Tupe – commercial considerations

So much is said about the law relating to Tupe, and how it appears to change
so frequently, that it is quite easy for an HR practitioner to forget that what
really counts when dealing with potential Tupe transfers are the commercial
considerations. What business managers want to know legally is what risk is
being taken on, and how much of the risk can be off-loaded onto other parties.
For these reasons HR practitioners should be looking at both the legal
arguments and the practicalities of any proposed deal.

Legal issues

Somewhat unbelievably, the law on Tupe, as interpreted by the European Court
of Justice, has become so flexible that it is possible for businesses these
days to manipulate the situation to argue Tupe might not indeed apply, when
previously it was inevitable. Thus, after the case of Suzen, 1997, IRLR 361,
for example, it is possible to say that in a "labour-intensive"
business (which, in layman’s terms, means a people-orientated rather than an
equipment-based or heavy machinery-orientated business), if there is no
transfer of the majority of people (in terms of numbers or skills), and if
there is no transfer of assets between the parties, Tupe can be said not to

Furthermore, from the case of Oy Liikenne, 2001, IRLR 171, in
"non-labour-intensive" businesses, it appears that a failure to pass
on the heavy machinery, equipment, or other key assets will mean there is no
transfer at all, even if the majority of staff (either in terms of numbers or
skills) do, in fact, transfer. In that case, where 73 per cent of the previous
staff were taken on, Tupe still did not apply.

Both of these give potential new employers considerable room to manoeuvre.
The only fly in the ointment is the repeated assertion by the English courts
that, if matters are manipulated purely to avoid Tupe from applying, then it
will apply, regardless. Credible business reasons can usually be found,
however, to justify not taking on staff. This approach may not be condoned, but
it is inevitable, given the parlous state of the current law.

Commercial implications

As mentioned above, however, the legal arguments will always be harnessed to
the commercial imperative of the business. There may be cases in which an
employer will want to strongly argue that Tupe should apply, in order to
capture (or lose) particular staff, or to retain the goodwill, for example, of
a client outsourcing some of its activities. The key issue, as always in Tupe
situations, will be who bears the risk for potential claims, both in relation
to the past (which would otherwise all fall on the new employer by operation of
the regulations), and in relation to any transfer-related dismissal claim.
Indemnities and warranties will be the main battleground.

Businesses would be well-advised therefore to have both commercial and HR
people looking at these issues.

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