Dealing with TUPE in a UK immigration context Dealing with TUPE in a UK immigration context

Dealing with TUPE in a UK immigration context
31 Dec 2014

TUPE transfers can give employers an awful lot to think about, and immigration issues are often forgotten, or at left near the bottom of the ‘to do’ list. However, if not addressed properly, immigration issues can cause legal difficulties and operational disruption.

Sometimes the immigration aspects of a transaction can be so significant, and the potential liability so great, that a transaction would never have been contemplated seriously at all if known at the outset.

TUPE and the duty to prevent illegal working

The Transfer of Employment (Protection of Employment) Regulations 2006 (SI 2006/246), commonly known as TUPE, can operate so that the employment of certain employees automatically transfers from one entity to another. This can happen, for example, when assets of a business are sold, or on an outsourcing of a particular function, or a change of contractor.

Employers have legal obligations to prevent illegal working and can be liable for civil and criminal penalties for employing those who do not have the right to work. The stakes are high, with custodial sentences and/or fines of up to £20,000 per illegal employee.

Employees who have automatically transferred to a new employer under TUPE are not excluded. The immigration position of these employees can, however, cause particular issues for the transferee employer.

Right to work checks

An employer will have a ‘statutory excuse’ from the civil offence if it makes the prescribed statutory checks on employees’ immigration status. This statutory excuse does not apply if the employer knows that the employee is, in fact, an illegal worker.

Even if the transferor (outgoing employer) has diligently made these checks, it is not certain that a transferee (incoming employer) can take the benefit of those checks in the event that it transpires that a transferred employee does not have the right to work. Transferors should therefore conduct their own checks in order to establish the statutory excuse.

In a transaction involving a large number of employees, this is going to be time consuming. Helpfully, the Code of Practice on Preventing Illegal Working gives transferee employers 60 days following a TUPE transfer to conduct right to work checks for the employees who have transferred to it.

Post-transfer dismissals

The additional time is helpful, but what if the immigration document checks performed within the 60 days indicate that some employees do not have the right to work? In most cases they will need to be dismissed to avoid civil and criminal penalties under immigration law, but a very careful dismissal process should be followed. Great care needs to be taken as there is a risk of:

• ordinary unfair dismissal claims
• automatic unfair dismissal claims (owing to the reason for the dismissal being transfer-related)
• race discrimination claims.

Due diligence

Ideally, it is better to find out about any immigration glitches before the transfer - in fact, as early as possible. If key people do not have the right to work (or would not have the right to work post transfer) then the business may not be in a position to succeed going forward.

If there are numerous and/or serious breaches of the transferor’s duty as an employer to prevent illegal working, then putting this right post-transfer may be more trouble, risk and expense than the transaction is worth. Remember that custodial sentences are one potential consequence of employing illegal workers.

Transferors have an obligation under TUPE Regulation 11 to provide certain information about employees, known as ‘employee liability information’ to the transferor.

Provision of information about immigration matters is not required under Regulation 11. The transferee will need to ask for it. Where the transfer is in the course of a negotiated business deal between the transferor/seller and the transferee/buyer, this can be included in the due diligence process. It may be more difficult in a service provision change such as an outsourcing.

Even if the transferor is co-operative and has kept (and shares) careful records for the purposes of flagging any immigration issues early on, transferee employers should not rely upon the document checking records conducted by the transferor employer. They should still conduct their own checks within the 60 days referred to above.

Sponsor licences

Information relating to sponsor licences is also something to ask for, if possible, at the due diligence stage.

Some employers will have a sponsor licence entitling the sponsorship and employment of certain qualifying employees in certain roles under tier 2. The transferee does not inherit the transferor’s sponsor licence under TUPE. Therefore, if there are any sponsored migrants amongst the transferring employees, the new employing entity will need to:

• apply for a sponsor licence (if it does not have one already) within 28 days of the date of the transfer
• notify UK Visas and Immigration (UKVI) of the details of the sponsored migrants who transfer under TUPE.

There will be some situations in which the transferee will not be able to obtain a Tier 2 sponsor licence. For example, it may have previously held a sponsor licence, but that licence has been revoked for non-compliance with its terms to the extent that the immigration authorities are not prepared to issue a new licence.

Here, it will be necessary to establish whether there is an alternative immigration category into which the sponsored employee could switch in order to work in the UK for the new employing entity. If there is not, termination of the employment (again, following a very careful procedure) will be necessary. The employee’s permission to stay in the UK will be curtailed to 60 days (sometimes less).

Information and consultation

For some employees who are subject to immigration control, a TUPE transfer can have very significant consequences. TUPE requires transferees to provide information to transferors about any ‘measures’ that they envisage taking in relation to affected employees. If dismissal for immigration related reasons is planned, this will be a ‘measure’.

TUPE also requires transferors to inform elected employee representatives of the ‘legal, social and economic implications of the transfer’. This would include any immigration related dismissals. Where there are ‘measures’, the transferor must also consult with the elected representatives about the transfer. A failure to inform and consult as required by TUPE can result in awards of up to 13 weeks pay per employee.

Commercial negotiations

Where the nature of the transaction is such that the transferor and transferee can negotiate the terms, for example the sale of a business, there are some possible steps that can be taken to assist with these immigration issues.

If the due diligence process brings to light immigration irregularities, the transferee (depending on its negotiating position) may be able to require the transferor to put things right prior to the transfer. Whilst the parties cannot validly contract out of TUPE, it is common to address TUPE liabilities by including warranties and indemnities in the commercial agreement that will govern the transaction.

However, this is not a complete solution. It will not provide valid protection for the transferee from criminal liability and custodial sentences, reputational harm or damage to a previously good relationship with the immigration authorities.

Conflicts between immigration law and employment law can arise at all stages of the employment relationship. Dealing with a TUPE transfer can be complicated enough before immigration issues are added in, but if immigration issues are addressed up front from the early stages of a transfer, they can be much more easily addressed and kept under control.

Anne-Marie Balfour, senior associate,
Charles Russell Speechlys LLP

TUPE transfers can give employers an awful lot to think about, and immigration issues are often forgotten, or at left near the bottom of the ‘to do’ list. However, if not addressed properly, immigration issues can cause legal difficulties and operational disruption.

Sometimes the immigration aspects of a transaction can be so significant, and the potential liability so great, that a transaction would never have been contemplated seriously at all if known at the outset.

TUPE and the duty to prevent illegal working

The Transfer of Employment (Protection of Employment) Regulations 2006 (SI 2006/246), commonly known as TUPE, can operate so that the employment of certain employees automatically transfers from one entity to another. This can happen, for example, when assets of a business are sold, or on an outsourcing of a particular function, or a change of contractor.

Employers have legal obligations to prevent illegal working and can be liable for civil and criminal penalties for employing those who do not have the right to work. The stakes are high, with custodial sentences and/or fines of up to £20,000 per illegal employee.

Employees who have automatically transferred to a new employer under TUPE are not excluded. The immigration position of these employees can, however, cause particular issues for the transferee employer.

Right to work checks

An employer will have a ‘statutory excuse’ from the civil offence if it makes the prescribed statutory checks on employees’ immigration status. This statutory excuse does not apply if the employer knows that the employee is, in fact, an illegal worker.

Even if the transferor (outgoing employer) has diligently made these checks, it is not certain that a transferee (incoming employer) can take the benefit of those checks in the event that it transpires that a transferred employee does not have the right to work. Transferors should therefore conduct their own checks in order to establish the statutory excuse.

In a transaction involving a large number of employees, this is going to be time consuming. Helpfully, the Code of Practice on Preventing Illegal Working gives transferee employers 60 days following a TUPE transfer to conduct right to work checks for the employees who have transferred to it.

Post-transfer dismissals

The additional time is helpful, but what if the immigration document checks performed within the 60 days indicate that some employees do not have the right to work? In most cases they will need to be dismissed to avoid civil and criminal penalties under immigration law, but a very careful dismissal process should be followed. Great care needs to be taken as there is a risk of:

• ordinary unfair dismissal claims
• automatic unfair dismissal claims (owing to the reason for the dismissal being transfer-related)
• race discrimination claims.

Due diligence

Ideally, it is better to find out about any immigration glitches before the transfer - in fact, as early as possible. If key people do not have the right to work (or would not have the right to work post transfer) then the business may not be in a position to succeed going forward.

If there are numerous and/or serious breaches of the transferor’s duty as an employer to prevent illegal working, then putting this right post-transfer may be more trouble, risk and expense than the transaction is worth. Remember that custodial sentences are one potential consequence of employing illegal workers.

Transferors have an obligation under TUPE Regulation 11 to provide certain information about employees, known as ‘employee liability information’ to the transferor.

Provision of information about immigration matters is not required under Regulation 11. The transferee will need to ask for it. Where the transfer is in the course of a negotiated business deal between the transferor/seller and the transferee/buyer, this can be included in the due diligence process. It may be more difficult in a service provision change such as an outsourcing.

Even if the transferor is co-operative and has kept (and shares) careful records for the purposes of flagging any immigration issues early on, transferee employers should not rely upon the document checking records conducted by the transferor employer. They should still conduct their own checks within the 60 days referred to above.

Sponsor licences

Information relating to sponsor licences is also something to ask for, if possible, at the due diligence stage.

Some employers will have a sponsor licence entitling the sponsorship and employment of certain qualifying employees in certain roles under tier 2. The transferee does not inherit the transferor’s sponsor licence under TUPE. Therefore, if there are any sponsored migrants amongst the transferring employees, the new employing entity will need to:

• apply for a sponsor licence (if it does not have one already) within 28 days of the date of the transfer
• notify UK Visas and Immigration (UKVI) of the details of the sponsored migrants who transfer under TUPE.

There will be some situations in which the transferee will not be able to obtain a Tier 2 sponsor licence. For example, it may have previously held a sponsor licence, but that licence has been revoked for non-compliance with its terms to the extent that the immigration authorities are not prepared to issue a new licence.

Here, it will be necessary to establish whether there is an alternative immigration category into which the sponsored employee could switch in order to work in the UK for the new employing entity. If there is not, termination of the employment (again, following a very careful procedure) will be necessary. The employee’s permission to stay in the UK will be curtailed to 60 days (sometimes less).

Information and consultation

For some employees who are subject to immigration control, a TUPE transfer can have very significant consequences. TUPE requires transferees to provide information to transferors about any ‘measures’ that they envisage taking in relation to affected employees. If dismissal for immigration related reasons is planned, this will be a ‘measure’.

TUPE also requires transferors to inform elected employee representatives of the ‘legal, social and economic implications of the transfer’. This would include any immigration related dismissals. Where there are ‘measures’, the transferor must also consult with the elected representatives about the transfer. A failure to inform and consult as required by TUPE can result in awards of up to 13 weeks pay per employee.

Commercial negotiations

Where the nature of the transaction is such that the transferor and transferee can negotiate the terms, for example the sale of a business, there are some possible steps that can be taken to assist with these immigration issues.

If the due diligence process brings to light immigration irregularities, the transferee (depending on its negotiating position) may be able to require the transferor to put things right prior to the transfer. Whilst the parties cannot validly contract out of TUPE, it is common to address TUPE liabilities by including warranties and indemnities in the commercial agreement that will govern the transaction.

However, this is not a complete solution. It will not provide valid protection for the transferee from criminal liability and custodial sentences, reputational harm or damage to a previously good relationship with the immigration authorities.

Conflicts between immigration law and employment law can arise at all stages of the employment relationship. Dealing with a TUPE transfer can be complicated enough before immigration issues are added in, but if immigration issues are addressed up front from the early stages of a transfer, they can be much more easily addressed and kept under control.

Anne-Marie Balfour, senior associate,
Charles Russell Speechlys LLP