Many people will have seen coverage in the news this week about a gathering storm at Rangers Football Club (“Rangers”). Those interested in employment law should keep a watchful eye on proceedings, which provide a good example of the type of difficulties employers face in complying with the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).
It emerged towards the end of last season that the company operating Rangers (“OldCo”) were in financial difficulty. Subsequently, the club entered into administration, with the administrators seeking to broker an agreement with creditors. No agreement was forthcoming and the administrators moved to dispose of the assets, which were sold to a new owner (“NewCo”).
As a consequence of TUPE, the contracts of employment for Rangers’ employees (including the players) transferred to NewCo; however, many players have now said that they want to exercise their right to object to the transfer under TUPE. Often, employees are reluctant to do this because it extinguishes their right to compensation, but, for a footballer, it potentially means that they can sign for another club for free, potentially commanding a higher weekly wage as a consequence.
NewCo argue that the players should have objected prior to the TUPE transfer taking place and that it is now too late for them to do so. NewCo are also threatening to sue the ‘objecting’ players (of which there are currently 10) for breach of contract.
The objecting players argue that they have not been informed or consulted with about the TUPE transfer and so did not know the identity of their new employer. As such, they argue that their objections are valid.
The Right to Object
Regulation 4(7) of TUPE provides that an employee’s contract of employment will not transfer if the employee informs the transferee or the transferor that they object to becoming employed by the transferee. Timing is, however, very important.
Case law in this area points towards an objection only being effective where it is given prior to the transfer; however, a 2007 High Court case found that objections made after the date of the transfer can be valid in certain circumstances. In that case, employees objected to the transfer two days after the date of the transfer, in circumstances where they had not been told the date of the transfer or the identity of the transferee and had not been informed or consulted with about the transfer. This decision is consistent with an employee's fundamental right to choose their employer.
The Rangers case is a good high profile example of the importance of complying with TUPE, both as transferor and transferee.
The consequences of getting it wrong can be expensive. For example, if the transferor and transferee fail to satisfy the obligations to inform and consult with affected employees, each affected employee can claim up to 13 week’s pay.
It will be interesting to see how the Rangers issue is resolved. Employment law and football have often endured a distant relationship but the players in this situation are all relying on employment law to enable them to join new clubs.
If you require advice in relation to TUPE or another employment law issue, please contact Joanne Holborn or Tom Scaife on 01228 552600. Alternatively, email one of the team at HR@baineswilson.co.uk.
29 June 2012