Will TUPE transfers be affected by day one dismissal rights?

When businesses inherit employees through Transfer of Undertakings (Protection of Employment) TUPE, there are often questions about what rights those employees bring with them.

One of the biggest changes on the horizon is Labour’s proposal to introduce a ‘day one’ unfair dismissal right.

So, what does this mean for businesses involved in acquisitions or service transfers?

What are the current rules on unfair dismissal under TUPE?

At present, employees must have at least two years of continuous service to claim ordinary unfair dismissal.

However, in cases where a dismissal is linked to a TUPE transfer, it may be deemed automatically unfair.

This protection applies only if the dismissed employee has the required two years of service.

For businesses, this two-year threshold provides some flexibility to restructure or dismiss short-service employees without the immediate risk of a claim.

What is changing under Labour’s proposals?

Labour’s Employment Rights Bill will provide a ‘day one’ right to claim unfair dismissal.

This means employees could bring a claim even if they have been employed for less than two years.

For businesses inheriting staff through TUPE, this would increase liability, as every dismissed employee would have the right to challenge the dismissal regardless of their length of service.

How will this affect businesses acquiring employees through TUPE?

• Greater liability at the point of transfer – Businesses will no longer have the safety net of the two-year rule for new employees. Every dismissal will require careful justification to avoid claims.
• Increased due diligence requirements – Employers will need to scrutinise the employment history, contracts, and performance records of transferring employees more thoroughly before completing a transaction.
• Impact on redundancy plans – If redundancy is necessary post-transfer, the dismissal process will need to be airtight, with strong evidence that it is not linked to the transfer itself.

What about dismissals linked to reorganisation or harmonisation of terms?

Currently, some dismissals linked to reorganisations or harmonising terms post-transfer can be lawful if they are for an economic, technical, or organisational (ETO) reason.

However, Labour’s proposals to strengthen redundancy and TUPE protections could limit this flexibility, making such dismissals harder to justify.

Does this mean businesses should avoid dismissals entirely?

Not necessarily, but it does mean dismissals must be approached with far greater caution. Businesses must:

• Clearly document the reasons for any dismissal
• Ensure those reasons are unrelated to the transfer itself unless they fall within the narrow ETO exceptions
• Follow a fair consultation process, even for short-service employees

What steps should businesses take to prepare for this change?

• Strengthen your due diligence – Before acquiring a business or service, conduct a detailed review of employee records to identify any potential risks.
• Review contracts and policies – Ensure employment contracts and HR policies are robust and compliant with TUPE requirements.
• Seek legal advice early – Engage with our legal experts during negotiations and before making any post-transfer employment decisions.

What does this mean for the future of TUPE transactions?

The introduction of a day one unfair dismissal right would make TUPE processes more complex and potentially more costly for businesses.

While the exact details of Labour’s proposals are yet to be confirmed, businesses should start preparing now to minimise risk.

If you are planning a TUPE-related transaction or are unsure how these changes might affect your business, our team of employment law specialists is here to help.

Contact us today for expert, legal advice.  

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