The importance of due diligence in TUPE transfers

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A recent Employment Appeal Tribunal (EAT) case underscores the importance of carrying out thorough due diligence checks when preparing for a TUPE transfer.

The case involved two print-finishing firms contracted by the well-known auctioneers Sotheby’s. In 2006, Sotheby’s outsourced the printing of its catalogues to Spire, but after that contract ended it engaged another company, Born, to carry out the work. In 2015, 32 print-finishing employees transferred from Spire to Born under a service provision change, in accordance with the Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2006 (TUPE).

Born claimed that it was owed compensation for an alleged misstatement under regulation 12 of TUPE: namely that Spire had stated before the transfer that an employee Christmas bonus was non-contractual, when in fact it was contractual. The original tribunal concluded that even if the bonus was contractual, regulation 11 of TUPE (which deals with the notification of employee liability information) did not require Spire to state whether or not the remuneration was contractual. Telling Born that the bonus was non-contractual went beyond the requirements of regulation 11, but did not constitute a breach of regulation 11. The EAT upheld the decision.

Gaby Hardwicke Employment Law Services Partner Paul Maynard commented: “This case emphasises the importance of a buyer of a business (or in this case the successful party in the retender of a contract) to undertake a thorough due diligence process, rather than relying upon Reg 11 of TUPE, which gives much more limited protection. Well-drafted warranties and indemnities are a must, but are not always easily obtained unless included in the original tender documentation.”

Expert employment solicitors in Eastbourne, Hailsham, Bexhill or Hastings

For expert legal advice on TUPE transfers or any other area of employment law, please email Paul Maynard (Employment Law Services Partner) or call him on 01323 435900. To learn about Paul’s skills and experience, please view his website profile.

Buying or selling a business in Eastbourne, Hailsham, Bexhill or Hastings

For expert advice on all legal aspects of buying or selling a business, please email Mark Williams (Corporate Finance Partner) or call him on 01323 435 900. To learn about Mark’s skills and experience, please view his website profile.

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