My employer is being sold or outsourced (TUPE): your rights and your settlement agreement

What TUPE 2006 actually does

The Transfer of Undertakings (Protection of Employment) Regulations 2006 apply when a business, part of a business, or a service (such as a contract that moves from one outsourced provider to another) transfers to a new employer. Where they apply, your contract of employment transfers automatically on its existing terms, your continuity of service is preserved as if you had always worked for the new employer, and most of your existing rights and liabilities transfer with you under regulation 4. You do not need to agree to the transfer for it to happen, and you cannot be made worse off simply because the transfer occurred; a variation to your terms made because of the transfer is void unless it falls within a narrow set of permitted exceptions.

When a TUPE redundancy is automatically unfair, and when it is not

Regulation 7 of TUPE 2006 makes a dismissal automatically unfair if the sole or principal reason for it is the transfer itself, with no minimum length of service required to bring that claim. The exception is a genuine economic, technical or organisational reason entailing changes in the workforce, usually shortened to an "ETO reason": a real drop in the work available, a technical change to how the work is done, or an organisational restructuring that changes headcount or role content. Where a genuine ETO reason exists, the dismissal is treated as a redundancy (or another potentially fair reason) in the ordinary way, and the usual fair-process and selection rules apply rather than the automatic-unfairness rule. Simply wanting to harmonise terms downward, or preferring the incoming employer's own staff, is not an ETO reason on its own.

Measures consultation before the transfer

Both the outgoing and incoming employer have a duty under regulation 13 to inform, and where "measures" are proposed, consult with, appropriate representatives of affected employees. A "measure" is any change connected to the transfer, redundancies among them, and this consultation duty sits alongside, not instead of, the ordinary collective consultation obligations that apply where 20 or more redundancies are proposed at one establishment. A failure to inform and consult properly can lead to a protective award of up to 13 weeks' pay per affected employee, which is separate from any unfair dismissal or redundancy payment claim and is itself something a settlement agreement can need to address.

Settlement agreements before a transfer: who pays, and who is released

Employers sometimes offer an exit before a transfer completes, whether to reduce headcount ahead of the move or to settle a dispute that has arisen because of it. If you sign before the transfer date, the agreement is with the transferor (your current employer), and it needs to be checked against what is actually being given up: a genuine redundancy exit is different from being pushed out to avoid the transferee inheriting a dispute. Because liability for pre-transfer acts usually passes to the transferee under regulation 4, an agreement signed only with the transferor can leave a claim still open against the transferee unless the release is drafted to cover both. A well-drafted agreement in this situation names both the transferor and the transferee as released parties, not just whichever one happens to be signing.

Settlement agreements after a transfer

Once the transfer has taken effect, the transferee is your employer and any settlement agreement is normally with them, even where the underlying dispute or dismissal is connected to conduct or decisions from before the transfer. This is because regulation 4 passes the transferor's rights, powers, duties and liabilities in connection with your contract to the transferee. If redundancies follow shortly after the transfer, the same regulation 7 question applies: is the transfer itself the real reason for your selection, or is there a genuine ETO reason for the restructuring the new employer is carrying out.

What a settlement agreement should contain in this situation

Split every item into what you are owed regardless of any negotiation, and what is genuinely up for discussion. Never sign an agreement that names only one of the transferor or transferee as the released party if both could plausibly be liable.

When the offer is too low

A dismissal where the transfer itself, rather than a genuine ETO reason, was the sole or principal cause is automatically unfair with no minimum length of service required to claim. A failure to inform and consult on measures can add a protective award of up to 13 weeks' pay on top. Together those are real leverage in a negotiation, and a reason to get any offer checked, and to confirm which employer or employers the release actually covers, before you sign.

Frequently asked questions