When is a TUPE not a TUPE?
January 22, 2009
With all the recent events as a result of the economic crisis, many business owners and HR professionals are currently dealing with TUPE issues. With companies facing troubled times and struggling to keep their heads above water, there are a lot of mergers and last minute buy-outs taking place or being negotiated. But it seems impossible to work out when TUPE regulations apply in the different situations, and even the most experienced legal experts cannot advise us with any certainty.
TUPE stands for the Transfer of Undertakings (Protection of Employment) regulations (2006). It means that when an undertaking (business) is transferred from one person or company to another, the people employed in the transferring company (the ‘transferor’) automatically become employed by the company taking over the business (the ‘transferee’), and their employment, including all their terms and conditions, is therefore protected. This legislation obviously provides implications for companies or investors considering buying a business or its assets, and unfortunately the law is very complicated and because of this, it is hard to know whether TUPE applies in certain situations.
A recent situation I heard about was a company that went into liquidation, and therefore all the employees became redundant. An investor started a new company in the same place, took over the lease of the equipment, and employed some of the staff that had worked in the company that was liquidated. I thought that this sounded like a classic case of TUPE, however I was informed that it wasn’t because the previous company had gone into liquidation under the supervision of an insolvency practitioner, which has different implications for TUPE than administration. I should really be satisfied with this explanation, but in reality the TUPE regulations are really difficult to comprehend and can be interpreted in different ways, so it means that in most situations you can never be completely sure. Basically, each case is different and it would be up to the Employment Tribunal to make the final call, which is not ideal for anyone.
I recently read a blog written by an experienced legal advisor who described TUPE as “Totally Unworkable, Penalises Everybody”. This is because it is too hard to decide who is right and wrong before a case reaches tribunal, and therefore nobody can get decent advice. Because of this problem and the difficulties in deciphering the legislation, many buy-outs that might happen which would save struggling businesses and many jobs, fail to go ahead because the potential buyer is too afraid of the implications of the possible liabilities they might or might not take on under TUPE.
I don’t think I will ever understand TUPE, and until the law is reviewed to make it more practical and helpful, I doubt a lot of other HR professionals will either.
What is your experience of TUPE?
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