Covid 19: Furlough Leave and TUPE

Covid 19: Furlough Leave and TUPE

When a business changes owner, its members of staff will find that they are protected under the Transfer of Undertakings (Protection of Employment) regulations, otherwise known as TUPE. It applies to all UK businesses, regardless of their size, number of employees or sector. It doesn’t matter whether the company is one small business with a handful of employees or part of a group with hundreds or even thousands of employees.

TUPE applies under two types of transfer. The first is a business transfer, which is when a business – or part of a business – moves from one employer to another. This is often found in a merge, which is when two companies close, and then join together to form a new one.

The second transfer under which TUPE applies is when it’s a service provision change. This is normally applicable when a service provided in-house moves to a contractor or vice versa, or when a service is moved from one contractor to another. It’s important to note that employees are not protected under TUPE if the contract is for the supply of goods for the company’s own use, or for a single event or short-term task e.g. a catering company being used for a one-off corporate event.

When TUPE applies, it normally means that each employee’s job transfers over to the new company along with their employment terms. Their continuity of employment is not affected either. In some cases exceptions may apply, for example if they’re made redundant or in if the business becomes insolvent.

Government clarification on TUPE and furlough leave

The government has clarified its stance on the relationship between TUPE and the new rules on furlough leave under the Coronavirus Job Retention Scheme (CJRS).

On 9th April 2020, HMRC advised that “a new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership”. This confirms that employers of new employees who have transferred under TUPE can put these employees on furlough, and is welcome news for both employers and employees.

Next steps

Up until recently, both employers and employees who were involved in a TUPE transfer after 28th February 2020 were left in the dark regarding whether they were able to furlough or be furloughed. Before the clarification was released, a key criterion for furloughing employees was that they were on the payroll on or before 28th February 2020. Thankfully, the details of the TUPE exception have now been released and employers can now furlough newly TUPE’d employees with certainty that they won’t be penalised for doing so.

If these issues are affecting your business or are likely to, please do get in touch with us today. We would be more than happy to help you.

This note comprises the view of the author at the time written. This note is not a substitute for legal advice. Information may be incorrect or out of date and may not constitute a definitive or complete statement of the law or the legal market in any area. This note is not intended to constitute advice in any specific situation. You should take legal advice in specific situations. All implied warranties and conditions are excluded, to the maximum extent permitted by law.