6 points to consider on employment law for corporate transactions
Most UK corporate lawyers have a good working knowledge of UK employment law; however it is often possible to overlook certain aspects during a corporate transaction which could lead to major issues for both the corporate lawyer and their client. Emma Clark, Employment Lawyer and Partner at Abbiss Cadres, highlights six points to remember.
1) Intra-group transfers — TUPE bites!
Although a Transfer of Undertaking (and therefore the TUPE regulations) applies to most asset acquisitions and outsourcing arrangements, it also applies to intra-group transfers that might take place before or after a share sale.
Ensure clients are aware that the dismissal of an employee could be automatically unfair if they are dismissed before or after an intra-group transfer and their dismissal is connected with that transfer. Clients may also need to be advised on their legal requirements to inform (and possibly consult) with the affected employees.
Beware of changing terms after a transfer within a group – the employees concerned will have the same protection as if they had been transferred to a third party.
2) Micro businesses are exempt from some TUPE rules
Micro-businesses with ten or less employees:
- Do not have to arrange a ballot to elect any employee representatives with which to inform (and consult if necessary) on the proposed TUPE transfer; and
- May inform (and consult if necessary) directly with affected employees in relation to the proposed TUPE transfer if there is no recognised union or existing appropriate representatives.
3) Conditions precedent — Allow enough time
If there is a condition precedent in a deal stipulating that a senior employee must enter into a new employment contract or a settlement agreement, ensure that sufficient time is allowed for them to seek independent legal advice (and consider whether the client should pay towards such advice). Failure to do so can be both embarrassing and antagonise senior players.
4) Restrictive covenants
It is essential to consider what types of post-transaction restrictive covenants are necessary to protect the client’s business. Are prospective customers covered by the restrictive covenants?
Consider if any current restrictive covenants are likely to be enforceable in the post-deal scenario. Do they provide the necessary level of protection? How do any fresh restrictive covenants in the commercial documents (for example the shareholders agreements) provide sufficient comfort or be made to? Bear in mind that the reasonableness of restrictive covenants is assessed at the point they are entered into, so what may have been enforceable may no longer be so if the scope and input of the restriction is significantly broader in its effect post-deal. Therefore it is prudent to review existing restrictive covenants to ensure they are fit for purpose.
5) Apportion all holiday costs
When drafting clauses about apportionment of holiday costs for the buyer/seller of a business, consider the impact of recent European Court of Justice rulings that certain commission payments must be included in holiday pay (see article here).
6) Disputes — Beware limitation periods
Be careful not to assume that a business is claim-free because certain employees left over three months ago and have not filed a claim in the employment tribunal. Some claims (like equal pay) have 6 month limitation periods in the employment tribunal (and 6 years in the commercial courts). All employment tribunal claimants have to inform ACAS of their intention to bring a claim (called ‘Early Conciliation’) and this process can add another 2 to 4 weeks onto the three month time period.
We are here to help
Abbiss Cadres has a unique service model incorporating all the expertise needed to help you manage the complexities of your clients’ employment issues. As well as employment law, our services include mediation, immigration, tax, pensions, compensation and benefits and global mobility (including compliance services). We have extensive experience of working alongside a variety of corporate legal teams where we are seen as either an additional resource or as an expansion to their current HR-facing services. Either way, we offer seamless support to help you help your clients.
For more information on how we can help you with this or another employment related issue get in touch with us on 0203 051 5711 or email firstname.lastname@example.org
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.