Rangers FC problems highlight the impact of TUPE objections on merger success.
The recent problems at Rangers FC have highlighted an important issue for employers, the impact of TUPE rules during a merger or takeover. The TUPE rules are designed to facilitate a smooth transfer of employees to a new company but can also give employers something they don’t want. Many purchasers find them an unwelcome hindrance, given the impact of the arrival of new employees on existing workforces. Equally they can potentially take away what employers do want – employees who are key to the business going forward.
The simple position is that under TUPE any employee who would otherwise transfer with the business to a new owner, can object to do so. Objections are relatively rare, as they leave an employee with few rights against their existing employer and no rights against the entity that would have been their new employer under TUPE. Consequently, for relatively low paid staff it is usually not a realistic financial option. However, as the Rangers scenario demonstrates, where an employee is more highly paid or has the ability to walk into new employment, the right to object may prove attractive. Unfortunately, it is usually these employees who are key to a business’ continued growth and success.
Paul Killen, Employment Partner, Osborne Clarke comments: “The Rangers FC situation shows that retention of key talent is a real issue for those acquiring a business, particularly one that is bringing itself out of financial trouble. A prospective purchaser must provide a range of information to the seller but has no right to actually consult with its prospective employees. As a minimum, purchasers should make sure that they open channels of communication with key employees before the proposed transfer and consider what commitment they can give financially and in terms of job security. “TUPE has the potential to disrupt the smooth running of a business as there is no requirement for an employee to confirm they will not exercise their right to object to a transfer. Rangers is in the unenviable position of having to wait and see over coming days which employees continue to be committed to the Club”.