Share sale didn’t trigger TUPE

12 July 2017

The Transfer of Undertakings (Protection of Employment) Regulations, known as TUPE, take care of employees’ rights when, broadly speaking, ownership of the business they work for, or the service they provide, changes hands. An employee can object to the transfer, which will have the effect of terminating their employment contract on the transfer date. That termination will not count as ‘dismissal’ for employment law purposes.

ICAP Management Services Ltd v Berry

The Transfer of Undertakings (Protection of Employment) Regulations, known as TUPE, take care of employees’ rights when, broadly speaking, ownership of the business they work for, or the service they provide, changes hands. An employee can object to the transfer, which will have the effect of terminating their employment contract on the transfer date. That termination will not count as ‘dismissal’ for employment law purposes. 

In the ICAP Management Services case the High Court was asked to determine whether or not an employee who objected to his employer’s share sale remained employed and therefore subject to the garden leave provision in his contract.

Mr Berry resigned from ICAP on 12 months’ notice, with the intention of going to work for one of ICAP’s competitors as soon as he was lawfully able to do so. He was put on garden leave, during which time a company share sale was being formalised. Mr Berry considered that that would amount to a TUPE transfer, and he wrote to ICAP objecting to the transfer. The sale went through and a few weeks later Mr Berry told ICAP that his employment had ended and that he was accordingly no longer bound by his garden leave provisions, and thus free to go and work for the competitor. That was met by ICAP’s application for an injunction to enforce Mr Berry’s garden leave, which still had some months to run.

The High Court held that TUPE didn’t apply to this share sale. There was no change in employer; no new owner had stepped into ICAP’s shoes. The contractual position was unchanged. Mr Berry had remained a party to the employment contract with ICAP. He did the same job, in the same role, for the same organisation and from the same premises. He had the same clients. He was responsible for the same staff, and answered to the same immediate management. A simple acquisition of control of shares doesn’t constitute a transfer within TUPE.

So, no TUPE transfer meant there was nothing for Mr Berry to object to, and thus no automatic termination of his contract. The garden leave clause was enforced via the injunction that ICAP sought.


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