tupe or not tupe spring edition surrey lawyer 2015
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Tupe or Not Tupe Spring Edition Surrey Lawyer 2015 by Ryan Clement of Conference ChambersTRANSCRIPT
Ina sense, the title to this article ismore than a play on Prince Hamlet'swords and can be read in at least two waysfor the purposes of employment law. Itcould be a decision on which a companyponders pre-acqulslrion or the examinationundertaken by a tribunal post -acquisition.Amatter of TUPEin the employmenttribunal is not too uncommon a featurebut the issue of a 'relevant transfer' andthe share sale of a business after is notyour everyday occurrence. And, yet, tosome degree, it is surprising that therearen't more. I say that because for the lay(from a legal perspective) entrepreneur, inthe absence of specific legal advice, there isprobably little difference between arelevant transfer as defined by reg.3 ofTUPE2006 [transfer of an undertaking orbusiness situated immediately before thetransfer in the UKto another person wherethere is a transfer of an economic entitythat retains its identity] and a share sale,which does not, of itself, amouht to a TUPEtransfer: The Print Factory (London) 199: vMillam [2007]ICR1331.The potential 'litt.edifference' has been judicially recognised.In Millam, Moses LJstated at p.1337,Therewill often be little to distinguish betweenthe case of transfer of control onacquisition by a new parent and transfer ofthe business to a new parent.'
For the employer, getting it wrong could berather expensive. It is not enough simply torely on the share agreement between the'seller' and 'buyer' of the shares inquestion. As Buxton LJstated in Millarn atp.1336, 'The legal structure is of courseimportant, but it cannot be conclusive indeciding the issue of whether, within thatlegal structure, control of the business hasbeen transferred as a matter of fact.' Yes,iis a 'matter of fact' for the tribunal todetermine on its examination of theevidence and not simply an endorsementof what the 'legal' share agreement states.
In Millam (a case considered under TUPE1981but, for the purpose of this article,there is no material difference from TUPE2006),Cwas employed by FP.FP's parentcompany (Parent Co) sold it by way of ashare agreement to M.Cwas told that hisemployer's identity would not change butalso, confusingly, that his employmentwould continue, 'under the TUPERegulations'. C was later dismissed when Mwent into administration. The followingday R acquired the business. C broughtproceedings against R for, amongst otherthings, unfair dismissal and wrongfuldismissal. However,R could be liable to C(liabilities passing from Mto R)only if Cwas employed by M,and M could have
employed C only if, 'contrary' to the sharesale agreement between Parent Co and M,there was a transfer under TUPEfrom FPtoM.There was evidence that, at the time ofthe share sale, employees were told that itwas M'S intention fully to incorporate thebusiness of FPinto its own. Later, there wasevidence that Mpaid C's wages. In fact, FPdid not even have a wages department ofits own. Amongst other things, despite theshare agreement there was clear evidencethat FP's activities were controlled by M.The ET found that there had been atransfer between FPand M.R appealedsuccessfully to the EAT.However,allowingC's appeal, the Court of Appeal held,amongst other things, that the questionwas whether as a matter of fact thebusiness in which Cwas employed hadbeen transferred from one company toanother and that the EAThad misdirecteditself in referring, as it had, to the issue of'piercing the rorporars veil'
More recently was the case of IacksonLloydsLtd & Mears Group PLCv Smith &OthersUKEAT/0127/13/LA.However,on thisoccasion the focuswas less on thecompany by whomthe shares wherepurchased (M)andmore on its parentcompany (Parent Co).In this case Mpurchased 100%ofthe shares of JL.Followingthepurchase, Parent Coembarked on aprogramme ofintegration. The ETfound thatimmediately prior tothe share purchaseParent Co appointedan 'integrationconsultant,' whoseremit was, ' ...to turnaround the UL]brandusing [Parent Co]systems, policies,procedures, methodsand its centralservices, leaving UL's]operatives in theirformer liverieduniform but to allintents and purposescontrolled by [ParentCo].at least until suchtime as he had revivedits business ... ' The ETfound, therefore, that
Professional Practice
a transfer hadoccurred, notbetween JLand M(the purchaser of by Ryan Clementthe shares), butbetween)L and Parent Co.It found that,following the share sale, although JLgavethe outward appearance of autonomy,separate and in competition with Parent Co,that was not in fact the case. On appeal theEATfound that no error of law wasdisclosed in the ET's legal directions, or inits analysis of the facts and conclusions.
One is almost tempted to suggest that, if indoubt, good practice demands that anemployer consults with its employees,whether or not it believes TUPEapplies, ofthe fact of what is taking place and theemployer's immediate intentions. But, fromthe above, it is clearly more complex thanthat. As advisors, employers have to bealert not only to the legal arrangement of apre-acquisition share purchase but also tothe post-acquisition intention, which is amatter/question of fact. •
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