The Tupe regulations should be a critically important consideration if you are selling your business or if you are working in a business which is being taken over.
The Transfer of Undertakings Directive of 1977, which became part of Irish law by the European Communities (Safeguarding of Employees’ Rights on Transfer of Undertakings) Regulations, 1980, protects the rights of employees where the business in which they are employed is transferred to a new owner.
What is an undertaking?
It is important to note that the TUPE directive covers undertakings and businesses or parts of undertakings and businesses-this leads to the critical question of what an undertaking is and as there is no definition in the legislation it has led to much case law with each case being decided on it’s own particular facts.
Key elements of the TUPE regulations
The key thrust of the TUPE directive is that the rights and obligations in respect of employment contracts of the transferring business are transferred to the new business.
- There must be a change of employer-this is a fundamental criteria
- A change of employer can occur where full ownership does not change (management responsibility may change and transfer to a subsidiary for example)
- Pension entitlements are excluded insofar as they do not have to be continued by the new company
- The parties to a transfer have an obligation to notify, inform and consult with employees or their representatives
- If TUPE legislation is breached the problem rests with the new business (the transferee)
- The TUPE directive does not apply where the reason for the transfer is the insolvency of the transferring business.
- TUPE also does not apply where the business is transferred by a transfer of shares
- TUPE may apply even where there is no agreement between the two businesses, for example where a lease or franchise is surrendered by operation of law.
Who does TUPE apply to?
Firstly employees but also persons having an employment relationship with the transferor. This may mean agency workers, depending on who pays them, for example and the Labour Court has held that agency workers can be covered by the directive, depending on the particular circumstances of the case.
If you are thinking about purchasing a business in Ireland or the EU there is quite a lot of complex issues which you would be well advised to obtain legal advice for.
There is considerable body of decided case law which teases out many issues that have arisen in this area-matters like
- the cessation and resumption of a business prior to transfer,
- what is an undertaking,
- who is covered by the legislation,
- whether public bodies are undertakings,
- questions surrounding dealerships and franchises,
- transfer of part of an undertaking,
- the difference between an “activity” and an undertaking and so forth.
For this reason do consult a solicitor if you feel that your rights have not been upheld in this potentially complex area.