The problem with TUPE is that it is a very complex piece of legislation. It’s complex because of its requirements, but also because of how those requirements need to be interpreted.
In order to simplify matters, sometimes innocent but sweeping statements are made which aren’t quite correct. These “TUPE myths” can lead to confusion and ultimately, mistakes being made.
Myth number 1: TUPE only applies to employees
The legislation defines “employee” as “any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services“. It is very clear that those who are genuinely self-employed (engaged under a contract for services) are not covered. However, the position is less clear when it comes to workers. There has only been one case where TUPE was deemed to apply to a worker. This was a case brought by John McCririck of Channel 4 Racing fame. The reason given by the tribunal was that there is no reason to infer that parliament intended to exclude workers when passing the implementing regulations.
There is another case (Boxer v CitySprint) which is due to be heard later this year which will consider whether TUPE applies to workers. Keep an eye on our newsletters and twitter feed for updates…
Myth number 2: TUPE doesn’t apply on share sales
Law lecturers across the land teach their students that TUPE applies to asset purchases, not share purchases. However, case law has confirmed that TUPE can apply to share purchases, where the new parent company “steps into the seller’s shoes” (ICAP Management Services Ltd v Berry).
In Guvera Ltd v Butler and others, it was held that Guvera was not just the parent company of its subsidiary, as it had taken control of the subsidiary’s business and a TUPE transfer had occurred as a result. The tribunal found that a TUPE transfer occurred when Guvera’s chief technical officer arrived at the subsidiary and started implementing the CEO of Guvera’s instructions. Guvera had assumed day-to-day control of the subsidiary’s business “in a way that went beyond the mere exercise of ordinary supervision or information gathering between parent and subsidiary”. This unexpected TUPE transfer resulted in a £3.5 million bill for Guvera.
Myth number 3: You can’t dismiss anyone if it’s connected to a TUPE transfer
This used to be the legal position, if there wasn’t an Economic, Technical or Organisational (ETO) reason which entailed a change in the workforce. However, the 2014 TUPE amendment regulations changed this. A dismissal is only automatically unfair if the sole and principal reason for the dismissal is the transfer. The words “connected to” have been removed by the 2014 regulations. The 2014 regulations effectively set out that if there is a valid ETO reason, then the transfer cannot be the sole and principal reason for the dismissal, and the reason for dismissal will accordingly be deemed to be redundancy or some other substantial reason.
Commentators expect that employers (and their lawyers) will be increasingly bold in relying on the 2014 amendment regulations, but how this sits with the overriding principle laid down by European law of protecting employees in the event of a transfer is a developing area of law. Watch this space…
This note is part of a series of notes on TUPE prepared by solicitors in our employment team. Please see the other notes for more information, or contact Claire, Rachael or Rebecca if you have any queries.