Global Litigator. How U.K. Employment Protection Law Affects U.S. Companies

• Author: Fahim rahman
• Pages: 11-12

Published in Litigation, Volume 48, Number 2, Winter 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not

be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 11

Global Litigator

FAHIM RAHMAN

The author is lead labor and employment counsel, Europe, Middle East, and Africa, for 3M Company and

is based in London.

HOW U.K. EMPLOYMENT

PROTECTION LAW

AFFECTS U.S.

COMPANIES

TUPE, an acronym for Transfer of

Undertakings (Protection of Employment),

is United Kingdom–derived legislation

that has a fascinating effect on U.S.-

headquartered, global companies’ legal,

human resources, and business functions.

In particular, TUPE laws are designed to

protect the rights of employees of com-

panies that are being sold as asset sales.

Many other countries have enacted their

own equivalent of TUPE.

TUPE laws are triggered when there

is a sale of a business whose employees

are based in a country with TUPE protec

-

tions. An underappreciated feature, how-

ever, is that TUPE also may come into play

in transactions that involve the outsourc-

ing of functions, bringing functions back

in house, or re-tenderings (i.e., moving a

function from one external provider to

another). The impact of noncompliance

with any applicable TUPE legislation can

be significant and, in some cases, can ne-

gate the commercially driven benefits of a

transaction. As a result, in a world where

global organizations are increasingly

contemplating outsourcing and similar

transactions, it is important to assess any

employee-related impact before a defini-

tive decision is made. Failing to do so may

result in either party to the transaction

facing the prospect of defending employee

claims in foreign tribunals.

TUPE legislation was born out of

the European Union’s Acquired Rights

Directive, which was passed in 1977 to

protect ongoing employment rights within

a business unit that was being sold. The

Acquired Rights Directive required that

workers were entitled to maintain their

jobs in the sale of a business under the

same terms and conditions as those agreed

upon with their original employer. Per the

Acquired Rights Directive, all European

Union countries were required to adopt

their own equivalent of TUPE. The United

Kingdom did so by enacting the TUPE leg-

islation initially back in 1981 and renewed

it in 2006. The United Kingdom’s TUPE

legislation is widely regarded as the

benchmark not only for the European

Union countries but also for other coun-

tries that have decided to implement simi-

lar protective legislation.

The Acquired Rights Directive was not

very prescriptive or detailed in terms of

what constituted a relevant transfer of

business assets for these purposes or how

to determine which employees will be im-

pacted or covered. Because the Acquired

Rights Directive provided only minimum

protective standards, these questions were,

by and large, left to each European Union

country to decide. Despite these country-

by-country differences, there are five fun-

damental elements that apply consistently.

Having a basic understanding of these five

elements, together with a grasp of the pur-

poses underlying them, will help lawyers

avoid protracted and costly litigation for

their clients in foreign labor courts.

The Five Fundamental Elements

First, when the transaction in question

is complete, the relationship (including

all terms and conditions) of all employ-

ees who are assigned to the business be-

ing sold will be transferred automatically

from the seller to the buyer. Typical TUPE

provisions assign an employee to the busi-

ness unit if the employee spends 50 per-

cent or more working hours within such

business unit. Employees who meet or

exceed the 50 percent threshold are re-

garded as in-scope for a TUPE transfer.

Employees who don’t meet the 50 percent

threshold are considered out-of-scope

and would remain in employment with

the seller.

Second, the seller must provide certain

information about the impacted employ-

ees to the buyer ahead of the closing of

the contemplated transaction so that the

buyer has an adequate opportunity to as-

sess what it needs to put in place to be

able to continue with the employment of

those it is about to inherit.