Round #470

We are buying the trade and assets of a competitor but not the company itself. Does TUPE apply and what employees transfer with the business?

**Yes, TUPE is very likely to apply.** You are acquiring the **trade and assets** (i.e. the business as a going concern) rather than the shares in the company. This is a classic “business transfer” under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). TUPE therefore applies automatically provided the economic entity retains its identity after the transfer (which it normally will if you are buying the business, customers, goodwill, contracts, etc. and intend to continue running it in broadly the same way). ### Which employees transfer? Only those employees who are **“assigned”** to the undertaking (or part of the undertaking) that is transferring will move to you. Key points: - **Assigned employees** – anyone who works wholly or mainly in the business you are buying. This is usually straightforward when the business is a distinct operation (e.g. a depot, a product line, a customer portfolio, a branch, etc.). - **Mixed-role employees** – if someone splits their time between the transferring business and other parts of the seller’s group, you look at the proportion of time spent and the organisational structure. The test is factual, not contractual. - **Employees who do not transfer** – those who work in parts of the seller’s business that you are **not** acquiring (e.g. head-office functions, other divisions, or a separate product line). ### Practical consequences - The employees transfer **automatically** on their existing terms and conditions (with limited exceptions for pensions). - You inherit all rights, liabilities and claims connected with those employees (unfair dismissal, discrimination, holiday pay, etc.). - You cannot cherry-pick which employees you want; you must take the assigned employees (or none, if you structure the deal so that TUPE does not apply – which is difficult and risky). - The seller must inform and (usually) consult the affected employees or their representatives before the transfer. ### Exceptions / points to watch - **Service provision changes** – if you are also taking on contracts that involve providing services to the seller’s former customers, the “service provision change” limb of TUPE may also apply. - **Pre-pack administration or insolvency** – some TUPE liabilities can be limited, but this is not the normal case. - **Due diligence** – you should ask the seller for a detailed employee schedule showing who is assigned to the transferring business, together with their terms, liabilities and any disputes. **Recommendation**: instruct your employment lawyer to review the transaction documents and carry out TUPE due diligence as early as possible. The allocation of employees and the associated liabilities is one of the most heavily negotiated parts of an asset purchase.

```csharp using System; using System.Collections.Generic; using System.Linq; namespace EmploymentLaw.Tupe { public sealed record AssignedEmployee( Guid Id, string Name, string Role, bool IsAssignedToUndertaking, DateTime StartDate); public sealed record EtoReason( string Description, bool JustifiesDismissal); public sealed record TupeTransfer( Guid Id, string AcquiringEntity, string TransferringUndertaking, DateTime TransferDate, IReadOnlyList<AssignedEmployee> Employees, EtoReason? EtoReason = null); public interface ITupeTransferProcessor { TupeTransfer Process(TupeTransfer transfer); } public sealed class TupeTransferProcessor : ITupeTransferProcessor { public TupeTransfer Process(TupeTransfer transfer) { if (transfer == null) throw new ArgumentNullException(nameof(transfer)); var transferringEmployees = transfer.Employees .Where(e => e.IsAssignedToUndertaking) .ToList(); if (!transferringEmployees.Any()) { throw new InvalidOperationException( "No employees assigned to the transferring undertaking. TUPE does not apply."); } // In a real asset purchase of trade and assets, TUPE applies if the // undertaking retains its identity (economic entity). // All assigned employees transfer automatically unless they object. return transfer with { Employees = transferringEmployees.AsReadOnly() }; } } } ``` **Explanation** `TupeTransferProcessor` encapsulates the core rule for an asset purchase: TUPE applies when a stable economic entity (the trade and assets) transfers as a going concern. Only employees who are `AssignedEmployee.IsAssignedToUndertaking == true` transfer with the business. The processor filters the employee list accordingly and returns the resulting `TupeTransfer` record. An `EtoReason` can be supplied later if post-transfer dismissals are contemplated, but it is not required for the initial transfer determination. The implementation is registered via the `ITupeTransferProcessor` interface for dependency injection.