Basic rights

If the business is sold to a new owner, the sale would usually be governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006, better known as TUPE. Employees are protected by TUPE as their contract of employment would transfer automatically to the new employer on the same terms and conditions.

This does not mean that the employee will be obliged to work for the new owner - they will have the right to inform you or the new owner that they object to becoming employed by the new owner.

However, if they do this, they will be considered to have resigned as opposed to being dismissed. This means that they will not be entitled to a statutory redundancy payment. However, if the employee resigned because the transfer to the new job would have resulted in a substantial and detrimental change to their working conditions, they may have a claim for constructive or wrongful dismissal.

If the employee is prepared to accept employment with the new owner, they are not entitled to anything more than they enjoyed under the previous employer.

For further information on TUPE please see How is the employee affected?.

Information & consultation

Where you decide to dispose of your business to some other party and TUPE applies, there is a duty on you, and the new owner of the business, to provide information to the affected employees and consult with them or any appropriate representatives.

The duty to consult comes from the TUPE regulations but may also be required under any information and consultation agreement your business may have in place. But you don't have to consult under both TUPE and any information and consultation agreement at the same time (you can opt out of the information and consultation agreement, provided you consult under TUPE).

The appropriate representatives

The appropriate representatives you must inform and consult with are either:

• representatives of the recognised trade union, if there is one; or
• employee representatives appointed specifically to be consulted on the transfer or who have already been appointed for a different purpose and are suitable for this purpose too.

For businesses in England, Wales and Scotland:

• If you have fewer than 10 employees, you don't have to appoint employee representatives for transfers.
• For transfers taking place on or after 1 July 2024, you will be allowed to inform and consult directly with affected employees if you don't have any appropriate employee representatives in place and either you have fewer than 50 employees or there are (or are likely to be) fewer than 10 transferring employees (whatever the size of the employer).

You must:

• Inform the appropriate representatives long enough before the transfer to enable consultation to take place.
• Consult with the appropriate representatives to attempt to seek agreement of the measures to be taken.

At all times, consultation should be carried out by all parties in good faith.

If you invited affected employees to elect representatives, but they fail to do so within a reasonable time, you must give the required information (see below) directly to all of them instead.

The required information

You have an obligation to inform the employees or all appropriate representatives of the following:

• The fact that a relevant transfer is to take place
• When it is to take place (approximately)
• The reason for it
• The legal, economic and social implications of the transfer for the affected employees
• The measures that you expect to take in relation to those employees (or, if no measures are expected, then that fact)
• If you are the seller, the measures that the new owner expects to take regarding the employees who will automatically be assigned to them on the transfer (or, if no measures are envisaged, then that fact)

Failing to consult

If you or a new owner fail to inform and consult with employees' representatives, your employees' representative (or the individual employees if they do not have one) can complain to the Employment Tribunal within than 3 months after the date of the transfer. If successful, the tribunal must make a declaration (order) that no consultation took place and can award compensation of up to 13 weeks' to each affected employee, depending on the seriousness of the breach.

Both you and the new owner of the business will be liable to pay.

Employee liability information

If you are the seller, certain information about the employees and their terms and conditions of employment (known as 'employee liability information' or ELI) must be given to the buyer.

This must be provided not less than 28 days (14 days for businesses in Northern Ireland) before completion, or as soon as reasonably possible if special circumstances mean it wasn't reasonably possible to provide it in time.

The ELI must include the following information:

• The identity and age of the employee
• Information of any disciplinary action taken against an employee and/or grievance invoked by an employee within the last 2 years
• Information of any court or tribunal case, claim or action brought by an employee against you within the last 2 years and whether you have reasonable grounds to believe that any employee may bring a claim against you arising out of their employment
• Information of any collective agreement which will have effect after the transfer
• The particulars of employment/statement of written terms that you must give an employee under the Employment Rights Act 1996.

Failing to do this means the buyer can make a compensaton claim against you. This will be at least £500 per employee, or potentially more if they suffered a greater loss as a result.

Further information is available from the Department for Business, Energy & Industrial Strategy guidance 'Employment rights on the transfer of an undertaking' or the similar guidance for Northern Ireland.