Legal lessons: employment rules in practice takeovers
My practice – let’s call it practice A – is considering taking over a neighbouring practice – practice B. What obligations do I owe to the staff of the taken-over practice?
My practice – let's call it practice A – is considering taking over a neighbouring practice – practice B. What obligations do I owe to the staff of the taken-over practice?
The takeover of another organisation that has employees of its own presents a number of legal difficulties. It is essential in such circumstances to take legal advice to avoid straying into a minefield.
The rights of employees who become employed by a different employer following the transfer of a business are covered by the Transfer of Undertaking (Protection of Employment) Regulations 2006, or TUPE as they are known. This is not a voluntary code. If there is a ‘regulated transfer' that falls within these there is no way of avoiding the consequences of TUPE, unless the employees themselves do not wish to be transferred.
The regulations are designed to protect the terms and conditions of any employee who is transferred. Terms protected include continuity of employment, pay and holiday entitlement. A transferring employee cannot be employed on inferior terms and conditions to those they enjoyed prior to the transfer. The converse is not true, however, in that a transferring employee can elect to adopt any additional contractual benefits offered by the transferee employer (in this case practice A).
TUPE only applies where there is a change of employer, so for example a purchase of shares of B by A is unlikely to amount to a TUPE-regulated transfer, as the employer is still B. A similar situation is likely to arise where employees are employed by a local health authority and not the practice.
Where a transfer is regulated by TUPE, practice A takes on responsibility for all of B's employees, as well as those employees who would have been employed by B but for being unfairly dismissed before the transfer. So A could find itself liable in an employment tribunal to employees it knows nothing about.
Further, practice A will be liable for any dismissals caused by the transfer whether the dismissal occurred on, before or after the transfer. It is essential that proper enquiries are made, and – if appropriate – an indemnity sought.
Taking on liabilities
In addition, many of B's liabilities (including liability for any personal injury caused to any of B's employees on B's premises) will pass to A, as well as any claim outstanding against B in the employment tribunal. Any criminal liabilities of B (for example, under health and safety legislation) will not, however, pass on to A.
Unlike normal unfair dismissal cases, if an employee can show that they were dismissed because of the transfer to A, then the dismissal will be automatically unfair, unless the employer can show that the dismissal was because of an economic, technical or organisational reason (also known as an ‘ETO' reason). The most common example of an ETO reason is redundancy. If practice A were to be sued
in the employment tribunal for unfair dismissal and were able to show that an ETO reason applied to the dismissal then, as with normal unfair dismissals, it will be for the tribunal to determine whether in all the circumstances of this case the employee was dismissed fairly having regard to all the circumstances in the case.
Where a practice is contemplating taking over another, the rights of employees must be considered as an important factor, especially where it is envisaged that now the combined entity will require fewer staff than the two separate practices. In all cases, practices should seek specialist legal guidance.
Michael Salter and Chris Bryden are barristers at 2 Gray's Inn Square Chambers: www.2gis.co.uk Legal points are provided for information and discussion only and are given without obligation. For specific legal advice consult your solicitor