The announcement yesterday that Rangers Football Club is to be placed into liquidation has one bizarre consequence- the country's football media are now prominently featuring comment on the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). Those who have had to consider TUPE in the past are no doubt aware of the technical nature of its provisions; the difficult practical problems it can throw up can be more complicated than the offside rule!
Leaving aside the sporting issues and the emotional debates which have arisen about the rights and wrongs of the situation in which Rangers has found itself, there are some interesting employment law considerations surrounding the statement made by Charles Green (the individual fronting the consortium looking to buy the club) regarding the ability of a "newco" to retain Rangers current playing staff.
The state of play
The consortium led by Mr Green had hoped to have a Company Voluntary Agreement ("CVA") accepted by Rangers creditors in an effort to allow the club to continue within its existing corporate structure. As HMRC have confirmed they will not agree to the proposals put forward in the CVA, Mr Green will now look to establish a new limited company ("newco") which will purchase the assets of Rangers in its current form, with a view to re-entering the playing field.
Mr Green has stated that, as part of the process of acquiring Rangers assets for the newco, all existing players (and for that matter, other employees of Rangers) must transfer to the newco on their existing terms and conditions of employment. He has stated that, should any player fail to do so, they would be in breach of contract.
Mr Green off target
There is more than one significant problem with Mr Green's analysis of the situation. While TUPE does seek to protect continuity of employment and ensure employees who work for an employer whose business is taken over have their terms and conditions of employment preserved, regulation 8(7) expressly states that the employment protections laid down in TUPE do not apply where the current employer (i.e. Rangers) is the subject of insolvency proceedings. This would include liquidation. Where this occurs and certain legal requirements are met, then the liquidation acts as a wall, which brings every employees employment to an end, without this transferring to the newco.
Accordingly, if Mr Green's consortium sets up its newco and then simply purchases the assets of Rangers from court appointed liquidators, the newco cannot force or oblige employees (i.e. the players) to contract or work for that newco.
Even if arrangements can be made to escape the exception set out in regulation 8(7), there is another obstacle to ensuring the existing player pool moves across to the newco. If TUPE does apply to the transfer of assets, regulation 4(7) allows any employee who would normally become an employee of the newco to object to that transfer. Where this happens, that employee's employment will automatically terminate on the date the formal transfer takes place. Again, where such an objection is raised, the newco have no ability to force the employee to honour his existing contract or to enter into a new one with the new organisation. The discretion lies entirely with the player.
In terms of trying to argue that any player who takes that step is acting in breach of contract, this does not appear to assist Mr Green and newco either. TUPE is clear the employment relationship would be brought to an end upon objection. Given there would be no contract between any player and newco if they take that step leaves something of a weakened attack.
It seems as though, whatever way matters develop, Mr Green will struggle to achieve an outcome in keeping with his statement. He will not be the first person to find that TUPE situations are extremely difficult and the law can often obstruct an employer in achieving their desired outcomes. The only thing that is certain is that the Rangers players who will ultimately be affected by the process will be subject to the transfer market in one way or another: whether under TUPE or, as would appear more likely, in the more traditional footballing sense.