TUPE on a share sale—time to tread carefully?

TUPE on a share sale—time to tread carefully?
What does the decision in Smith v Jackson Lloyd Ltd mean for future share sales? The Employment Appeal Tribunal (EAT) recently held that the Transfer of Undertakings (Protection of Employment) Regulations 2006 applied to a share sale resulting in the employees of the target company transferring to the parent company of the purchaser.

Original news

Smith v Jackson Lloyd Ltd UKEAT/0127/13/LA, [2014] All ER (D) 157 (Apr)

In dismissing the employers' appeal, the EAT held that the employment tribunal had directed itself correctly and applied the correct law in holding that there had been a transfer of undertakings pursuant to the Transfer of Undertakings Protection of Employment Regulations 2006, SI 2006/246, reg 3(1)(a) (TUPE).

How did the issue arise in this case?

In September 2010, Jackson Lloyd Ltd (JL), a repair and maintenance company, was in severe financial difficulties. It was agreed that Mears Ltd (ML), the subsidiary company of Mears Group plc (MG), would purchase the shares in JL.

Upon acquisition, the original JL board resigned with immediate effect and were replaced by MG nominees. MG announced to the JL workforce that MG had acquired JL and that it was embarking on a programme of integration but that there would be no change to the terms and conditions of their employment.

The employees of JL brought a claim for breach of TUPE for failing to consult with and inform the affected employees about the transfer to MG. The Employment Tribunal (ET) found there was a TUPE transfer to MG and made an award in respect of the failure to consult with and inform the employees. The EAT subsequently dismissed an appeal by MG against the decision of the ET.

What are the relevant statutory provisions?

TUPE, reg 3(1):

'These Regulations apply to-

(a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before transfe

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