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TUPE - from concept to practice

Presentation April 8, 2014. This presentation does not purport to provide legal advice and cannot be relied upon.
by

arnold keizer

on 19 May 2015

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Transcript of TUPE - from concept to practice

Transfer of undertaking - from concept to practice
Introduction
What is it?
Who & what transfers
and when

TUPE issues in M&A
EU at a glance

Importance of getting employee issues right
Cost of getting employee issues wrong, e.g.
Financial penalties
Decisions to proceed can be blocked/delayed in some jurisdictions
Damage to industrial relations
Receive more than you bargained for…

Getting it right

Cross-Atlantic M&A
Whether and how employees will transfer
Information and consultation obligations
Proposed changes to terms and conditions of transferring employees
Proposed dismissals
Obligations and liabilities of parties
Exit issues (on an outsourcing)

Why does it matter?

Why does it matter?
What is it?
Who transfers?
What transfers and when?
Specific considerations on M&A transactions




Overview

Aim
EU Acquired Rights Directive affords minimum employee protection across EU
Contracts of target business employees transfer from seller to buyer
Employment liabilities and obligations pass to buyer or, in some countries, parties jointly liable
Obligations to inform/consult triggered for seller/buyer
Complexities in varying terms and conditions
Special dismissal protection






ARD issues on Business acquisitions

Automatic transfer, i.e. straightforward
EU countries
Non-EU countries with ARD equivalent (e.g. Argentina, Korea and Singapore)

No automatic transfer principle (e.g. US, Hong Kong, Japan and Australia)
Offers of new employment
Risk of termination costs for seller

Transfer of employees

Art. 153 TFEU

To be implemented through Directives. These are different from Regulations.

A regulation is a law that has direct effect. A directive needs to be transposed, within certain limits, into national law;

EU labour law

EU law

Two treaties:
Treaty on European Union
Principles EU (freedom of movement, services and goods)
Institutes bodies
Treaty on the Functioning of the European Union (TFEU)
More detailed: role, policies and operation
Employment: art. 151 TFEU

1. Stable organized economic entity;
2. With its own “identity”





ECoJ Süzen 11.3.1997

UNDERTAKING =


Retaining Identity
Resurfacing of Identity



ECoJ Oy Liikenne 25.1.2001

CENTRAL CRITERION FOR TRANSFER =

Type of undertaking CoJ Sodexho 20.11.2003, CoJ Suzen
Tangible and intangible assets
Value of assets; personnel; customers
Degree of (suspension) going concern

WHAT IS DECISIVE FOR THE IDENTITY:
(CoJ Spijkers 18.3.1986)

Current position

Likely to apply where significant assets transferred, or where majority of employees and skilled employees are taken on, and where provision of services will continue in much the same way as before transfer
ECJ and domestic courts are making broader application of ARD.
Local extensions, eg Service Change provision in UK

Transfer of employees - EU jurisdictions

CoJ Ziemann 10.12.1998
CoJ Watson Rask 12.11.1992
CoJ Temco 24.1.2002
A group of workers engaged in a joint activity on a permanent basis may constitute an economic entity.
CoJ Oy Liikenne
CoJ Securicor
CoJ Sodexho

Examples

assets

Undertaking

Undertaking

sale

1)
Sale of business, NOTE: not transfer of shares
...

TRANSFER OF UNDERTAKING:
3 CASES

Or part of business…

IT
Catering, security, payroll
Etc.

Supplier B

Supplier A

3. Change of contract (second generation outsourcing):
outsourced activity is transferred to new supplier.
Seller
Buyer
Buyer
Dept.
2. Outsourcing: transferring a business activity to a specialized third party.
External supplier
Customer
Supplier A
Supplier B
CoJ “Temco”: Transfer can occur if competitor not only continues the activity, but also takes over a major part of the workforce (in number and skills) or significant tangible or intangible assets.
Carney attacks EU’s banker bonus cap - FT.com - January 15, 2014.

David Cameron: British public do not want referendum on European Union 'right now' - Daily Telegraph, March 27, 2014
Borrowing costs in recovering Greece fall to pre-bailout levels , Reuters, April 2, 2014
Full transcript