TUPE in property deals
SOURCE: INSIDER, JANUARY 2008
The Transfer of Undertakings (Protection of Employment) Regulations 2006 [“TUPE”] apply to commercial property transactions just as they do to other business transfers.
Take, for example, the common situation of the sale of a shopping centre. TUPE could apply in various ways, including:
-
Between the Seller and the Purchaser, particularly if the Seller employs someone to manage the asset being sold or to provide common services;
-
Between Managing Agents, particularly where before completion the Seller has appointed Managing Agents to provide common services and the Purchaser appoints its own Managing Agents to provide common services with effect from completion.
If TUPE applies, it is crucial that the parties understand that there will be an automatic transfer of employment. This means that the transferee (e.g. Purchaser or Purchaser's Managing Agents) will automatically become the employer of those people who are employed by the transferor (e.g. Seller or Seller's Managing Agents) in the undertaking being transferred. Any dismissals will be unfair and any contract variations will be ineffective, except in very limited circumstances.
The transferor and transferee must also comply with strict obligations, including duties on both the transferor and transferee to inform and consult with affected employees, and a duty on the transferor to provide information about employees to the transferee at least 14 days before completion.
Can the transferor effect dismissals or contract variations pre-completion at the request of the transferee? This may arise where during the due diligence process the transferee takes the view that there are too many security staff employed at the centre. Following the recent case of Hynd -v- Armstrong, it seems clear that a transferor cannot rely on a transferee's purported reasons. Accordingly, such a dismissal would clearly be connected to the transfer and would therefore be automatically unfair. It would be far better for the transferee to conduct a post completion staff review and redundancy consultation before making any such redundancies.
AUTHOR: ALISON GOW
Complete the details below to send a link to this page to a friend.