Commercial Property and TUPE
06 September 2019
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For most businesses, when looking at leasing or buying a new property, employment law will probably not be something they consider at all. However, it is important to be aware that, whether you realise it or not, the Transfer of Undertakings (Protection of Employment) Regulations (more commonly known simply as “TUPE”) may be applicable.
TUPE protects the employment and rights of employees when the “business” they are assigned to transfers to a new entity or on change of a service provider where they are assigned to a particular service. Although it may seem surprising, where a business is being operated from a property then the change of ownership of that property can actually result in a “business transfer” for the purposes of TUPE.
As an example, if a restaurant’s lease comes to an end and the owner of the restaurant has to move the business out, then if a new restaurant moves into the premises and starts operating the same type of business, then that could constitute a business transfer under TUPE. The effect of this, technically, is that the employees of the original restaurant would actually automatically transfer to the new restaurant. This could cause multiple problems:
The original restaurant may actually want to take those existing staff to its new premises, but may instead have to hire new employees.
The incoming restaurant would receive all the staff of the previous restaurant, even if it doesn’t want them, on the same terms and conditions as they were on previously (e.g. salary, holiday allowance, etc.).
If the restaurant owners didn’t realise TUPE would apply, then neither of them would have complied with their legal duties to inform and consult the employees about the transfer - leading to legal claims by the employees (potentially up to 13 weeks’ pay).
Of course, the problems can be even worse if one of the restaurants believes that TUPE will apply, but the other does not. For example, the first restaurant owner may have no intention of reopening in another location, and instead of having to pay redundancy to its employees, simply declares to the employees that under TUPE they will transfer to the new restaurant when it takes over the lease. This may result in the employees reporting for work when the new restaurant opens, and expecting the new owner to pay their salary - a big problem if the new restaurant owner was not expecting this.
In certain circumstances, it could even be that the employees actually transfer to the landlord of the premises, either permanently or pending the arrival of the new restaurant.
In reality, of course these issues might not occur - it is possible that neither party may have enough information to be aware of whether or not TUPE applies, or they simply might not be aware of it. If the original restaurant owner has new premises arranged and informs the staff that they should all come to work at the new premises, then if they are happy to do so (they keep their jobs, and may themselves not be aware of TUPE) there is again likely to be no problem in practice.
However, protecting your company means preparing for these sorts of scenarios, rather than simply hoping that they don’t happen - and of course, this doesn’t just apply to restaurants, it could apply to any situation in which a very similar business takes over from another. This means ensuring that when your new lease (or extension of an existing lease) is being reviewed before signing, you should be checking for whether there are any protections against TUPE - such as indemnities from the other party - regardless of whether you are the tenant or the landlord.
3HR have specialist solicitors in both Commercial Property and Employment Law, and are able to provide full advice and assistance in relation to lease reviews, to ensure that they are not just standard, but specifically fit for your purpose. Contact one of our team for more information.
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