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Employment Question of the Month: What happens if a transferee refuses to accept transferring employees following a TUPE transfer?

Posted on Mar 04, 2014 by Hayley Anderson  | 0 Comments

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) (as amended) provide that anyone “employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer” will automatically become employees of the transferee.  In other words, the Regulations protect the employment of employees when their employer is taken over or where the contract they work on is awarded to another provider.

In many cases it will be obvious whether or not there is a relevant transfer and the Regulations will operate smoothly. However, in some cases there may be a dispute between the transferor and the transferee.

Some of the arguments that the transferee (or incoming service provider in the case of a service provision change) may put forward include :

  • The individuals are not covered by the Regulations. TUPE will apply primarily to employees; however, the definition included within the Regulations is slightly wider than the ordinary definition of employees and arguably could include workers as well as employees. The principal question to consider here is whether those individuals were assigned to the ‘organised grouping’ before the transfer. It is clear though that those who are self employed under contracts for services will not be included.
  • The individuals are not employed by the transferor. The Regulations require that those transferring are employed immediately before the transfer by the transferor. It would seem individuals employed by holding or service companies will not be covered which has meant that some employers who operate complicated group structures have managed to avoid the operation of TUPE.
  • The individuals are not assigned to an organised grouping. There is no specific definition of “assigned”, however, a temporary assignment will not be sufficient. Every case will turn on its own facts and one of the factors to be considered is the percentage of time spent by an individual working on the undertaking being transferred. The courts have been silent in terms of general guidance and have stated that the decision will vary from case to case. In the case of a service provision change, it may be the case that the individuals are employed under more than one contract with the transferor and the transferee may then take the view that the individuals are not sufficiently assigned.

If a transferee refuses to accept that they are now or will become the new employer of a particular group of employees, whether on one of the grounds above, or on any other basis, this can leave the transferor (and the transferee) in a particularly difficult position. In the case of a share sale, arguments will often be resolved relatively quickly as part of the wider commercial terms. In relation to service provision changes, there is not normally a contractual relationship between the old and new employers; however, it should be noted that it may be difficult to persuade a tribunal that a transfer has not taken place.

Given that the operation of TUPE is automatic, it is not necessarily the case that there will be a dismissal where there is a dispute over the operation of the Regulations. If employees do find themselves in ‘No-man’s Land’ they can apply to a tribunal for a declaration as to their rightful employer. If neither party is willing to take on the employees it may also be necessary to consider the unfair dismissal claims of the individuals and attribute liability according to the relevant employer. If there has been a transfer, any costs and liabilities will normally pass to the transferee (or incoming service provider).

It is therefore important as a transferor to establish contact with a transferee early on in order to ensure that all relevant information can be passed on to support the assertion that a relevant transfer will occur and to allow the transferor to consider any representations put forward by the transferee and brief any employees accordingly.

If you have any queries about TUPE transfers, please get in touch. Meanwhile, if you have a suggestion for our next employment law question of the month, please email hayley.anderson@mbmcommercial.co.uk or hannah.roche@mbmcommercial.co.uk

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