Business transfers 




There will be a business transfer where, immediately after a transfer such as a business sale, there is an identifiable economic entity that has retained its identity. This is often described as the “going concern” test. Broadly speaking, it involves examining whether what has changed hands on the transfer date is a recognisable business, capable of continuing to operate as a going concern, as opposed to just a collection of assets, such as land and buildings, with no intention to carry on the business. The economic entity need not exist separately before the transfer. TUPE will still apply if the separate business emerges as a result of the transfer (Fairhurst Ward Abbotts Limited v Botes Building Limited [2004] IRLR 304).
In addition, TUPE can apply even if the sold business is integrated into the buyer’s business straight after the transfer. 




In the UK, tribunals apply what is known as a “multi-factorial test” to decide whether a business transfer has taken place. In other words, all the factors making up the transaction must be examined, without singling out any one factor, to decide what has happened (Cheeseman v R Brewers Contracts Limited [2001] IRLR 144). Relevant factors might include, for example:



• the type of business;




• the assets being transferred and whether they include goodwill, equipment or premises; 




• whether most employees are being taken on by the new business, and if not, why not;



• whether customers are transferring; 




• similarities and differences between the activities of the new and old business; and




• any break during which activities are suspended, and the reason for and length of that break. 




The fact that an employer is carrying out some activities unlawfully before the transfer, for example breaking tax laws, does not stop TUPE applying (Ejiofor t/a Mitchell & Co Solicitors v Sullivan [2014] UKEAT/02868/13/SM).




Where employees are not taken on by a new business, the tribunal will have to work out why not. In general, pre-transfer dismissals will only infringe TUPE if the main reason for dismissal was an intended business sale or service provision change (for example, because the new business owner or service provider has refused to take on the transferor’s workforce). This is one of the main weaknesses of TUPE protection, especially in the context of business failure. It is all too easy for a new business owner to argue that employees lost their jobs before the transfer not because of a planned sale, but instead because there was no money left to pay their wages (a reason unrelated to the transfer), and that as a result, their employment does not transfer to the new business. Here is a notorious illustration: