, although, sometimes redundancy is inevitable. Dealing with redundancy at the same time as a TUPE transfer can be complicated. There are statutory minimum requirements with regard redundancy consultation which differ and are separate from TUPE consultation. However, TUPE regulations do allow for redundancy consultation to start prior to the transfer, in some circumstances. The statutory redundancy consultation and notification periods apply.