Transfer of Undertakings (Protection of Employment) Regulations: (TUPE)
Article from April 2008 Your Voice (updated May 2013)
What happens to staff when a school becomes an Academy
by Solicitor David Brierley
The notoriously complex Transfer of Undertakings (Protection of Employment) Regulations, better known as TUPE, were introduced in 1981. They originated from European rules about business transfers. In 1981 there was a huge gap between the worlds of business and education and TUPE was only of passing interest to our sector. However, TUPE issues now arise regularly in member casework, particularly since the introduction of Academies.
The TUPE Regulations protect employees when a business is sold by one employer to another. Where there is ‘a relevant transfer’, employees and their contracts of employment transfer from the old employer to the new employer with their terms and conditions intact. They become employees of the new employer who also takes on any liabilities under their contracts. An employee could make a claim against the new employer in respect of events, for example discrimination, that occurred before the transfer.
It is unfair to dismiss any employee just because the business has been transferred. Any dismissals or contract changes made at or around the time of the transfer have to be for ‘economic, technical or organisational reasons’ (ETOs) and entirely unconnected with the transfer. TUPE does not prevent the new employer agreeing positive contract changes with the transferred employees.
It is not always clear whether the reason for a change is the transfer or an ETO reason. There is no definition of an ETO reason in the TUPE Regulations. A common ETO reason is a fall in pupil numbers. So a redundancy around the time of a transfer for a reason unconnected with the transfer is potentially a fair dismissal, provided that a fair redundancy procedure has been followed. It may be unclear whether an employee has been made redundant by the old or the new employer. Employment tribunal claims often name both.
Very importantly, when an employee transfers to the new employer there is no break in service. Continuity of employment runs from the original start date, not from the date of transfer. Employment rights are not lost, most particularly the right not to be unfairly dismissed after one year’s continuous service and the right to a redundancy payment after two years’ service. Any redundancy payment from the new employer will be based on service since the original start date not the date of transfer.
There are obligations on both employers to consult with, and provide information to, unions and employee representatives before the transfer takes place.
Other situations are far less clear. A TUPE transfer requires a transfer from one employer to another. In 1999, the Court of Appeal ruled that there was no TUPE transfer when a local authority replaced a first school and a middle school with a new primary school as part of a school reorganisation scheme. There was no change of employer. Staff at the old schools were employed by the local authority, even though they had been appointed by the governing body, and staff who moved to the new school remained in LA employment even though appointment decisions were made by the new school’s governing body.
TUPE clearly applies when an Academy is set up to replace an existing school. Staff transfer to the Trust board or governing body of the Academy with their contracts intact, including national pay and conditions, unless any contract variation or dismissal can be justified for ETO reasons. The consultation stages leading up to an academy conversion are particularly important.
Another straightforward example of a TUPE transfer is when an independent school is sold by its owner to a new owner – there is a transfer, the transfer is of an ‘economic entity’ and the economic entity ‘retains its identity’ after the transfer.
Surprisingly, TUPE does not fully cover pension rights. Pension rights accrued before the transfer are unaffected. If employees were members of an occupational pension scheme or eligible to join one before the transfer, they are entitled to have a similar scheme provided for them by the new employer. The Teachers’ Pension Scheme covers teachers employed in LA maintained schools or independent schools that have been accepted into the Scheme. Academies can apply to join the Scheme. Support staff working in local government or for other participating employers are in the Local Government Pension Scheme, which is administered at a local level.
Solicitor Arwen Makin