As you may be aware, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply when an undertaking transfers from one entity to another. This can be in situations like mergers and acquisitions, outsourcing and insourcing, and changes in contractor.
In the vast majority of cases, TUPE transfers are seamless – the employees are employed by one entity, and upon the TUPE transfer they are immediately employed by the new entity. TUPE means that their terms and conditions of employment transfer with them, and their continuity of employment is preserved.
Sometimes there can be situations where there is a gap. For example, if a restaurant is changing hands and needs to be refurbished before re-opening, there may be a period of time between the end of the employment with the first owner and the start of the employment with the new owner.
TUPE has specific provisions to state that a “temporary cessation of work” will not prevent it from applying. This is to prevent employers trying to play the system by closing a business for a short time in an attempt to avoid taking on liability for the employees.
Over the years the issue of a “temporary cessation of work” has come up in case law, but the courts have always tended to resist giving specific guidance on how long a gap has to be in order to be ‘temporary’, saying that it will depend upon the facts of a particular case.
The issue was dealt with recently by the European Court in the Spanish case of Colino Siguenza v Ayuntamiento de Valladolid. In the case, a music teacher worked at a state school. The running of the school was eventually outsourced to a private contractor, but in 2012/13 the relationship between the contractor and the local authorities deteriorated and the school was no longer profitable. As a result, the contractor dismissed all of the staff in April 2013.
The local authority put out a tender for a new contractor to operate the music school, and the new provider started running the contract in September 2013. The new music school used the same premises, instruments and resources, but with new staff.
A group of employees claimed that they should have transferred under TUPE. The case was referred to the European Court for guidance.
The European Court was asked to consider whether or not the long gap between the contracts had prevented there from being a TUPE transfer. They decided that the fact that an undertaking is temporarily closed, and has no employees, is a relevant factor, but not determinative, therefore TUPE had applied. They found it especially relevant that three of the five months’ closure were school holidays in any event.
Cases involving such a long gap are rare, but this is a good example of the courts interpreting TUPE “purposively”, i.e. bearing in mind the purpose for which it was introduced, which is of course the protection of employment. If employers are involved with buying businesses, or contracting in and out of services, it is definitely something to be aware of so that you don’t get caught out!
Unfortunately for the employees in the case, theirs was a bit of a Pyrrhic victory, as although TUPE applied, the European Court also found that they seemed to have been dismissed for an ETO (economic, technical or organisational) reason and therefore they hadn’t been automatically unfairly dismissed. However, the issue was referred back to the Spanish courts to consider the question of whether there had been a deliberate attempt to avoid TUPE, which would be void.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).