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The date of a TUPE transfer

Employees transfer from one employer to another under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) when there is a “relevant transfer” in the form of a business transfer or a change in service provider. Disputes often arise regarding whether there has been a relevant transfer and, if so, when that took place.

The case of Housing Maintenance Solutions Ltd v McAteer, which has just been decided by the Employment Appeal Tribunal (“EAT”), provides a good example of issues which can arise. A particular lesson is that there may even be a transfer at a time when no employees are working and no activities are carried out.

Housing Maintenance Solutions Ltd (“HMS”) is owned by a housing association, LMH, and was set up on 1 July 2011 with a view to providing repair and maintenance services to LMH.

In 2009, LMH entered into an agreement with Kinetic for the provision of repair and maintenance services, but Kinetic did not provide a satisfactory service and LMH terminated the contract on 9 June 2011. Administrators were appointed to Kinetic and its staff were sent home. On 14 June 2011, the staff were told that their employment had been terminated on 9 June due to redundancy.

As at 9 June 2011, LMH did not have the ability to carry out the work previously carried out by Kinetic. However, it retained its responsibilities to tenants and referred emergency work, ad hoc, to contractors.

On 9 June 2011, HMS engaged in consultation with Kinetic employees and reassured them that it would employ them. Four senior ex-employees of Kinetic were asked by LMH to assist in managing the situation and with a view to helping set up HMS. They began working for HMS on 15 June. On 20 June, HMS started performing some cleaning services work for LMH, and on 1 July 2011, HMS commenced its repair and maintenance service for LMH.

Some former employees of Kinetic claimed that they had been unfairly dismissed by Kinetic on 9 June 2011 and also sought wages for the period 9 June to 30 June. They sought a declaration as to the identity of their employer between those dates. Claims were also made for failure to inform and consult in respect of TUPE and collective redundancy consultation.

As a preliminary issue, an employment tribunal had to decide whether there was a relevant transfer from Kinetic to HMS. If there was such a transfer, it had to decide when this occurred. At a pre-hearing review, an employment judge held there was no transfer, but ultimately a tribunal decided that there was a transfer and it took place on 9 June 2011.

Central to the employment tribunal's findings was that from 9 June 2011 HMS “accepted responsibility for the employment of the claimants [our emphasis]”. This was an error: on appeal the EAT held that it is the date when an entity assumes responsibility for a relevant business or service which is decisive when determining the date of a transfer. The employment tribunal lost sight of the fact that employment contracts transfer by operation of law, rather than the existence of an employment relationship being something which itself determines the date of the transfer. The matter was remitted to an employment tribunal to determine the date of the transfer, applying this principle.

The EAT made the following key points:

  • Neither employment of staff nor resumption or continuation of activities are determinants of the date on which an undertaking is transferred – all the circumstances must be taken into account.
  • It is not correct that an undertaking does not transfer until the transferee starts carrying out the transferred activities.
  • Temporary closure of the undertaking does not of itself preclude the possibility that there has been a transfer. There may be a transfer of a business at a time when no employees are working and no activities are carried out.
  • Therefore it may well be that the date of the transfer was 9 June 2011, and that HMS will be liable to pay each relevant employee’s remuneration for the whole period from  9 – 30 June 2011, notwithstanding that none of them actually performed any work for HMS until 15 June and that most of them did not until 1 July.

TUPE is a complex area that requires specialist legal advice. The Employment team at Lanyon Bowdler has considerable experience in this area, and if you would like us to help you or your business, please contact me John Merry (T: 01952 211 010; E: john.merry@lblaw.co.uk) or Will Morse (01432 377152; E: william.morse@lblaw.co.uk).