Legal Article - Employment Law

The Process of TUPE Transfer

“Undertaking” means any distinct economic unit, which has a degree of autonomy. It can include an entire company, a department, or even a single employee who performs a specific task.

An Economic Entity relates to an organised group of resources such as premises and equipment or employees and assets that pursues an economic activity.
The Courts have identified a number of considerations relevant to determining whether a business has been transferred. The crucial point is whether “an economic entity” has been transferred and remains in existence performing the same or similar activities. Several factors have been identified that clarify when this happens, although an overall assessment has to be made in any one transfer case.

The factors are:
• Whether or not the tangible assets of the business (e.g. buildings, equipment and moveable property) have been transferred

• Whether the majority of employees are taken over by the new employer (transferee)

• Whether the customers of the former business are transferred

• The degree of similarity between the activities carried on before and after the transfer, and the length of any period during which those activities were suspended

• Whether intangible assets (e.g. goodwill, know - how) have been transferred.

A transfer can still occur when one or more of the above do not occur, although normally there must be at least a transfer of assets or employees.

Some examples of when TUPE has occurred in practice are:

• when there is a change in the person responsible for employing people in the entity even if it arises without any arrangement relating to the business activities as such

• Change of a lease, franchise, licences and concessions (e.g. a lease of a pub or petrol forecourt; transfer of a motor vehicle dealership from one dealer to another provided the contract territory remains the same or similar. In one case a company held the franchise to run a car hire business under the name of an international car hire firm in a particular town.

The company went into administrative receivership and the franchise was transferred back to the international company. This company then transferred the franchise to a third company who operated it from different premises, with different cars, but retaining the international company’s name. All the employees of the first company went to work for the third one the next day
• Where an undertaking enters into a contract with another undertaking to provide a service which had previously been managed directly (e.g. contracting out car valeting jobs, canteen facilities or transport operations) This is known as a Service Provision Change.

• Change from one contractor to another

• taking a service provided by a contractor “in-house”.

On the other hand, a transfer does not take place when

• Where only physical assets are transferred (e.g. if the vendor sells a plot of land with buildings, which the purchaser uses for a purpose quite different to that of the vendor

• Where a company makes workers and materials available to another company for completion of some short-term work (e.g. building subcontractor assigned the completion of some work to another subcontractor).

• Where a company buys in contractors for a one off service

• If shares are sold to new shareholders as the employer remains the same. Known as “transfer by share takeover”.

• The business ID or organisation structure changes dramatically


Published: 27 May 2011


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