Employee Rights Explained: What Happens When a Business Is Sold

When selling a business, UK employment law—specifically TUPE legislation—places clear responsibilities on you as the employer. The Transfer of Undertakings (Protection of Employment) Regulations protect staff contracts, maintain employment continuity, and safeguard employee rights during business transfers.

TUPE outlines the duties of both the outgoing and incoming business owners. However, it is a complex legal framework, so seeking professional advice is essential to ensure compliance and avoid legal risk.

Failing to follow employment law can lead to costly disputes or tribunal claims. So, what exactly are your obligations to employees when transferring business ownership?

Informing and Consulting Employees

Employers must inform and consult all staff affected by the transfer through a trade union or an appointed employee representative. Where none exists, representatives must be elected specifically for this process.

You must provide written details, via the representatives, covering:

• The facts of the transfer – including timescales and the reasons behind it

• The legal, economic, and social impact for transferring employees

• The measures you and the buyer intend to take concerning affected staff

These obligations also extend to employees not transferring but still impacted by the sale, ensuring they are aware of your intentions.

Providing Information to the New Employer

You must give the buyer employee liability information—a legal requirement enabling them to understand their obligations under TUPE. This data, provided in writing or electronically, must be supplied at least 14 days before the transfer.

This information includes:

• Name and age of transferring staff

• Written statement of employment particulars

• Details of any collective agreements in place

• Records of disciplinary actions, grievances, or legal proceedings in the past two years

Failure to provide this information within the legal timeframe could result in compensation claims at an employment tribunal.

If the New Employer Does Not Want All Staff

If the buyer refuses to take on certain employees, TUPE generally deems dismissals due to the transfer as automatically unfair, protecting staff rights. The only exception is where there are valid Economic, Technical, or Organisational (ETO) reasons, and a fair process has been followed.

Examples of ETO reasons include:

• Economic – Declining demand (e.g., post-pandemic) making the business unsustainable

• Technical – Current staff lacking skills for new technology being introduced

• Organisational – Relocation of the business, making transfers impractical

These protections also apply to any contractual changes made before or after the transfer.

Compliance with TUPE Regulations

Navigating TUPE successfully demands specialist knowledge, as responsibilities to employees during a business sale span multiple legal areas. Correct handling of employee rights is essential to avoid legal repercussions and protect both your business and workforce.