CWS 3.0: March 15, 2011 - Vol. 3.7

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Because You Asked: TUPE Laws

Dear Enquiring,

The Acquired Rights Directive (ARD) is a European Union law that automatically transfers employees when a business is sold or an activity is outsourced. Stemming from their implementation in the United Kingdon, these rules are more familiarly known as the TUPE (Transfer of Undertakings Protection of Employment) Regulations.

Despite having a common legal basis, TUPE laws across Europe are far from uniform. Even the definition of the transfer of an undertaking may vary and the law is further complicated by ongoing case law.  For example, there will be a relevant transfer when there is:

  • in France, a transfer of an autonomous economic entity which retains its identity and the activity of which is either continued or taken up
  • in Germany, a transfer of an economic entity which retains its identity and involves a transfer of the main assets that are necessary for the business or part of the business to continue
  • in Italy, a change in legal title of an autonomous economic entity whose economic activity is continued and identity preserved after the transfer
  • in Spain, a transfer of an economic entity which maintains its identity and is understood as a group of organised resources that carries out an economic activity (whether essential or incidental)

However it is worth noting that TUPE regulations do not apply when only the shares of a company are transferred.

The sanctions that can be imposed for a breach of TUPE requirements also differ among countries and range from a capped award of civil damages (as in the U.K.) to criminal sanctions (Belgium and Poland).\

The key to navigating your way through the TUPE minefield is to appreciate that the laws are different in each country; seek local advice at an early stage, starting from whether or not TUPE will apply.

Once you have established that it does apply, find out:

  • How many employees are affected in each country?
  • Who are the relevant employee representatives/trade unions?
  • Who has to be informed/consulted? What is the process for doing this and what are the risks if it is not followed? Can the transfer be prevented or delayed?
  • What are the current terms and conditions that will transfer and can they be changed?
  • Can employees object to the transfer, and if so, what is the consequence of an objection?

In almost all countries, there is a duty to at least inform employees (or their representatives) about a transfer. In many countries, a duty to consult will also be triggered. The role of trade unions and works councils differs between countries and it will pay to take local advice early on as to which employee representatives should be given a seat at the table.

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