Background

As those of you who have been involved in TUPE transfers will understand only too well, TUPE acts to preserve terms and conditions of employees through a transfer of a business and stops the new employer making changes to employees’ contracts, unless for certain statutory reasons.

In this case the transferor (the seller) had mobility clauses in the contracts of the employees who transferred to the transferee (the buyer).  The mobility clause allowed the selling business to move the employee to work at other locations “within the Trust” (this was an NHS Trust employer). The transferee sought to argue that, because the contracts had come across to them under TUPE, the mobility clause covered the transferee’s work sites. The Employment Appeal Tribunal however ruled that, following the TUPE transfer, this mobility clause only covered the transferors’ locations and TUPE did not operate so as to expand the scope of mobility clauses to the transferee’s work sites.

Comment

TUPE acts to protect employees (not employers, despite their many protests and ways of evading TUPE) and case law is almost always expanding to make sure the TUPE Regulations still achieve this protection. The decision further restricts the buying business and will need to be factored into the commercial cost of the deal and when negotiating indemnities and price.

If the transferee business is not able to rely on the mobility clauses to cover their own sites, then it may be that they have to consider redundancies if employees are unwilling to relocate. This in turn could however lead to automatically unfair dismissal claims because the redundancies would be related to the transfer. Furthermore it was thought that (if this were the case) the transferee could rely on the ETO (i.e. an economic, technical or organisational reason) defence under TUPE (of which redundancy is a classic example). This point is presently however subject to an appeal in the Court of Appeal.

The law therefore remains uncertain in this area and transferees need to be wary of the above when considering the costs and terms of any business deals where TUPE applies.