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Employment contracts can be split between multiple transferees

22 July 2020 #TUPE

UK Case law has established that TUPE can still apply to business transfers where the undertaking is transferred to multiple transferees provided the undertaking does not lose its identity. Further, TUPE can apply to service provision changes in the same circumstances provided it is possible to identity to which contractor the individuals transfer.

In the recent Belgium case of ISS Facility Services NV v Sonia Govaerts & Atalian NV, the European Court of Justic (ECJ) had to consider this point again in the context of business transfers. It held that the Acquired Rights Directive (on which TUPE is based) does not deal with multiple transferees but that the ultimate objective of the Directive is to safeguard employees’ rights and allow their contracts to continue unchanged to avoid individuals being in a less favourable position.

On this basis, it determined that in such cases it was possible for the contract to be transferred to all of the transferees in proportion to the tasks performed by the individual provided the individuals’ rights and working conditions were not adversely affected (possibly resulting in a full time contract being converted to a number of part time contracts). It would be up to national courts and tribunals to consider the practical implications of this. It further held that if this division presents a problem or is not possible and the employee is dismissed (or resigns) as a result, liability will fall to the transferee(s).

Whilst this reaffirms the existing UK position that there may be a business transfer where the undertaking is transferred to multiple transferees, the approach taken by the ECJ is very surprising and marks a significant departure from the current UK case law. The splitting of contracts will raise a number of practical issues and it’s hard to see how this approach will not be detrimental to the employee.

With the UK in the process of leaving the EU it is unclear the extent to which this will be followed by the UK. Further, the judgment only applies to business transfers and not service provision changes which are outside of the scope of the Acquired Rights Directive. Regardless it is wise for parties to try and factor this situation into their commercial indemnities where possible.

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This information is for guidance purposes only and should not be regarded as a substitute for taking professional and legal advice. Please refer to the full General Notices on our website.

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Louise Keenan

Louise Keenan
Associate

E: LKeenan@clarkslegal.com
T: 020 7539 8082
M: 0779 900 7325