TUPE – percentages are not the answer

On the sale of business assets or a change of service provider in the UK, the Transfer of Undertakings Regulations 2006 (TUPE) apply to the employees who are wholly or mainly assigned to the assets that are sold or to the contract that is lost. The employment contracts of such employees transfer to the purchaser or new service provider.

In many cases, it is clear which employees are wholly or mainly assigned to the part of the business or contract being transferred. However, issues can arise where there are shared services or where employees are not wholly assigned to the part of the business being sold or contract being transferred.

In determining whether an employee is mainly assigned to the assets being sold or where a contract is lost to a new service provider, many of us are tempted to determine the issue by applying a simple percentage test to the time an employee spends in the part of the business being transferred.

The decision in the Eddie Stobart case, heard earlier this year, made it clear a percentage test is not the answer.

The Employment Tribunal (and endorsed on Appeal) found there is not a TUPE transfer unless there is an “organised grouping” of employees.

In order to satisfy the “organised grouping” question there must be a certain degree of planning and intent on the part of the employer to assign the employees to a specific client or contract or to the identifiable economic entity being transferred.

For further information or advice please contact Rachel Harrap, Partner and Head of Employment by emailing rachel.harrap@edwincoe.com.

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