EMPLOYMENT

Tupe or not Tupe

The law relating to business transfers and connected employee rights is extremely complex and a common area of dispute in the Industrial Tribunal. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE Regulations) and the Service Provision Change (Protection of Employment) Regulations (NI) 2006 afford employees significant protection when transfers arise however it is not always easy for employers to identify a relevant transfer under the regulations.

 

The TUPE regulations confirm that a relevant transfer occurs where there is a transfer of an economic entity (or part of one) to another person or company in circumstances where the economic entity retains its identity post transfer.

The question as to whether an economic entity retains its identity is often extremely problematic as can be seen in the recent case of Ferreira da Silva e Brito & Others v Estado Portugues heard in the European Court of Justice.

In February 1993 Air Atlantis, a company which provided charter flights, was wound up and their employees were dismissed as part of a collective redundancy exercise. In March of that year the main shareholder of Air Atlantis, TAP, started to operate some of the routes using four aircrafts, offices, equipment, other assets and employees of Air Atlantis. The applicants argued that a relevant transfer had occurred and brought proceedings seeking reinstatement to their previous roles and compensation.

A judgement by the Supreme Court of Justice in Portugal held that a relevant transfer had not occurred as when TAP operated the flights in question over the course of the summer of 1993, it did not use an entity with the same identity as the entity previously belonging to Air Atlantis. In the narrow approach taken by the Portuguese Supreme Court, a transfer of a business could not be said to have occurred since the two 'entities' were not identical. The Supreme Court also considered that there had not been a transfer of customers from Air Atlantis to TAP and that the business owned by Air Atlantis was one linked to a specific asset, namely a licence, which was not transferable. The employees appealed and the matter was ultimately referred to the European Court of Justice (ECJ).

In its judgement provided on 9th September 2015 the ECJ overturned this decision and held that a relevant transfer had occurred. The decisive factor in establishing that a transfer had taken place was the ECJ’s view that the entity had retained its identity as the activity had continued or resumed. In a situation such as air transport, the fact that tangible assets transferred was also a key factor. In this case, TAP had taken over the charter flight routes, aircraft leases, assets, activities, and employees. It was irrelevant that the employees were integrated into TAP's structure, and did not retain an autonomous organisational structure. A 'functional link' between the various assets and staff, and the activities which they carried out, had been preserved and retained.

This case serves as a reminder to all businesses to seek advice on the implications before acquiring company assets and/or seeking to acquire activities formerly carried out by another entity.