Executive Summary
- What’s new: The UK government conducted a call for evidence on TUPE regulations. Skadden responded, discussing issues that we see working with employers involved in TUPE transfers, including variations to terms and conditions, pension rights, redundancies, employee objections and consultation requirements.
- Why it matters: These issues affect employers navigating TUPE transfers in mergers and acquisitions, carve-outs, outsourcings and corporate reorganisations, particularly given the overlap with new fire-and-rehire restrictions.
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As part of its Plan to Make Work Pay legislative initiative, the UK government recently launched a Call for Evidence on the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), seeking views on the effectiveness of the current framework and how it might be updated. Skadden submitted a response to the call for evidence drawing on our experience advising employers on TUPE transfers in corporate transactions, including on mergers and acquisitions, carve-outs, outsourcings and corporate reorganisations.
While the current TUPE framework is well established and provides certainty for the parties to a TUPE transfer, we identified a number of areas where we argued that greater flexibility might be helpful for employers, particularly around the ability to harmonise or vary terms and conditions of employment in connection with a TUPE transfer. You can see the full response Skadden submitted to the consultation.
Variations to Terms and Conditions
The current restrictions on varying terms and conditions following a TUPE transfer prevent employers from harmonising terms and conditions even where the changes are objectively beneficial to or neutral for employees, and allow employees to “cherry pick” and revert to prior terms even after agreeing to new ones. This can result in uncertainty for both parties.
We recommended that reforms introduce a mechanism allowing employers and employees to agree on new terms and conditions following a TUPE transfer, provided that, for example, replacement terms are no less favourable in the aggregate or the employee takes independent legal advice on them. This would mean that new employment agreements signed in connection with a TUPE transfer are clearly enforceable.
Defined Benefit Pension Rights
While some pension rights are protected in a TUPE transfer, there is significant uncertainty around the scope of so-called Beckmann enhanced redundancy rights and early-retirement pension benefits that may transfer notwithstanding the general position that TUPE does not operate to transfer rights in connection with an occupational pension scheme. This position stems from the European Court of Justice decision in Beckmann and related cases, where the relevant court held that enhanced redundancy and early-retirement rights fall outside the scope of standard “old age, invalidity or survivors pension benefits,” which generally do not transfer under TUPE.
These liabilities that derive from defined benefit pension schemes can be difficult to quantify, can risk having a chilling effect on M&A and, in practice, may deter employers from allowing employees to retire early. We recommended that the government provide clarity in this area about the scope of pension rights that transfer.
Pre-Transfer Redundancies
Any dismissal in connection with a TUPE transfer is an automatically unfair dismissal unless the employer has an economic, organisational or technical (ETO) reason for the dismissal. An ETO reason can include a genuine redundancy, but typically only the incoming employer can take advantage of this since it is the party that can demonstrate that a genuine redundancy situation exists.
In circumstances where (i) there is clearly no role for an employee following their TUPE transfer and (ii) the incoming employer has an ETO reason to dismiss the employee, in order to ensure that the dismissal is fair, the transfer is typically structured so that the employee transfers (even if momentarily) to the incoming employer that holds the ETO reason for dismissal. This is still the case even where all parties know there will be no continuing role.
To increase certainty and improve employee experience in this scenario, we recommended that the parties be able to agree and implement a redundancy prior to or upon the transfer without the risk of an automatically unfair dismissal claim.
Employee Objections to Transfer and Restrictive Covenants
Where an employee objects to a TUPE transfer in circumstances where there is no substantial change to their working conditions to their material detriment, their employment agreement falls away by operation of law and gives the employee an argument that the provisions contained in it are no longer enforceable, including their post-termination obligations such as restrictive covenants and confidentiality obligations. In our experience, well-advised employees can use this mechanism strategically to free themselves from restrictions such as a noncompete provision in order to join a competitor.
We recommended that where an employee objects to a TUPE transfer where the incoming employer has not proposed a substantial change to the employee’s working conditions to their material detriment, core post-termination obligations should continue in force.
Consultation Requirements
While TUPE’s information and consultation requirements generally work well, uncertainty remains around which employees (of both the transferor and transferee) need to be consulted where the pool of “potentially” affected employees is not clear. For example, requiring a nontransferring employee population to elect representatives where the employer’s plans for the combined business are not fully formed may be disproportionate.
We suggested the government consider a different standard of consultation for employees who are merely “affected” by a transfer in circumstances where they are not changing employers.
Interaction With the Employment Rights Act 2025
A recurring theme in our response is the interaction between TUPE and the new restrictions on “fire and rehire” under the Employment Rights Act 2025, which is expected to limit even further the already narrow circumstances under which an employer can change contractual terms following a transfer.
In our view, the combined effect of the current TUPE restrictions and the incoming fire-and-rehire provisions will make the regime increasingly difficult to navigate in practice, particularly for employers seeking to harmonise terms and conditions of employment following a transfer or where the incoming employer is proposing even minor changes to terms and conditions.
Next Steps
We will continue to monitor the government’s response to the call for evidence and any resulting legislative proposals.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.