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If newco did not exist and/or have payroll on 28.02.20, and where TUPEd employees are on furlough with oldco, will furlough continue?

Company Director

  1. This raises an important question: if somebody TUPEs into a business after 28 February (but has continuity from before then), can the new employer claim 80% of salary under the Job Retention Scheme? The position is not straightforward, and the answer is uncertain
  2. Applying the legal principles behind TUPE, the answer ought to be “yes” in that the employment has simply continued and the whole point of TUPE is that the rights and liabilities of the employer and employee remain unchanged despite the change of employer.

  3. Thus, where the previous employer (the transferor under TUPE) agreed that the employee should be put on furlough leave and only be entitled to 80% of salary, this would still be a binding agreement between the employee and the new employer (the transferee under TUPE).

  4. The problem is whether the new employer (the transferee) can claim the 80% back from the Government.

  5. From the wording of the Coronavirus Job Retention Scheme, the answer appears to be “no”. In reality, I suspect that it is an issue which the Government may not have not considered or considered fully.

  6. TUPE operates to transfer all 'rights, duties, powers and liabilities' under the employment contract, but only as between employee and employer - not third parties. That is why there are special provisions in TUPE to transfer collective agreements.

  7. The reimbursement of salary paid for employees on furlough leave is a matter between HMRC and the employer - not between the employer and employee.

  8. Thus, it is arguable that TUPE does not 'transfer' the right to claim back the salary paid to employees on furlough leave. It may transfer continuity of employment, but that doesn't mean the employee was on the new employer's payroll scheme as at 28 February.

  9. On a literal reading of the Scheme, where Newco did not exist and / or have a payroll on 28th February, Newco will not be eligible to claim back the salary paid.

“Who can claim

You must have:

  • created and started a PAYE payroll scheme on or before 28 February 2020”
  1. It is possible the Guidance will be expanded to deal with this point. However, at best, the position is uncertain. The new employer could become liable for the wages of the furloughed employees from the date of transfer without being able to claim the sums back under the Scheme.

  2. Hope this assists although I appreciate that it may not be the hoped for answer.

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