Economic Entity TUPE

Is there an economic entity?

This is defined in Reg. 3(2):

“In this regulation “economic entity” means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.”

It will frequently be clear that there is an economic entity involved, for example the sale of an entire business as a going concern. However, where the assets are being split between different transferees, it is necessary to determine, in respect of each of the individual sales, whether that particular collection of assets constitutes an economic entity. To a large extent, it is a question of fact. How important it is that a particular asset transfers will depend on the nature of the business concerned. For example:

  • In the case of a sale of a farm, the transfer of the land (in which the business is inevitably tied up) will be critical in determining whether there has been a transfer of a business. 

  • However, in the case of a sale of a printing business, for example, the transfer of the land is less likely to be critical in determining whether there has been a transfer of a business; in this example the printing equipment, materials and customers would be more important.

  • For a cleaning company, a transfer of the employees will be a key factor in determining whether there has been a transfer of a business.  (Case law has decided that a single employee such as a cleaner can amount to an economic entity depending on the facts.)

Non-commercial ventures are covered under the TUPE Regulations.

Has the economic entity been transferred (i.e. has it retained its identity)?

The undertaking must be transferred in a recognisable form from one employer to another.  The greater the similarity between the business run before and after the transfer, the more likely it is to satisfy this test.  Case law has developed certain guidelines in deciding whether a business has retained enough of its identity on transfer to be covered by the business transfer definition, although no single factor needs to be present in every case and an overall assessment must be made.

The case of Spijkers v Gebroeders Benedik Abattoir CV [1986] 2 CMLR 296 set out useful guidance to assist in determining whether the economic entity had retained its identity.  The factors to consider are as follows (the ‘Spijkers factors’):

  • customers,

  • goodwill,

  • buildings,

  • tangible assets and

  • employees should be considered.