In Ireland, the transfer of undertakings is governed by the European Communities (Protection of Employees’ Rights on Transfer of Undertakings) Regulations 2003 (“TUPE” or “the Regulations”).
For those unfamiliar with TUPE, the Regulations, in a nutshell and in very basic terms, provide that the employees attaching to a business which is being transferred must transfer with the business to the new employer. Not only must the employees be transferred but they must be transferred with their accrued years of service, their existing terms and conditions of employment, and also with the benefit of any collective agreement to which they may already be subject.
While it is settled law that TUPE can apply to outsourcing, TUPE does not automatically apply to every outsourcing, or indeed insourcing, in Ireland. Similarly, a changeover of contractors is not a transfer of an undertaking of itself. Unlike their UK counterpart, which provides that TUPE applies in every outsourcing situation, the Irish TUPE Regulations are not as clear cut on this point and whether TUPE applies depends on the facts of each individual case.
In order to trigger TUPE an outsourcing, insourcing or changeover of contractors must involve the transfer of an economic entity which retains its identity. In an outsourcing situation, there must be an associated and related transfer of significant tangible or intangible assets or the transfer of the major part of the workforce in terms of numbers or skill. It follows then that in the absence of any transfer of assets or indeed a major part of the work force in terms of skill or numbers, there is no “transfer” within the meaning of the Regulations and TUPE will not be triggered.
A distinction must be made between labour intensive businesses and asset reliant businesses. For example, in a labour intensive business, such as cleaning contractors, the deciding factor is whether the new incumbent accepts into its employment a major part of the workforce, in terms of their numbers and skills. Case law strongly suggests that in the context of an outsourcing where there is no transfer of assets and the new incumbent / transferee refuses to accept any of the employees into its employment, then the Regulations do not apply. Where the new incumbent does accept a major part of the workforce, the Regulations do apply; a chicken and egg result!
Accordingly, it can be the case that the actions of the parties to a proposed transaction can impact on whether TUPE is triggered, an issue of which all parties should be aware.