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Scope

Covered Employees

  • EU Directive.  The Directive covers full-time, part-time and indefinite-term or fixed-term employees.  The Directive does not cover independent contractors or other persons who are not regarded as “employees” under national law.
  • Belgium.  CBA 32bis covers full-time, part-time and indefinite-term or fixed-term employees.  The Directive does not cover independent contractors or other persons who are not regarded as “employees” under national law.  Employees working for employers belonging to the public sector are not covered by CBA 32bis.
  • France.  Covers full-time, part-time and indefinite-term or fixed-term employees.  Independent contractors or other persons who are not regarded as “employees” are not covered.
  • Germany.  Section 613a of the German Civil Code covers all existing employment relationships irrespective of whether full-time or part-time, indefinite-term or fixed term, active or on leave of absence as well as apprentices, executive employees (leitende Angestellte) and employees seconded outside of Germany.  Independent contractors, civil servants and freelancers as well as managing directors (Geschäftsführer) and managing board members (Vorstand) are not covered.
  • Italy.  Covered employees include both indefinite-term and fixed-term employees, as well as part-time employees and executives treated as employees or quasi-employees from employment law purposes. Consultants and directors do not fall within the scope of these rules.
  • UK.  In the UK, individuals can provide their services as employees (with full employment rights under English law), workers who are not employees (individuals whose employment relationship with their employer is looser than employees, but who still benefit from limited core employment rights), or as independent contractors who are in business on their own behalf. TUPE covers employees, including full-time, part-time, indefinite-term or fixed-term employees1. TUPE does not cover workers who are not employees or self-employed individuals.

Covered Transactions

  • EU Directive.  The Directive broadly covers transactions involving a change in the entity responsible for a business (or part of a business)2 resulting in a change of employer, such as an asset sale or a merger.3 The Directive requires the relevant business (or part) to constitute an “economic entity”.  Broadly, this requires resources (whether tangible and/or intangible) that are deliberately organized together for purposes of pursuing economic activity of some sort.
  • Belgium.  CBA 32bis scope of application is aligned with the Directive and its interpretation by the European Court of Justice (“ECJ”).  It broadly covers transactions involving a change in the entity responsible for a business (or part of a business) resulting in a change of employer, such as an asset sale or a merger.  The relevant business (or part) must constitute an “economic entity” which this requires resources (whether tangible and/or intangible) that are deliberately organized together for purposes of pursuing economic activity of some sort, whether or not operating for profit.
  • France.  French law relies on the same test as provided under the Directive as interpreted by the ECJ and requires the relevant business (or part) to constitute an “economic entity”.  However, by contrast to the ECJ case-law, French case-law is more demanding on the nature of the assets transferred by the transferor to the transferee and requires that substantial assets are transferred. This implies that businesses that rely on manpower and do not use material assets (e.g., cleaning services) are usually not considered to characterize an economic entity for the purpose of the application of French rules on transfer of undertakings whereas the ECJ has accepted to apply the Directive to this type of activities.
  • Germany.  Section 613a of the German Civil Code broadly covers transactions involving a change in the entity responsible for a business (or part of a business) resulting in a change of employer (in particular an asset sale and transfer) and also applies in cases of mergers, demergers and transfers of assets in accordance with the provisions of the German Transformation Act (Umwandlungsgesetz).  Section 613a of the German Civil Code requires the relevant business (or part) to constitute an “economic entity”.  Broadly, this requires resources (whether tangible and/or intangible) that are deliberately organized together for purposes of pursuing economic activity of some sort.  Section 613a of the German Civil Code does not deviate from the provisions of the Directive in this respect.
  • Italy.  Article 2112 of the Italian Civil Code broadly covers any transactions resulting in a change of ownership of an organized going concern, which existed prior to the transfer and maintains its “identity” afterwards. The type of agreement or provision on the basis of which the transfer takes place is irrelevant for these purposes. Transfers of parts of a business or business units are also included, provided that such parts could be treated as an autonomously functioning and organized going concern, as identified by the transferor and transferee at the time of the transfer.
  • UK.  TUPE applies to a “relevant transfer”, which means:
    •  A business transfer: broadly tracking the Directive, TUPE covers a transfer of a business (or part of a business) which constitutes an “economic entity”. An “economic entity” requires resources that are deliberately organized to pursue an economic activity, and must have a degree of structure, autonomy and stability. In asset-light businesses, an economic entity may be made up only of the employees (or even an individual employee) that form part of it.; or
    • A service provision change (“SPC”): building and expanding on the Directive, TUPE covers outsourcing of services, insourcing of services or a transition from one service provider to another (“on-sourcing”). Broadly, this captures situations where an organized grouping of employees is carrying on an activity for a client, and that client intends that, following the SPC, these activities will be carried out by a (different) service provider or (in an insourcing) by the client. The service provider’s employees must be operating as a dedicated team, but need not necessarily be devoting the whole (or even the majority) of their working time to the client’s work. Whether a change in service provider will constitute and SPC under TUPE will be highly fact-sensitive and legal advice should be sought on a case by case basis.

Excluded Transactions

  • EU Directive.  The Directive does not generally apply to:
    • Businesses (or the relevant part) not situated within the EEA.
    • Stock sales.
    • Transfers of assets not constituting an “economic entity” or where the economic entity does not retain its identity.  However, the analysis of whether the transfer of assets constitutes an economic entity is fact-specific, and legal advice should always be sought before concluding that the Directive does not apply.
    • Unless an EU Member State provides otherwise, liquidations in bankruptcy or analogous proceedings.4  Where an EU Member State provides that the Directive does apply in this context, the EU Member State may relax the usual rules and provide that (i) certain employee debts do not transfer where they are otherwise protected under national law and (ii) changes to employees’ terms and conditions may be agreed, provided these are designed to safeguard employment opportunities by ensuring the survival of the business.
    • Transfers between certain governmental bodies.
  • Belgium. CBA 32bis does not apply to:
    • Stock sales. 
    • Transfers of assets not constituting an “economic entity” or where the economic entity does not retain its identity.  However, the analysis of whether the transfer of assets constitutes an economic entity which retains its identity is fact-specific, and legal advice should always be sought before concluding that CBA 32bis does not apply.
    • Liquidations in bankruptcy or analogous insolvency proceedings. 
    • Insolvency proceedings that do not involve a liquidation. Some of the more stringent rules of CBA 32bis are relaxed ((i) certain employee debts do not transfer where they are otherwise protected under national law, (ii) the new employer may pick and choose which employees are taken over and (iii) changes to employees’ terms and conditions may be collectively agreed) in order to safeguard employment opportunities by ensuring the survival of the business.
    • Transfers between employers belonging to the public sector.
  • France. French rules on transfer of undertakings do not generally apply to:
    • Stock sales.
    • Transfers of assets not constituting an “economic entity” or where the economic entity does not retain its identity.  However, the analysis of whether the transfer of assets constitutes an economic entity is fact-specific, and legal advice should always be sought before concluding that French rules do not apply.
    • With respect to transfers happening in the framework of bankruptcy or analogous insolvency proceedings, French law permits the bankruptcy Court to authorize the liquidator (or similar practitioner) to proceed with some dismissals to happen prior to the transfer of the economic entity, an exception to the general rule that dismissals related to the transfer are prohibited (see “Protection Against Dismissal”).  In addition, liabilities owed to the employees and relating to the period prior to transfer are not transferred to the transferee.
    • Specific rules govern the transfer of economic entities from the private sector to the public sector and vice and versa, including the conditions under which the transferee is required to offer to the transferred employees private law or public law governed employment agreements (as applicable).
  • Germany. Section 613a of the German Civil Code does generally not apply to:
    • Stock Sales. 
    • Transfers of assets not constituting an “economic entity” or where the economic entity does not retain its identity.  However, the analysis of whether the transfer of assets constitutes an economic entity is fact-specific and highly depended on individual circumstances.  Legal advice should always be sought to evaluate whether Section 613a of the German Civil Code does apply.
    • Transfers exclusively by act of public authority.
    • In compliance with the derogations provided for in the Directive, Section 613a of the German Civil Code applies in insolvency proceedings with regard to safeguarding jobs and the continuity of the works councils.  In transfers occurring during insolvency proceedings, the liability of the transferor for claims already arisen before the transfer of undertaking are not transferred to the transferee, e.g., the transferee does not assume pension liabilities towards the transferring employees with respect to the time period prior to the transfer.
  • Italy. Article 2112 of the Italian Civil Code does not generally apply to:
    • Stock sales. 
    • Transfers of assets not constituting a going concern or where the going concern does not maintain its “identity” following the transfer. However, the analysis of whether a transfer of assets can be characterized as  going concern is fact-specific and highly depends on specific circumstances.  Legal advice should always be sought to evaluate whether Article 2112 of the Italian Civil Code does apply.
    • Transfers occurring in the context of bankruptcy procedures or similar insolvency procedures, in case during the consultation procedure (see “Obligation to Consult”) an agreement on preserving jobs is reached (and unless the provisions of Article 2112 are agreed to be applied in the context of the consultation procedure).
  • UK. TUPE does not generally apply to: 
    • Businesses (or the relevant part) or, in relation to an SPC, organized groupings of employees not situated in the UK immediately prior to the transfer.
    • An intra-governmental transfer, which may involve any public body whose functions involve the exercise of public authority: it need not necessarily be a public sector organization.
    • In relation to a business transfer:
      • Stock sales.
      • A transfer of a business not constituting an economic entity or where the economic entity does not retain its identity. However, the analysis of whether the transfer of assets constitutes an economic entity is fact-specific, and legal advice should always be sought before concluding that UK rules do not apply.
    • In relation to an SPC:
      • Supplies of goods.
      • An SPC where the nature of the activity carried out by the service provider (or client) after the change is fundamentally or essentially different from the activity carried out prior to the change.
      • Activities which the client intends to be carried out in relation to a single specified project or a task of short duration.
      • An on-sourcing where the client changes.

[1] Note that this will include employees of associated companies (for example group service companies) who have an employment relationship with the transferor of a business or, in relation to a service provision change, with the service provider or client.

[2] The Directive also applies to undertakings, which is a broad concept and includes, for example, charities, trade associations, certain governmental bodies, schools and universities, whether or not operating for profit.

[3] The Directive may protect employees of the surviving entity in a merger, subject to the structure of the transaction and the applicable law of the member state in which such merger occurs.

[4] With respect to insolvency proceedings that do not involve a liquidation, the Directive will apply, but certain of the Directive’s requirements may be relaxed by the EU Member State.