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 function 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 out of the transfer (Fairhurst Ward Abbotts Limited v Botes Building Limited [2004] IRLR 304).
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 often called a “multi-factorial test” to decide whether a business transfer has taken place. This is another way of saying that all the relevant factors making up the transaction must be examined, without singling out any one factor, to work out what has happened (Cheeseman v R Brewers Contracts Limited [2001] IRLR 144). Relevant factors might include:




• 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. 





TUPE will apply even though the employer was carrying out some of its business activities unlawfully before the transfer, for example, by breaking tax laws (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 breach TUPE if the main reason for the dismissal was an intended transfer, that is, a business sale or change of service provider (typically because the incoming business owner or service provider refuses to take over the workforce). This is a key weakness of TUPE protection, especially when businesses fail. It is all too easy for an incoming owner to argue that employees of a business in financial trouble lost their jobs before the transfer not because of a planned sale, but rather because there was no money to pay their wages (a reason unrelated to the transfer). If a pre-transfer dismissal is unrelated to TUPE, there will be no breach of TUPE and the employees will not transfer to the new business. 


Here is a notorious illustration: