I am sometimes asked by chiropractors looking to purchase a clinic whether they can simply buy the patient list from the seller rather than taking on the clinic premises equipment and its staff.
The short answer is that this can be done but, because of the provisions of the Transfer of Undertakings Protection of Employment Regulations 2006 (known as “TUPE”), the acquisition of the patient list is likely to be regarded as the “transfer of an undertaking” with the result that all employees of the business will automatically transfer across to the buyer and be deemed employed by the buyer under their old terms of employment. If the buyer does not acknowledge that the employees have been acquired and treat them as employees on their old terms of employment, the employees will be deemed to have been automatically unfairly dismissed and they will be able to make a claim for unfair dismissal against the buyer. This is the position whatever the seller and the buyer may put in their business sale contract since the regulations have been designed to protect employees and to make it impossible for buyers and sellers to circumvent the rules.
A buyer may be prepared to take on employees but buyers should be aware that any changes to the terms of the employment of the employees may also amount to an “unfair dismissal” or a “constructive dismissal”, leaving the buyer open to a further claim by the employees. Such claims could run to many thousands of pounds per employee (depending on the losses suffered by the employee and other statutory calculations) and the current statutory limit on such claims is in the region of £70,000 per claim.
While both seller and buyer need to take care in relation to the automatic transfer of these employee rights, given that the employees are deemed to be “inherited” by the buyer, it is the primarily for the buyer to be aware of the position and to consider how the potential costs can be avoided or catered for. Usually this would involve agreeing either to a reduction in the price of the clinic or an indemnity from the seller in respect of any costs claims and expenses incurred as result of any claims made.
It is sometimes possible for a buyer to take on the employees and then, where “economical, technical or organisational” circumstances justify it, to consider redundancies. However, redundancy payments would still be payable according to the statutory scale (or any higher contractual scale in force) and the buyer would probably need to include its existing employees in the pool of employees from which it had to select those to be made redundant. There are also risks in going down this route since it is not always possible to demonstrate that the necessary requirements are met and if a redundancy situation is not made out or proper procedures are not followed, this can also result in a claim by the employee before an employment tribunal with a potential award for unfair dismissal.
In short, there is often no easy answer to this problem but it is important that both parties (and particularly the buyer) are aware before they get to involved in the negotiations as the consequences can often be a deal-breaker.”
Mike Hutchinson, FCA