UK Employment Law Update: TUPE transfer after share purchase

16 May 2014

In Jackson Lloyd and Mears v Smith and others, the EAT had to decide whether there was a TUPE transfer when –

  • One company (ML) had purchased 100% of the shares in a  service company (JL) which was in severe financial difficulties; and
  • ML’s parent company (MG) then embarked on a process of integrating the JL business and methods into those of MG.

For commercial reasons (they did not wish to trigger a re-tendering of JL client contracts and thus put those contracts at risk), the outward appearance was that JL remained a separate company.

The TUPE regulations do not apply where a business is acquired by means of a share sale and purchase and there is no change in the identity of the employer.

However, in this case, the EAT said that the share purchase by ML provided the context within which MG then began to acquire JL’s business and this did trigger TUPE.

This meant that there was a TUPE transfer of an undertaking to MG.
Points to note –
• When considering whether TUPE applies, a tribunal must always take account of all the factors set out in the leading European case of Spijkers. There was no doubt here that JL retained its identity and continued to do the same work. The essential question was whether a different legal person (MG) now controlled the business. A share sale on its own will never be enough to trigger TUPE but MG’s actions following on from, and in the context of, the share sale to ML meant that TUPE applied here.
• This meant that all JL employee contracts transferred to MG and MG was also liable to pay compensation for total failure to consult with the JL workforce over the transfer as it had not appreciated that TUPE would apply.