No TUPE Transfer Where Employment Transfers to a Group of Companies Including the Original Employer
The Employment Appeal Tribunal (EAT) has held that TUPE does not preclude a transfer from one employer to multiple employers, provided that the economic entity to which the employee is.
In this case the EAT found that there was no relevant transfer in these circumstances because the employer had not changed.
Legal Background
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply where there is a transfer of an economic entity that retains its identity (a business transfer). This involves three elements:
- an economic entity
- a transfer of that economic entity to another person
- that economic entity retaining its identity following the transfer
Facts
In Hyde Housing Association Ltd and other v Layton, Mr Layton worked as a multi-skilled decorator for a social housing provider, Martlet Homes Limited (Martlet), from 2005. In 2008, Martlet joined a group of companies called the Hyde Group and became a subsidiary of Hyde Housing Association Limited (HHA). Martlet remained as Mr Layton's employer but the payroll and HR functions were taken over by HHA on Martlet's behalf.
In 2013 Mr Layton was offered an alternative role as an employee of all of the companies in the Group, to be employed on a joint and several basis. He refused this alternative role. Mr Layton was dismissed, but subsequently accepted re-engagement on different terms. Notwithstanding his re-engagement, Mr Layton presented an unfair dismissal claim.
Employment Tribunal
A preliminary issue at the Employment Tribunal (ET) hearing was whether there had been a TUPE transfer of his employment to Hyde Group. The ET decided the kitchen and bathroom maintenance team in which Mr Layton was employed was an economic entity for the purpose of TUPE. They also decided that there had been a TUPE transfer and noted that if Martlet left the Group, Mr Layton's employment would remain with the other group members.
The Hyde Group appealed to the EAT, arguing that there cannot be a transfer under TUPE where there are multiple transferees, and that there is no transfer when the transferor is also one of the transferees.
EAT's Decision
The EAT allowed the appeal and accepted Hyde Group's argument, stating there was no relevant transfer under TUPE because, on the facts, there had been no change of Mr Layton's employer. He would still be employed by Martlet under the new arrangements.
The EAT did say, however, that there could be a TUPE transfer where there are multiple transferees as there was no reason why the requirement that the transfer be to 'another person' could not be read in the plural. This means that a TUPE transfer could arise when an employee's employment was to be transferred to more than one entity - as long as in doing so it did not become fragmented to the extent that it lost its identity.
Despite this finding, the EAT concluded that, on the facts, the control of the business and Mr Layton's employment remained with Martlet. The fact that Martlet's liability would be joint and several with the other members of the Hyde Group did not change this position.
Best Practice
Employers should give careful thought to proposed restructures in order to take into account the impact of TUPE at any early stage. This case illustrates the importance of reviewing how the activities of an economic entity will be organised post transfer, particularly when a number of different legal entities are involved. Given the wider implications of this case, the EAT has given Mr Layton permission to appeal.