TUPE and the Fire Safety Sale: What Transfers and What Surprises People

The TriggerWhether TUPE applies at all depends on how the deal is structured

A share sale does not trigger TUPE. The company continues to employ the same people under the same contracts; only its ownership changes. That is one reason share sales are common in this sector, and it is worth knowing before anyone tells you an employment process is unavoidable.

An asset or business sale does trigger it. Where the trade, the contracts and the goodwill transfer to a different legal entity, employees assigned to that business transfer automatically on their existing terms, with their continuity of service intact, and dismissal for a reason connected to the transfer is automatically unfair unless the employer can show an economic, technical or organisational reason entailing changes in the workforce.

Which structure applies is not purely a legal preference, so it is worth raising early rather than late. Buyers often prefer an asset purchase because it limits the historic liabilities they inherit, while sellers frequently prefer a share sale for tax reasons as much as for simplicity. That tension is normally settled at heads of terms, and the employment consequences follow from whatever is agreed there.

There is a third route that catches fire businesses more often than either: a service provision change. When a client moves a maintenance contract from one contractor to another, or brings it in-house, the engineers principally assigned to that contract can transfer with it. That is a live issue in this sector every time a large servicing contract is lost or won, quite apart from any sale.

That is one reason share sales are common in this sector, and it is worth knowing before anyone tells you an employment process is unavoidable.

The ObligationThe timetable stops being yours once the obligation bites

Where TUPE applies, both employers must inform and consult appropriate representatives of the affected employees in good time before the transfer, covering the fact it is happening, when, why, and any measures envisaged. Businesses with fewer than ten employees may consult employees directly where no representatives already exist, which covers a fair number of firms in this sector but by no means all of them.

The seller must also give the buyer employee liability information at least twenty-eight days before the transfer: identities, ages, terms, disciplinary and grievance records from the previous two years, claims in the previous two years and collective agreements. That twenty-eight day figure is the reason an employment file assembled at the last minute becomes a completion delay rather than an inconvenience.

Both obligations matter commercially as well as legally. Failure to inform and consult carries an award of up to thirteen weeks' pay per affected employee, and a buyer will usually want that risk reflected in the agreement rather than carried quietly. It is one of the few parts of a sale where getting the sequence wrong has a directly calculable cost.

One point catches sellers who have been through this in another sector. The obligation falls on the outgoing and the incoming employer separately, and neither discharges it for the other, so a buyer who is relaxed about its own consultation does nothing for your position. Agree at heads of terms who is telling whom and when, and put the dates in the timetable rather than leaving them to be worked out later.

The PracticeFour places this goes wrong in a fire safety deal

The first is timing, and it is almost always the same mistake: an owner determined that nobody should know until completion runs into the consultation obligation with a fortnight left and has to choose between a delay and a defect. Put the employment timetable on the table while heads of terms are being drafted, not in the final month when there is no room left to move.

The second is the file itself. Employment records in this sector are often incomplete not through carelessness but through growth: engineers taken on over fifteen years, terms varied verbally, a long-standing subcontractor whose status has never been examined. That last point matters, because a self-employed engineer working exclusively for you for a decade is a question a buyer will ask and a tribunal might answer differently.

The third is specific to this sector and deserves naming. Engineers are frequently assigned across a mix of contracts rather than to one, and where only part of a business transfers, deciding who is assigned to the transferring part is a judgement rather than a given. Getting that analysis wrong leaves people transferring who should not have, or staying who should have gone, and both are expensive to unpick afterwards.

The fourth is what gets promised in the room. Owners naturally want to reassure a team that has worked for them for years, and assurances about pay, vehicles or roles given verbally during a transfer have a habit of becoming terms. Say what is accurate, say what is not yet decided, and let the formal process carry the rest.