On the Papers. Failed Rhetoric

• Author: George D. Gopen
• Pages: 13-17

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

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Third, both the seller and buyer are

required to engage in an information and

consultation session prior to closing with

representatives of the employees who are

going to be impacted by the transaction.

Fourth, impacted employees must have

an opportunity to object to having their

employment relationship transferred to

the buyer. This usually occurs as part of

the information and consultation exercise.

The consequence of an employee objec-

tion differs significantly from country to

country. Some countries’ legislation pro-

vides for employment to continue with the

seller while other countries’ TUPE laws

provide that there is a mutual termination

of employment between the objecting em-

ployee and the seller.

Fifth, the impacted employees’ terms

and conditions remain largely the same,

and the buyer’s ability to alter them is ex-

tremely limited. For example, changes to

key terms and conditions like salary and

working hours by either buyer or seller

in connection with the transfer are pro-

hibited unless specific exceptions apply.

Similarly, it is very difficult for either

buyer or seller to alter the terms under

which an employee can be discharged if

such alterations are deemed to be in con-

nection with the transfer.

What Trips Up Lawyers and

Human Resources

Since the Acquired Rights Directive was

enacted, most lawyers, human resources

practitioners, and business leaders have

become accustomed to the notion that

employees assigned to a business being

sold automatically will be transferred to

a new contract so long as the buyer in-

tends to continue to operate that business.

What continues to catch such profession-

als unaware are transactions other than a

permanent sale of a business unit that also

may fall within the remit of a particular

country’s TUPE laws. For example, the

United Kingdom’s TUPE laws expressly

cover outsourcing, bringing functions

back in house, and re-tendering to a dif-

ferent external provider as conferring em-

ployee rights.

The scope of liability for TUPE non-

compliance also differs by country.

Consequences can be significant, wide-

ranging, and, in some cases, serious

enough to negate any commercial benefits

of the transaction itself. For example, li-

ability for failing to provide the required

information to an impacted employee or

for failing to meet the information and

consultation obligations could result in

fines on a per-employee basis. The larger

the number of employees whose TUPE

rights are violated, the larger the amount

of potential fines. Liability also lurks in

potential unfair dismissal or reinstate-

ment claims, in which employees can

lodge TUPE claims in the country’s labor

court against either the buyer or the seller.

Potential remedies include the forced re-

hire of workers that the buyer or seller did

not expect or intend to employ.

TUPE laws loom among the issues

faced by any company conducting busi-

ness outside the United States. It is there-

fore vital to be aware of whether your cli-

ent’s operations or transactions may be

implicated by TUPE legislation. q

A basic understanding

of the law will

help law yers avoid

protracted and costly

litigation for their

clients in foreign labor

courts.

Illustration by D ave Klug