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What is TUPE? And How Do You Say It?

What is TUPE? And How Do You Say It? Background Decorative Image

To deal with the second question first, it’s not toupee (as in a wig) and it doesn’t rhyme with hoop. It’s pronounced like two-P.

The first question is a little bit harder to answer. TUPE is an acronym for a specific UK law, but often used as shorthand to refer generally to laws in European jurisdictions that protect employment rights when businesses are sold or services are outsourced. Any in-house counsel or HR professional that deals with cross-border personnel issues should be aware of some basic TUPE principles so that they are better prepared to spot TUPE transfers when they arise.

In the U.S., when a company sells a part of its business through an asset sale, or it decides to outsource a function (such as cleaning, security or IT services), the employees who work on those assets or provide those services will get left behind with the company (and then potentially laid off) unless the asset purchaser or new service provider chooses to hire them. Not so in Europe. Under TUPE, those employees will automatically transfer as a matter of law to the purchaser/new service provider on their existing terms of employment, and most historic employment liabilities relating to those employees will transfer too. Further, there will also be obligations on the businesses to inform and consult with the employees before any TUPE transfer is finalized.

It’s easy for U.S.-based lawyers and HR professionals to miss this issue because it is so different from what they are used to, and failing to spot a TUPE transfer, or realizing too late, can result in some unwelcome legal and financial liabilities. But the sooner you spot it, the easier it is to deal with it.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.