What rights transfer under TUPE?
A consideration of what liabilities a new employer may inherit under TUPE.
Do discretionary benefits transfer under TUPE?
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) are very complicated. Transferred employees retain all the rights and obligations existing under the contracts of employment with the previous employer and these are transferred to the new employer. The main exception to this rule concerns the treatment of occupational pensions which do not transfer under TUPE. The new employer simply has to establish a minimum level of pension provision for the transferred employees. However, provisions in a pension scheme which are not “benefits for old age, invalidity or survivors” do transfer under TUPE.
In a recent case, the Proctor & Gamble Pension Fund had a Defined Benefit in the form of Early Retirement Benefits. This was a discretionary benefit, but the High Court determined that the phrase “rights and obligations” in TUPE was to be “liberally interpreted without regard to domestic distinctions between a discretionary entitlement and a legally enforceable right” (but only to the extent that an employee’s position is protected, not enhanced).
It has yet to be seen how this case might extend the rights transferring under TUPE, but it does seems to open up the possibility for discretionary benefits to transfer.