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1 TUPE Due Diligence Checklist August 2012, NCVO This Due Diligence checklist is for use by voluntary, community and social enterprise organisations conducting a TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) transfer. Due Diligence is a process of understanding risk to assure organisations business decisions are suitable and manageable. This Due Diligence checklist explains the evidence and documentatio on including employee liability information organisations need to understand the liabilities being transferred and therefore their levels of risk and responsibility. This Due Diligence document has beenn written by TPP Law on behalf of NCVO. This document is intended to support greater understanding and preparation when undertaking TUPE; it should not replacee direct legal advice. NCVO recommends that all organisations undertaking TUPE seek legal advice.
2 What is TUPE? The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) transfer employees and their employment rights to a new employer. The employees are transferred if the area of business on which they work (a project or contracted programme) is transferred. In the voluntary sector this can arise at the end of a funding period (for example when a different provider wins a current contract), or when one organisation is taken over by another, or where two or more organisations choose to merge. Where TUPE applies a number of legal obligations arise. Responsibility for employees assigned to the project, organisation or part of the organisation transferring, and most employment rights and liabilities relating to those employees, will pass to the new employer. In this document we refer to transferor and transferee. The transferor is the outgoing employer and the transferee is the incoming employer. For detailed explanation of TUPE read the NCVO TUPE Factsheet (revised 2012).) The Regulations: what information must be declared? The TUPE Regulations came into force on 6 April 2006 and apply to all transfers taking place on or after 6 April Under reg. 11 of the TUPE Regulations the transferor is obliged to notify to the transferee in writing the employee liability information of any employee who is assigned to the organised grouping of resources or employees that is the subject of the relevant transfer. The information that must be given is as follows: Identity and age of the employee Written employment particulars required to be given to the employee under s.1 of the Employment Rights Act 1996 (i.e. the basic terms and conditions of employment) Information on any disciplinary or grievance procedure taken within the previous two years Information on any court or tribunal case, claim or action brought by the employee against the transferor within the previous two years, or any court or tribunal case, claim or action arising out of the employee's employment with it that the transferor has reasonable grounds to believe that the employee may bring against the new employer Information about any collective agreement that will have effect after the transfer in relation to the employee including working time opt-outs The employee liability information must also include information about any person who would have been employed by the transferor and assigned to the resources or employees to be transferred had the individual not been dismissed because of the transfer or for a reason connected with it i.e. in circumstances where the dismissal is automatically unfair. The information must be provided no later than 14 days before the transfer. Once the employee liability information has been provided, the transferor is under an obligation to notify the transferee in writing of any change in this information. It is permissible for the transferor to give notification in more than one instalment and indirectly through a third party, for example where an outgoing provider gives the information to the client (eg the commissioner) to then pass to the incoming provider.
3 Undertaking Due Diligence Despite the requirement for the transferor to provide employee liability information, a transferee should, where it can, still carry out a due diligence exercise and ask the transferring employer further questions as necessary. We include below examples of information that may be necessary to make an informed decision. Note that the information outlined below will not always be necessary and could result in wasted time in analysis. It is important to find a balance. Due diligence is the process by which formal investigations are carried out in relation to the company or undertaking subject to the TUPE transfer prior to the transfer. The purpose is for the transferee to obtain as much information as possible about their business options in this case, potential merger, or taking on established services and contracts. A comprehensive due diligence exercise will help the transferee to identify any potential problems and avoid any unexpected costs and liabilities following completion. Particular issues to look out for include onerous terms such as long notice periods or golden parachutes (an agreed lump sum payment upon termination of employment), as well as terms that may be of use to the transferee such as restrictive covenants and provisions making it difficult for key employees to leave. Hidden costs to be wary of include occupational pension schemes, enhanced redundancy payments and health and safety or discrimination issues that could result in costly proceedings and damage the transferee s reputation. Once the transferee receives the due diligence information they should then analyse the information carefully to identify any actual or potential risk and liability. The transferee can then establish whether they wish to enter into the contract. It may be that due diligence in other areas of the business or service will also be required. In the case of tenders, it may be that the transferee can request further information at the tender stage in order to submit a more accurate tender. The less information available, the greater the exposure to risk. Where little information about staff is made available the transferee should make clear that any quotation is subject to the provision of reasonable and adequate due diligence information or, at the very least, the employee liability information required by the TUPE Regulations Remedy The remedy for failure to notify employee liability information is a complaint by the transferee to the High Court (or in Scotland the Court of Session). If the court finds the complaint well founded it will issue a written penalty notice to the transferor requiring it to pay a penalty of not less than 500 per employee in respect of whom the information was not provided.
4 Checklist In carrying out a due diligence exercise the following additional information may be desirable (please note that this is a non-exhaustive list, you should consider other information that may be relevant depending on your particular organisation): Employee Information Contract of employment Identification of key personnel Date of commencement of service for each employee Notice required to terminate each employee's contract of employment Salary, wage, other benefits and hours of work of each employee including a statement about whether overtime is contractual or voluntary and details of job grades Holidays and holiday pay including details of the holiday year and holiday taken to date Details of any commission or bonus scheme, whether contractual or discretionary, in relation to any employee Restrictive covenants, confidentiality agreements and intellectual property agreements Pension details in respect of each employee Full particulars of the transferor's pension scheme including details of the trust deed and rules on retirement and benefits on retirement Names of all trustees of the transferor's pension scheme(s) and dates of appointment Details of any profit-sharing scheme and of the employees to whom it applies Details of any share option scheme and the number of employees who are members All other benefits, arrangements and facilities in relation to each employee, whether they are believed to be contractual or otherwise eg private health insurance, life assurance, company car, free products, discounts and share option schemes Details of the Company's grievance procedure, disciplinary procedure, redundancy, health and safety, and equal opportunities policy [specify other examples of documentation if required] Details of any current appeals against dismissal Details of any employee who has resigned in the last year
5 Details of any employee who has been dismissed in the last year and the reasons for the dismissal Details of all individuals in the undertaking working on training, work experience or similar schemes Details of any changes to terms and conditions in relation to any employee introduced over the past two years Details of any employee who is about to exercise, who has given notice to exercise or who has exercised a right to maternity, adoption, paternity or parental leave and who may elect to return to work after such leave; Numbers of all employees who have been or are currently off sick or otherwise absent for more than two weeks (including on periods of maternity leave, parental leave, etc) Details of all employment tribunal or other court claims in the last two years including details of any settlements and whether they remain unpaid Non-employee Information Details including terms of engagement of any non-employees such as consultants, casual workers, agency workers and volunteers. Demographics (to identify any potential discrimination claims) Numbers of weekly and monthly paid employees Salary bands and total employment costs Number of temporary and part-time staff Number of consultants, trainees, apprentices, casual workers and selfemployed Absence records Ethnic breakdown of workforce Gender breakdown of workforce Age breakdown of workforce Job evaluation structures in force
6 Contractual Documentation Sample offer letter Job descriptions Company rules and policies Staff handbooks Directors and Senior Executives Names of all executive and non-executive directors Details of directors fees paid within the last 2 years and due to be paid in the current year Details of all directors other interests Copies of senior executives service agreements Collective Issues Details of any trade union recognised by the transferor including particulars of the recognition agreement, the date of the agreement and how long the union has been recognised Wages and salary review dates Names of all trade union or other employee representatives, along with the name of the trade union where relevant, the position and how long the position has been held Details of any other agreement, whether plant, local or national, with any union or other body of employee representatives Current state of employer-union negotiations Details of any consultation committees Requests made under the Information and Consultation of Employees Regulations 2004
7 Miscellaneous Matters Accommodation commitments Lay-off and guarantee payment provision Normal retirement age and details of any justification for relying on a retirement age Flexible working arrangements including part-time, job sharing and homeworking Details of any inquiry, correspondence or contact between the transferor and the Equality and Human Rights Commission within the last two years and the outcome Details of any inquiry, correspondence or contact between the transferor and the Health and Safety Inspectorate and the outcome, as well as employee liability insurance cover, levels of claims over the past three years, and any current claims or reported accidents Details of any inquiry, correspondence or contact between the transferor and HM Revenue & Customs concerning employees within the last two years and the outcome Data Protection Given the specific requirements in the Data Protection Act 1998 (DPA) all transferors should ensure that they have specific provisions in their policies to allow for the retention of data to enable them to comply with their obligations to provide employee liability information pursuant to TUPE The Information Commissioner has confirmed that the DPA does allow employers to disclose personal employment data as required by TUPE. Nevertheless, particularly where information sought is wider than required by the provisions of TUPE, it is advisable that employers ensure they have specific consent from employees to disclose the data. Where transferors are unable to obtain employees consent, they might consider supplying the data in an anonymised form. This could be contained within a data protection policy. Transferors might also consider imposing confidentiality obligations in contracts requiring the return of personalised information should the transfer fall through.
8 Further Support and Information Legal Training NCVO provides half-day legal seminars on TUPE. These events are delivered by TPP Law solicitors. For details of the next seminar in your area contact or see Information and Policy For detailed explanation of TUPE read the NCVO TUPE Factsheet (revised 2012).) For the latest policy information, including details of our on-going policy advocacy around TUPE, see Using a solicitor TPP Law provides specialist advice on the transfer of businesses. We help our clients to navigate their way through this complex area and to successfully achieve their objectives. For further information, please contact Gemma Brown on t e gemma@tpplaw.co.uk. Whilst every effort is made to ensure accuracy of the content, no responsibility can be accepted for errors or omissions. The content is for general guidance and is not a substitute for specific legal advice.
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