What is TUPE?24 March, 2015
Nick Austen and Gemma Mintram, pharmacy solicitors in the healthcare team at Cripps LLP, consider how TUPE will affect the sale or purchase of your pharmacy.
What does TUPE stand for? TUPE stands for The Transfer of Undertakings (Protection of Employment) Regulations 2006 which came into force on 6 April 2006.
When does TUPE apply? TUPE applies whenever there is a pharmacy sale which involves the transfer of the assets of the pharmacy (i.e. the goodwill, NHS contract, fixtures and fittings, any lease and stock), whether the seller is a company or an individual. TUPE does not apply where the company that operates a pharmacy is itself sold (known as a share sale). Therefore TUPE only needs to be considered when the employer of the pharmacy employees will change due to a sale.
TUPE can also apply on the sale of part of a pharmacy business (for example if the pharmacy has a separate business supplying community MDS to care homes).
What is the purpose of TUPE? It has the aim of protecting employees if the business in which they are employed changes ownership. Its effect is to move, by law, employees and any liabilities associated with them to the new employer and it imposes legal duties on both the seller and the buyer during the sale process.
What does TUPE protect?
Terms and conditions of employment
The transferring employees will transfer to the buyer on the same terms and conditions of employment that were in place with the seller of the pharmacy, including their continuity of employment. This applies even if the pharmacy staff are on zero hours contracts.
Rights and Liabilities
In addition to the transfer of the terms and conditions, the employee’s rights against the seller will also transfer to the buyer who will take over liability to meet any claims (for example, an ongoing discrimination or harassment claim). The buyer could also become liable for any potential personal injury claims which an employee might have had against the seller.
Because of this, if you are a buyer you should ask your solicitor to ensure that the pharmacy sale contract includes a clause providing that the seller compensates (indemnifies) the buyer for liabilities relating to events during the seller’s ownership that transfer under TUPE.
Equally, if you are a seller you should ask your solicitor to ensure that the buyer indemnifies you for any TUPE liabilities relating to an event following the sale.
If you do not take into account the effects of TUPE when selling or buying a pharmacy then as buyer or seller there is a real risk that you could be exposed to employment-related claims.
Who does TUPE protect?
It relates to employees only, therefore self-employed locums or delivery drivers would not be protected provided that they are genuinely self-employed.
What are the seller’s obligations under TUPE?
Employee Liability Information
Sellers have an obligation to provide specific employee liability information (“ELI”) to the buyer. ELI should contain a range of details in relation to the pharmacy employees including their name, age, a copy of their employment contract or particulars of employment, details of any disciplinary matters or grievances that have arisen in the previous two years and any actual or potential legal actions against the seller in the two years preceding the sale of the pharmacy.
Duty to Inform and Consult
When a TUPE transfer is going to take place, both the seller and the buyer have a duty to inform and potentially consult with representatives of the employees. This applies to employees that are transferring and also those who are affected by the transfer (i.e. the buyer’s superintendent pharmacist who will take responsibility for the new pharmacy).
TUPE does not specifically set out when the informing/consulting should take place but it must be complied with “long enough before the relevant transfer”. Every circumstance is different so there are no golden rules to follow.
It is important that the seller informs the pharmacy employees of the following:
- That the transfer is going to take place, the proposed transfer date and the reasons for it.
- The legal, social and economic implications of the transfer for any of the affected employees.
- Details of any “measures” the seller thinks that it will take in relation to any of the affected employees.
- Details of any “measures” the buyer envisages that it will take in relation to the employees which are to be transferred or a statement that no “measures” are to be taken.
What are the buyer’s obligations under TUPE?
Provide “measures” information to the seller as soon as possible
“Measures” include matters such as the buyer’s plans for restructuring the workforce through making redundancies or changing job functions, changes to terms and conditions of employment (for example paying employees on a monthly instead of weekly basis), changing hours of work or times of lunch breaks.
Assist the seller’s consultation exercise as required
If any “measures” are to be taken then the seller should consult with the employees and consider and reply to any comments the employees make. If the duty to inform and consult is not satisfied then the employees could seek compensation from both the seller and the buyer at an employment tribunal.
Can the employee’s terms and conditions be changed?
Only if the reason for the change is an economic, technical or organisational (“ETO”) reason under employment law. If it is a reason connected with the transfer of the pharmacy, for example, in order to harmonise the terms of the employees that are to be transferred with the buyer’s existing employees’ terms, then the change will not be valid.
An ETO reason must be connected with the running or conduct of the pharmacy and must involve a change in the workforce by way of a change in numbers or job functions. We would advise that you first seek legal advice if you intend to make any changes to the workforce either before or after the transfer.
TUPE is complex but important and it is vital that you are aware of your obligations and the other party’s obligations in order to ensure the smooth transfer of employees on a sale or purchase of a pharmacy, avoiding unnecessary issues, delays and costs.