TUPE Flashcards
(13 cards)
Briefly in one sentence, what is TUPE?
TUPE provides protection for employees when the business in which they are employed changes ownership or there is a change in service provider in relation to activities that employees have been carrying out.
What are the 3 elements of TUPE in an asset sale?
- An economic entity
- A transfer of that economic entity
- The economic entity retaining its identity following the transfer
What happens in a service provision change?
A client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work “in-house” (a service provision change). This can, therefore, encompass an initial outsourcing, a subsequent outsourcing (re-tendering) or an in-sourcing.
To be caught, activities carried on after a change in service provider must be “fundamentally or essentially the same” as those carried on before it. However, the supply of goods and “one-off buying-in of services” are excluded
When does it apply despite being cross border? (2 answers)
- A business transfer: where the undertaking is situated in the UK immediately before the transfer.
- service provision change: where there is an organised grouping of employees situated in Great Britain immediately before the service provision change.
What happens if you don’t inform and consult?
Potential compensation equivalent to up to 13 weeks’ uncapped pay. The transferor and transferee may, in certain circumstances, be held to be jointly and severally liable for this compensation.
What is a warranty?
A warranty is a statement by the seller about a particular state of affairs of the business (or the target, in a share purchase).
A breach of warranty will only give rise to a successful claim in damages if the buyer can show that the warranty was breached and that the effect of the breach is to reduce the value of the business acquired.
The onus is therefore on the buyer to show breach and quantifiable loss. Warranties are subject to an obligation on the aggrieved party to mitigate their loss.
What is an indemnity?
An indemnity is a promise to reimburse the aggrieved party in respect of a particular type of liability, should it arise.
The purpose of an indemnity is to provide a guaranteed remedy (on a pound-for-pound basis) where a breach of warranty may not give rise to a claim in damages.
It is generally considered that indemnities are not subject to the obligation on the aggrieved party to mitigate its loss.
What does it mean to ‘disclose against the warranty’
Most sellers will negotiate a provision in the contract which states that the seller will not be liable for breach of warranties to the extent that it has disclosed to the buyer the nature of the claim (or circumstances giving rise to the claim). In reality, claims for breach of warranty are rare.
What is the position of ‘workers’?
Could be covered on the basis of the Dewhurst decision
Who should implement redundancies?
Redundancies should ideally be made by the buyer post-transfer to minimize legal risks and unfair dismissal claims.
The buyer might prefer pre-transfer redundancies by the seller to avoid initial management distractions and negative impressions on new employees.
How are redundancy cost liabilities dealt with via indemnity?
If the seller makes redundancies pre-transfer, the buyer may indemnify the seller for related claims.
Considerations -
Total financial limit on claims.
Scope of indemnity (all claims or specific ones like redundancy pay and notice pay).
For post-transfer redundancies, costs may be shared between buyer and seller, either by percentage or a specified fund.
A clawback clause may require the buyer to repay shared costs if re-employing a redundant employee within a certain period.
Alternatively, adjust the purchase price to reflect redundancy cost allocation.
How would a claim for unpaid holiday come about?
An unlawful deduction from wages claim.
2 year backstop.
