Transfer law

This month’s cases include a ruling on a situation in which a sale of shares can amount to a TUPE transfer.

The key developments

• Short-term workers who were employed to provide flexibility in the workforce did not amount to a separate “economic entity” for the purposes of TUPE (case 1).

• The legal structure of the companies involved does not determine whether there was a TUPE transfer; what is important is whether control of the business transfers (case 2).

• An employer can only rely on an ETO reason for dismissal when that reason relates to its own workforce (case 3).

The basic legal rules

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) state that, when a business is transferred from one employer to another, the employees doing the work should also transfer on their existing terms and conditions. To come within TUPE, there has to be a relevant transfer of an activity that amounts to a “stable economic entity”.

The employer before the transfer is referred to as the “transferor”, and the employer to whom the business transfers is the “transferee”.

Under TUPE, most legal liabilities (such as outstanding legal cases being taken against the transferor) transfer to the transferee.

An employee covered by TUPE has the right to continued terms and conditions, including redundancy terms. Additionally, there is no time limit after which TUPE protection no longer applies. However, this does not mean that changes to transferred employees’ terms and conditions can never occur.