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Greene & Greene is a long established firm of solicitors based in Bury St Edmunds, Suffolk. Our lawyers advise individuals and businesses based all over the UK.

We regularly attract new clients who have been using firms in London, but now receive a more cost efficient and more personal service from us here in Bury St Edmunds.

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Entries in Business Law (2)

Tuesday
Jul252017

TUPE: a cautionary tale of a business sale

In their latest blog, Employment law specialists, Angharad Ellis Owen and Greg Jones talk about the rights and obligations where employees transfer under TUPE.

You may have first-hand experience of business sales and having to comply with TUPE; alternatively, you may have only heard the acronym and wondered what it was all about!  TUPE refers to the Transfer of Undertakings (Protection of Employment) Regulations 2006; the purpose of which is to protect employees' rights on a business sale. TUPE essentially means that a buyer of a business steps into the shoes of the seller. A buyer therefore needs to know what it is they are in fact acquiring.  

What transfers under TUPE?

Where employees transfer under TUPE, various rights and obligations, powers and liabilities transfer with them to the buyer. For example, this includes:

  • the employees’ continuity of service;
  • the contracts of employment, including all terms and conditions of employment such as pay, commission and bonus entitlements, holidays and sick pay provisions; and
  • liability for the seller’s acts and omissions in respect of the newly acquired employees.

 

How do you know what you’re inheriting?

TUPE requires the seller to provide the buyer with ‘employee liability information’ (ELI) 28 days before the business transfer. The ELI must contain the information that an employer is obliged by law to provide its employees when starting in post; this includes detail as to the employee’s rate and method of calculating pay.

The Employment Tribunal can award compensation of a ‘just and equitable’ sum in the event of a failure to comply with the ELI obligation. Any award is generally subject to a minimum of £500 for each employee whose information was not provided or was defective.

What if the seller wrongly labels the contractual status of an entitlement?

In the recent case of Born London Ltd v Spire Production Services Ltd, the scope of the ELI obligation was considered. S supplied B with its ELI and stated that it operated a non-contractual Christmas bonus. After the transfer, B contended that this was incorrect, that the bonus scheme was contractual, rather than discretionary, and S was therefore in breach of its ELI obligation under TUPE. B estimated its losses would exceed £100,000.

The Employment Appeal Tribunal held that although the employer had to specify the method by which remuneration had to be calculated it did not mean that the employer had to state whether any aspect of the remuneration was contractual. It therefore followed that as part of the ELI a seller was not obliged to state whether remuneration, including a bonus, was contractual or not.

“…that is a matter for due diligence, it is not a requirement of TUPE”.

The Employment Appeal Tribunal also observed that a buyer may prefer to have greater clarity as to the precise nature (contractual or otherwise) of some of the matters listed, but that is a matter for due diligence, it is not a requirement of TUPE.

Where does this leave us?

The decision should not be seen as authority for the proposition that a seller can escape liability for inaccuracies in the ELI.  However, the case does confirm that the employee liability information is not confined to contractual entitlements only. From the buyer’s perspective it is important that further details of the precise contractual nature of these employee liabilities should be pursued through due diligence and ideally dealt with in warranties and indemnities contained in the business sale agreement. Conducting thorough due diligence will also enable a buyer to agree a suitable price for the business, taking into account any potential liabilities that arise from the sale.

If you have any questions regarding to TUPE or any other employment law matters please contact Angharad Ellis Owen (aellisowen@greene-greene.com ~ 01284 717453) or Greg Jones (mail to:gregjones@greene-greene.com ~ 01284 717446).   For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw.

“This article was previously published in the EADT Business East Monthly Magazine on 18/7/17.”

Wednesday
May042016

Business Workshop in Bury St Edmunds

On Thursday 19 May we will be jointly hosting a free workshop in Bury St Edmunds with business consultancy Business Doctors and Larking Gowen Chartered Accountants for owners of SMEs, focussing on how owners can save time and increase the value of their business by reviewing their management strategy.

As part of the workshop, Andrew Cooper, a partner in our Corporate & Commercial team, will be giving a presentation on the importance for SMEs of putting in place the correct legal documents and framework.  Andrew will explain how the right legal structures can improve efficiency and increase the value of your business.

Further details of the workshop, and on how to book a place, can be found here.

Contact Andrew Cooper for Corporate & Commercial advice on 01284 717511 or email andrewcooper@greene-greene.com.  Follow Greene & Greene on Twitter @greenegreenelaw or LinkedIn (www.linkedin.com/company/greene-&-greene).