Legislation provides that any dismissals that are due to the transfer of an undertaking or, except for certain prescribed reasons, are for a reason connected with the transfer, will be automatically unfair, and prescribes which employer will be liable. It is important that organisations understand where liability rests, not least so that, if desired, they can come to a private agreement to apportion any liability between them. This XpertHR “how to” guide sets out the legal considerations that both the transferor and the transferee should take into account when dismissals are proposed in the context of a transfer and addresses some practical scenarios that may arise.

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How to comply with the law on dismissal of
employees in relation toTUPE transfers
Legislation provides that any dismissals that are due to the transfer of an
undertaking or, except for certain prescribed reasons, are for a reason
connected with the transfer, will be automatically unfair, and prescribes which
employer will be liable. It is important that organisations understand where
liability rests, not least so that, if desired, they can come to a private agreement
to apportion any liability between them.
This XpertHR“how to”guide sets out the legal considerations that both the
transferor and the transferee should take into account when dismissals are
proposed in the context of a transfer and addresses some practical scenarios
that may arise.
The guide covers:
Introduction
Information and consultation underTUPE
Automatic unfair dismissal andTUPE
Which employer has liability?
Negotiating the appropriate indemnities
Identifying the reason for dismissal
The rules on general fairness still apply
Collective redundancy consultation
Pre-transfer dismissals by the transferor
Post-transfer dismissals by the transferee
Post-transfer dismissals by the transferor
Dismissals that are unconnected to the transfer
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How to comply with the law on dismissal of employees in
relation to TUPE transfers
Introduction
When an undertaking transfers from one organisation to another, usually due to the sale of a
business, an insourcing or outsourcing, or a change in the provider of a service, the Transfer of
Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE Regulations)
may be engaged. Where engaged, the Regulations provide that any employees assigned
to the undertaking should transfer from the organisation losing the work (the transferor)
to the organisation gaining the work (the transferee) with their terms and conditions of
employment intact and with full continuity of employment.
There are a number of reasons why an organisation might wish to dismiss employees in the
context of a transfer. For example, the transferor may wish to dismiss employees to cut costs to
make its business or contract more attractive to a purchaser or incoming provider, or because
the disposal of part of its business means that it no longer requires so many employees
elsewhere in its business. For its part, the transferee may end up with too many employees
following the transfer and wish to dismiss some of them.This scenario is particularly likely
where the transferee has a more efficient way of carrying out the work than the transferor.
To protect employees from being dismissed unfairly in the circumstances surrounding a
transfer, the Regulations provide that any dismissals that are due to the transfer or, except for
certain prescribed reasons, are for a reason connected with the transfer, will be automatically
unfair.
Depending on when and for what reason any dismissals are effected in the context of a
transfer, the Regulations prescribe which employer will be liable for any claims for unfair
dismissal. It is important that organisations understand where liability rests, not least so that,
if desired, they can come to a private agreement to apportion any liability between them.
A TUPE-related dismissal will often amount to a redundancy, in which case the employer must
carry out a fair redundancy procedure, in addition to complying with its duties under the
TUPE Regulations.
This guide sets out the legal considerations that both the transferor and the transferee should
take into account when dismissals are proposed in the context of a transfer and addresses
some practical scenarios that may arise.
Information and consultation underTUPE
In order for both the transferor and the transferee to understand what their obligations
towards employees are as a result of a relevant transfer and to decide whether or not any
dismissals will be necessary, the TUPE Regulations require them to communicate with each
other. The Regulations also require both the transferor and the transferee to inform and, in
some cases, consult with their own employees about the transfer and the effects that it will
have on their employment.
The basic process is that:
n the transferor should provide the transferee with details of all transferring staff prior to the
intended transfer date;
n the transferee should advise the transferor whether or not it envisages taking any measures
in connection with the transfer in relation to the employees who will be transferring, for
example making any dismissals following the transfer;
n the transferor should inform its employees’representatives about the transfer and, in
particular, about any measures that the transferee envisages taking in relation to the
transferring employees post-transfer;
n the transferor should consult representatives of its affected employees if it envisages taking
measures in relation to the employees; and

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n the transferee should inform representatives of its own affected employees about the
transfer and, if it envisages taking measures in relation to those employees, consult the
representatives about them.
The appropriate employee representatives for TUPE consultation will be either union
representatives or, if there is no recognised union in respect of the affected employees,
elected employee representatives (see How to arrange the election of employee
representatives for informing and consulting on a TUPE transfer).“Affected employees”
includes all employees who may be affected by the transfer or measures taken in connection
with it, not only those employees who will transfer. For example, it could include employees
of the transferor who may be affected by a loss of work resulting from the transfer.
There is no specified minimum period over which the information and consultation process must
be carried out, but reg.13(2) of theTUPE Regulations states that the employer must provide the
required information to employee representatives“long enough before a relevant transfer to
enable the employer of any affected employees to consult the appropriate representatives”.
A failure on the part of either employer to inform and consult as required under TUPE can give
rise to a protective award of up to 13 weeks’pay per affected employee.
Automatic unfair dismissal andTUPE
Regulation 7(1) of theTUPE Regulations provides that any dismissal of an employee with the
relevant length of service will be automatically unfair where the reason for the dismissal is either:
n the transfer itself; or
n a reason connected with the transfer that is not an economic, technical or organisational
reason entailing changes in the workforce (known as an“ETO reason”) (see What is an
economic, technical or organisational reason?).
Unlike most claims relating to other automatically unfair reasons for dismissal (for example
pregnancy or union membership), which employees can bring from the first day in employment,
the usual unfair dismissal length of service requirement applies to claims for automatic unfair
dismissal under reg.7(1), ie an employee will need two years’service if his or her employment
began on or after 6 April 2012, or one year’s service if employed prior to 6 April 2012.This is
because the purpose of theTUPE legislation is to preserve, not to enhance, employee rights.
In some cases, employees who resign, or refuse to transfer, either in anticipation of or because
of a transfer may be treated as having been dismissed for the purposes of the legislation. This
will be the case where employees have learnt, usually through the pre-transfer information
and consultation process, that there will be a substantial change to their working conditions,
to their material detriment, following the transfer (see Employment law manual TUPE
Transfer of undertakings An employee’s refusal to transfer).
Which employer has liability?
The Regulations determine which employer will have liability for dismissals in the context of a
relevant transfer.
In relation to any dismissals made by the transferor prior to the transfer, the reason for the
dismissals is very important because it will determine which employer is liable for any claims
that result.
In relation to pre-transfer dismissals made by the transferor:
n liability will transfer to the transferee where either:
n the reason for the dismissal is the transfer itself; or
n the reason is connected with the transfer and is not an ETO reason; and
n liability will remain with the transferor where either:
n the reason for the dismissal is unconnected to the transfer; or
n the reason is connected to the transfer and is an ETO reason (although the transferor
cannot rely on an ETO reason of the transferee).

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In relation to dismissals effected pre-transfer by the transferee (ie of its own employees at that
time), the transferee is liable.
Any dismissals of transferring employees effected after the transfer will be the responsibility
of the transferee, which will at that stage be the employees’employer.
Negotiating the appropriate indemnities
Despite the clear demarcation of liability set out above, the fact is that whether or not a
dismissal is for a reason connected with a transfer, and whether or not it is a valid ETO reason,
can be answered only by the employment tribunal. Employees dismissed pre-transfer
are therefore likely to hedge their bets and bring claims against both the transferor and
transferee. For this reason it is common for the parties to attempt to negotiate appropriate
indemnities between them in any sale and purchase agreement or other contract relating to
the relevant transfer.
The transferor is likely to seek to the fullest extent possible the transferee’s agreement to be
responsible for any costs and expenses, including compensation, relating to any pre-transfer
dismissals, particularly where such dismissals have been made to push the transfer through,
sometimes at the behest of the transferee.The transferee, on the other hand, may seek to
have the transferor agree to bear the liability for any such dismissals, even where they are
found to have been connected to the transfer and not for a valid ETO reason. Which party will
achieve its objectives in the negotiations over indemnities will depend largely on general
commercial considerations.The most common position is for the transferor to agree to accept
responsibility for all actions taken in respect of employees up to the date of the transfer and for
the transferee to accept responsibility for all actions taken from the date of transfer onwards.
Identifying the reason for dismissal
When considering a dismissal in the context of a TUPE transfer, the employer should ensure
that it can clearly identify the reason for dismissal and should understand the effect of the
TUPE Regulations on the fairness of such dismissals.
There is no statutory guidance on the difference between a dismissal that is due to the
transfer itself, which will always be automatically unfair, and a dismissal that is for a reason
connected with the transfer, which will be automatically unfair only if it is not for an ETO
reason. Non-statutory guidance issued by the Department for Business, Innovation and
Skills on Employment rights on the transfer of an undertaking (PDF format, 188K) (on the BIS
website) suggests that a dismissal is likely to be found to be by reason of the transfer itself
only where there are no extenuating circumstances linked to the reason for it.
Most dismissals occurring in the context of a transfer will be dismissals made for a reason
connected with the transfer and the employer will be able to avoid a finding of automatic
unfair dismissal only if it can show that it had an ETO reason for the dismissal entailing a
change in the workforce.
Dismissals for potentially fair reasons that are not ETO reasons, such as capability and
misconduct, which would have occurred notwithstanding the transfer, are unlikely to be
because of the transfer or for a reason connected with the transfer. Therefore, the usual unfair
dismissal rules will apply.
What is an economic, technical or organisational reason?
An employer that is considering dismissing an employee where the reason for the dismissal is
connected to the transfer must determine whether or not it is an ETO reason. Although there
is no definitive answer to this question, an ETO reason is likely to be a reason related to the
day-to-day running of the business. The non-statutory guidance issued by BIS states that the
term is likely to include:
n a reason relating to profitability or market performance of the business (ie an economic reason);
n a reason relating to the nature of equipment or production processes that the employer
operates (ie a technical reason); or

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n a reason relating to the management or organisational structure of the employer’s business
(ie an organisational reason).
For example, if a transferor loses a key customer as a result of a transfer, this could be a
possible economic reason; where the transferee has acquired a number of warehouse
operatives into a fully mechanised warehouse environment, this could be a possible technical
reason; or where the disposal of part of the transferor’s business means that fewer employees
are required at line manager level, this could be a possible organisational reason.
What does“entailing changes in the workforce”mean?
The existence of an ETO reason is not in itself sufficient to defend claims of automatic
unfairness. The employer must also show that the ETO reason“entails changes in the
workforce”. This means that, for the ETO defence to work, in addition to the dismissal of the
employee for an ETO reason, there should be either:
n a connected reduction in the number of employees in the employer’s workforce; or
n a material change in the functions performed by the workforce.
Where the employer relies on changes to the functions performed by the workforce, the
changes should be more than just minimal changes and should be related to the role held by
the employee whose dismissal is in question.
The meaning of“entailing changes in the workforce”is currently under review by the
Government. In its Consultation on proposed changes to the TUPE Regulations 2006 (PDF
format, 521K) (on the UK Government website), the Government proposed amending the
Regulations so that“changes in the workforce”can cover changes in the location of the
workforce, to align the definition of an ETO reason with the definition of redundancy under
the Employment Rights Act 1996. Currently, redundancy dismissals as a result of a change of
workplace, related to the transfer, are not covered by the ETO definition (because a change
of workplace does not involve a change in the number of employees or the functions
they perform) and are therefore automatically unfair. The Government has said that, if the
consultation results support the proposed changes, it will seek to introduce them in October
2013.
Considering whether or not an ETO reason for a dismissal exists is not straightforward, but a
good rule of thumb is that if, notwithstanding the transfer, the reason for any dismissal would
be likely to amount to redundancy or, for the purposes of making economies or efficiencies,
to“some other substantial reason”for dismissal, it will probably amount to an ETO reason in
the context of the transfer.
The rules on general fairness still apply
Where, in the context of a transfer, the employer can show that a dismissal was either not
because of the transfer or was for a reason related to the transfer that was an ETO reason, it
will avoid a finding of automatic unfair dismissal under reg.7(1). However, that is not the end
of the matter. The rules of general fairness under s.98(4) of the Employment Rights Act 1996
will still apply to any dismissal and any employer falling short may still find itself facing claims
of unfair dismissal.
Typically the reason for an employer dismissing an employee in the context of a transfer will
be“redundancy”within the meaning of s.139 of the Employment Rights Act 1996 (ie dismissal
because the employer ceases to carry on the business in which the employee was employed
or ceases to carry on that business in the place where the employee was employed; or the
needs of the business for employees to carry out work of a particular kind have ceased or
diminished). When called to decide on the fairness of a dismissal for redundancy, the tribunal
will be guided to a large extent by the rules established in Williams and others v Compair
Maxam Ltd [1982] IRLR 83 EAT.
In Williams the Employment Appeal Tribunal held that, an employer will not normally act
reasonably unless it:
n warns and consults any employees affected or their representatives;
n adopts a fair basis on which to select for redundancy; and

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n takes such steps as may be reasonable to avoid or minimise redundancy by redeployment
within its own organisation.
Warning and consulting about possible redundancies should occur in each case or this will
almost certainly lead to a finding of unfairness.
For the avoidance of doubt, this general fairness requirement to warn and consult employees
about possible dismissals is independent of and in addition to any obligation to inform
and consult under reg.13 of TUPE. Employers should also be aware that, depending on the
number of dismissals and the reason for those dismissals, the duty to consult on collective
redundancies (under s.188 of the Trade Union and Labour Relations (Consolidation) Act
1992 (TULR(C)A)) may also apply. Although these are separate duties, employers might
choose to kill two birds with one stone and run the consultations in parallel (see Pre-transfer
consultation of transferring employees).
The employer should carry out consultation on an individual basis with affected employees,
regardless of any collective consultation with union or employee representatives (see How to
consult on an individual basis during a redundancy exercise).
Collective redundancy consultation
As a starting point, when considering dismissals in the context of a transfer, the employer
should establish whether or not the collective redundancy consultation rules set out in
s.188 of TULR(C)A apply. These rules apply where an employer proposes to make 20 or more
employees redundant within a period of 90 days or less. (While the legislation says that the
duty to consult applies where the redundancies are proposed“at one establishment”, the
EAT in Usdaw v Ethel Austin Ltd (in administration); Usdaw and another v WW Realisation 1 Ltd
and others EAT/0547/12 EAT/0548/12 said that these words should be disregarded.) If there
are 100 or more affected employees, the employer must commence consultation with a
recognised trade union or elected employee representatives at least 45 days before the first
dismissal takes effect. If 20 or more employees are affected, consultation must commence at
least 30 days before the first dismissal takes effect.
The term“redundant”under these rules is wider than the definition under the Employment
Rights Act 1996, and applies where dismissal will be for a reason“not connected with the
individual worker concerned”. This definition of redundancy will apply to most transfer-
related dismissals. There is a list of specified information that the employer must provide to
the representatives, including the reasons for the proposed redundancies and the proposed
method of selecting employees for redundancy. Consultation should be about ways to avoid
or reduce redundancies and any ways in which the effects of redundancy can be mitigated.
See Good practice manual Change management Informing and consulting during a
collective redundancy process for guidance on how to carry out collective redundancy
consultation.
If an employer fails to meet its collective redundancy consultation obligations, a tribunal can
make a protective award in relation to the relevant employees.
Pre-transfer dismissals by the transferor
The transferor cannot rely on the transferee’s ETO reason to dismiss employees fairly prior
to a transfer. For example, if, during the course of pre-transfer discussions, the transferee
suggests that it will have too many staff post-transfer (ie an ETO reason entailing changes
in the workforce applies) the transferor cannot rely on that reason to effect fair dismissals
prior to the transfer. The transferor must have its own ETO reason in order to avoid claims of
automatic unfairness.
That being said, where a transferor does dismiss in connection with a transfer and it does
not have its own ETO reason, liability in respect of the dismissals, insofar as they relate
to employees who would otherwise have transferred, will in any event transfer to the
transferee. Nevertheless, the transferor may still be sued by dismissed employees, so, if it is
making dismissals prior to the transfer without a valid ETO reason, the transferor should

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seek to obtain indemnities for any unfair dismissal claims that result, or be prepared to bear
the cost.
The better way for the parties to manage dismissals in these circumstances is for the
transferee to effect the dismissals after the date of the transfer, relying on its own ETO reason.
Post-transfer dismissals by the transferee
If, prior to a transfer, the transferee envisages making dismissals following the transfer, it
should ensure that it complies with its obligation under reg.13(4) of the TUPE Regulations
to inform the transferor of the measures that it intends to take in respect of the transferring
employees.
The transferee must also comply with its obligations under TUPE to inform and consult with
the appropriate representatives of its own staff about potential dismissals.
Pre-transfer consultation of transferring employees
Although there is no requirement under reg.13 for the transferee to consult with the
transferor’s employees about post-transfer dismissals (its obligation is just to inform
the transferor about the measures it envisages taking), in practice, with the transferor’s
consent, the transferee may consider it appropriate to play an active role in any pre-transfer
consultation that the transferor has with its employees. This joint approach to consultation
will be particularly attractive where the transferee wants to make the first dismissals on or
very soon after the date of the transfer.
By carrying out a consultation prior to the transfer the transferee can argue that it satisfied
the requirements of general fairness before making any dismissals. By consulting for the
prescribed time period prior to the transfer, the transferee may also be able to argue that
it has complied with the collective redundancy consultation rules, where these apply. The
law about whether or not it is acceptable for pre-transfer consultation to count towards the
dismissing employer’s collective consultation obligations under TULR(C)A is uncertain and
is currently under review. In its Consultation on proposed changes to the TUPE Regulations
2006 (PDF format, 521K) (on the UK Government website), the Government has proposed to
amend the Regulations to ensure that consultation by the transferee with staff who are due to
transfer will count for the purpose of the obligation to consult on collective redundancies.
If the transferee decides to go ahead with pre-transfer consultation with employees who are
due to transfer, and the transferor agrees to allow access to the employees, the transferee
should consider its options with regard to how to carry this out in practice. For example, it
should consider whether to hold joint meetings with representatives of its own affected
employees and affected employees of the transferor, or whether to conduct consultation with
the two groups separately. It could arrange meetings with the appropriate representatives
only, or it could invite all affected employees to group meetings. It should liaise with the
transferor about holding and publicising meetings on the transferor’s premises.
The transferor’s duty to inform and consult its own employees
Where the transferee intends to make dismissals post transfer, the transferor, for its part,
should ensure that it complies with its obligations under reg.13 of the TUPE Regulations
to inform representatives of its own staff prior to the transfer. The information process will
involve the transferor passing on information about the dismissals that the transferee has
indicated that it envisages making post-transfer. The transferor does not have a duty to
consult on measures that the transferee envisages taking.
Selection for redundancy
Where, following a transfer, the transferee’s ETO reason for dismissing employees is
redundancy, the principles of general fairness require the transferee to treat both the
transferring employees and its own employees equally. Therefore, where redundancies will be
made from among a class of employee that consists of existing and transferring employees,
the redundancy selection pool should include both groups. Any attempt to favour one group
over the other will almost certainly give rise to unfairness.

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Post-transfer dismissals by the transferor
Following a relevant transfer, a transferor may need to dismiss staff for an ETO reason
connected to the transfer, for example it may need fewer support staff as a result of part of its
workforce transferring out of the organisation.
Where the transferor envisages making post-transfer dismissals, it should, before the transfer
takes place, comply with its obligations underTUPE to inform and consult with representatives
of its employees about these dismissals. If it fails to inform and consult prior to the transfer,
although it may have exposed itself to the risk of claims for a protective award, the transferor
will be under no obligation underTUPE to consult once the transfer has happened.
That being said, any dismissals will still be subject to the rules of general fairness and, where
they apply, to the collective redundancy consultation rules under TULR(C)A. Therefore, before
making any dismissals in such a case, although there is no TUPE obligation after the transfer,
the transferor will need to undertake the appropriate redundancy consultation to avoid
claims for unfair dismissal and, if TULR(C)A applies, for a protective award.
Dismissals that are unconnected to the transfer
There will be occasions where the reason for dismissing a transferring employee is not
connected with the transfer at all, but is related to the individual him- or herself. For example,
the transferee may wish to dismiss transferring employees who are part way through
a performance management process or are on long-term sick leave. In such cases, the
transferee should abide by the usual rules associated with carrying out a fair dismissal.
It will, of course, be possible for an employee dismissed in such circumstances to argue that
his or her dismissal was because of the transfer or for a reason connected with it. However, the
question will be a matter of fact for the tribunal and it will be up to the employee to prove the
connection.
As a general rule, if there is a potentially fair reason for the dismissal that appears unrelated to
the transfer and the employer has a reasonable explanation as to the timing of the dismissal
(ie it does not look to have been expedited as a result of the transfer) the dismissal is likely to
be found not to have been connected with the transfer.
Dismissals where a disciplinary or capability process is ongoing at the time of the
transfer
If the transferor is conducting a disciplinary or capability procedure in relation to an employee
in the period leading up to the transfer, it should make every effort to complete the procedure
prior to the date of the transfer, while ensuring that the procedure remains fair. Where that
is not possible and the procedure is ongoing at the time of the transfer, the transferee needs
to ensure, as far as possible, that the procedure is unbroken. Any undue delays, lost evidence
or unavailable witnesses, for example, could give rise to claims of a flawed procedure and
general unfairness.
In the circumstances, the transferee should ensure that it obtains full disclosure of all the
necessary evidence prior to the transfer. Also, in relation to any relevant witnesses that will
not transfer, it should try to obtain their agreement that they will attend to give evidence at
any subsequent hearing. Where that is not possible, the transferee should at least attempt to
obtain signed witness statements from them.
Although it is acceptable for a transferee to dismiss entirely on the basis of a procedure
carried out by a transferor, because liability for the dismissal would rest solely with the
transferee, it would be advisable for the transferee to audit that procedure to ensure that no
mistakes were made by the transferor prior to the transfer date.
The belt and braces approach would be for the transferee to insist on an indemnity from the
transferor in respect of any such proceedings that are ongoing at the date of the transfer.
Whether or not the transferor would be likely to agree to indemnify against a claim the
conclusion of which is out of its hands is another matter and will be for negotiation between
the parties.

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More guidance from XpertHR
“How to”guide on:
n avoiding falling foul of the law on harmonising
contractual terms and conditions following aTUPE
transfer
FAQs on TUPE, including:
n Where a transferee has no need for the employees
transferred to it underTUPE, can the selection pool for
redundancy include only the transferred employees, or
must it also include the transferee’s existing workforce?
n Does an employee need a minimum period of service to
bring a claim of unfair dismissal when dismissed by
reason of aTUPE transfer?
Line manager briefings on:
n handlingTUPE transfers
n individual redundancies
n collective redundancies
Good practice guide on TUPE
Liveflo: see how our revolutionary online HR tool can help you
n Liveflo workflow on conducting an election for employee
representatives forTUPE consultation
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