The Transfer of Undertakings (Protection of Employment) Regulations 2006 are intended to ensure that where an employee is employed in a particular role but the employer changes (for example, if a new company takes over an existing employer’s business or contract) the employee is entitled to treat their employment with the first employee as continuing into their employment with the new employer, so that their terms and conditions of employment, and any entitlement to claim unfair dismissal or redundancy pay, are carried over to the new employment.
I dealt with a case recently where my client had taken a new lease of a pub and had to deal with Tribunal claims for unfair dismissal, unpaid wages and holiday pay and sex discrimination brought by an employee (“Miss E”) of the previous leaseholder of the pub (“A Ltd”).
Some months before, A Ltd had given notice to the owner of the pub (“Pub Co”), a large chain owning numerous pubs all over the country, setting a date for their departure from the premises and Pub Co had approached my client to see if he would be willing to take the lease of the premises. Discussions had been positive with both parties intending that my client could move in as soon as A Ltd’s lease expired and “hit the ground running”, perhaps with a very short closure while the premises were redecorated.
The matter was complicated by the fact that A Ltd was wound up a week before the anticipated handover, and one of the directors of the company (“Mrs B”), acting personally, then continued to operate the pub and pay Miss E for a few days. My client visited the property on the date of the anticipated handover to find that the gas supply had been cut off and the meter equipment physically removed, and the pub required rather more extensive refurbishment than originally anticipated before it could be opened for business.
My client and Pub Co had not yet agreed terms for a new lease, and the uncertainty of when the gas supply could be replaced and how long the refurbishment would take meant that it was a couple of months before a new lease was agreed and then a further two weeks before the pub could open for business.
My client had spoken to the employees at the pub when he visited before the handover and, at the request of the owner, had asked Miss E if she wanted to work at another pub he operated for a week or so while the refurbishments were completed; she declined but said she would like to work for him when the pub reopened. When the pub did reopen a couple of months later, Miss E worked a couple of shifts and then left as she had found alternative work which fitted better around her family responsibilities.
Miss E’s Tribunal Claims
Miss E, on the (no doubt, well-intentioned but wrong) advice of her father, then decided to claim unfair dismissal and/or redundancy pay, and for pay and holiday pay during the closure of the pub as well as sex discrimination against, initially my client, and then against Mrs B and Pub Co (but, bizarrely, not against A Ltd).
If my client had moved in as planned after A Ltd’s lease expired then the temporary closure, even of a couple of weeks, while the anticipated refurbishment works were completed would not prevent there being a “relevant transfer” of undertaking within the meaning of the 2006 Regulations (see Inex Home Improvements Ltd v Hodgkins  ICR 71) and Miss E’s employment would have transferred to my client.
However, at the time of the closure of the business, the original plan became impossible because of the issues about the gas supply and the additional refurbishment works and it was not clear whether my client and Pub Co would be able to agree terms for the new lease and whether my client would, in fact, take over the premises.
Furthermore, Regulation 8 of the 2006 Regulations provides that where a transferor (i.e. in this case, A Ltd) is insolvent there cannot be a “relevant transfer” so the fact that A Ltd was wound up meant that responsibility for subsequent events rested with the company; the employee could and should have made a claim for redundancy against A Ltd and, as they were wound up, would have received her redundancy pay from the government protection scheme. By the time of the hearing she was, however, too late to make such a claim.
Mrs B’s decision to employ Miss E for less than a week meant she was obliged to defend the claim brought by Miss E, even though she had no personal liability in law for either the redundancy dismissal or the later resignation, Similarly, the fact that Pub Co and my client had tried to help Miss E out while she was (technically) unemployed meant they were also dragged into the Tribunal proceedings.
When my client employed Miss E some months later that started a new chapter in her employment; there was no “continuity of employment” even though she had been doing the same job in the same pub for A Ltd, Mrs B and my client and she was, therefore, not able to pursue her main claims against my client and the, rather “optimistic”, sex discrimination claim was settled for a modest sum on a purely economic basis (i.e. it was cheaper for my client to settle than to successfully defend the claim).
In short, this was a fairly typical (and far too common) situation where, if the various parties had considered their respective positions and taken professional advice at an early stage, everyone (apart from the lawyers) would have been better off. Miss E could have received her statutory entitlement to redundancy pay and Miss E, Mrs B, Pub Co and my client could have saved themselves several months of hassle, stress and/or legal fees.
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