Concessions and TUPE?

April 15, 2011

Concessions within stores come and go all the time. The store might decide no longer to sell a particular brand, or to sell its own branded product or to acquire a new concessionaire selling a new brand. This is a retailing fact of life and seems quite straightforward. But is it? Could it be the case that, contrary to usual practice, TUPE potentially applies at the end of a concession arrangement?

If the parties have taken the cautious approach of covering every eventuality in their concession agreement, this issue may be covered and the agreement may provide for what is to happen, or more importantly, who is going to pick up the financial liabilities if TUPE does apply.

TUPE essentially operates to protect employees when a business (or undertaking) changes hands. The idea is that the employees pass with the business to the "buyer" rather than lose their jobs. Liabilities in relation to the employees therefore pass to the new owner. If TUPE is not properly complied with or if employees are dismissed due to a TUPE transfer, these liabilities can become expensive, particularly where a significant number of employees is involved.

Whilst the prevailing view used to be that the termination of a concession did not fall within the scope of TUPE, the "new" TUPE Regulations 2006 are broader in scope than the initial Regulations (and broader in scope than the European equivalent!)  Whilst whether TUPE applies involves a detailed analysis of all the relevant facts, there are certainly circumstances in which the termination of a concession agreement could constitute a TUPE transfer (either to the store or to the replacement concessionaire). This is particularly so where the trend of the UK employment tribunals is to find that TUPE applies unless there is a good reason why not.

This can create headaches for concessionaires (and stores) where the concession agreement does not mention TUPE and there is therefore no agreement as to whether it applies on termination and who will be liable for employee compensation claims if TUPE is found to apply.

Those embarking on a new concession agreement should make sure to raise the issue of TUPE with the store and insist that this point is dealt with in the concession agreement.


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