The issue here is whether the contract of a person employed by a business operating unlawfully can transfer when that business is acquired by another.
the Claimant worked for Aaronson & Co, a solicitors firm. The principle of Aaronson, Mr Aaronson was struck off the solicitors roll in 2010 and he made arrangements to continue the firm and supervise staff which did not comply with the solicitor’s regulatory regime. It was held by the ET that Aaronson & Co continued to trade, albeit in an unorthodox manner and outside of the regulatory requirements applicable to solicitors.
In March 2011 Mitchell & Co entered into arrangements with Mr Aaronson which the ET found involved the staff of Aarons transferring to Mitchell and Co. On transfer the entity retained its identity, it operated exactly the same before. Further, after the transfer the staff, client files operating functions and the service to the public remained the same. The premises were taken over by Mitchell & Co. C’s salary was unilaterally reduced and when she refused to accept this she was dismissed.
The EAT judgment
Mitchell & Co appealed on the facts but also raised the point that there could be no transfer because Aaronson & Co was operating illegally. The EAT held that whilst the undertaking had to be a legal one – it could not be one that was for an unlawful purpose such as drug dealing or money laundering – it was not essential that all activities had to be entirely lawful. Here the operation of a solicitors practice was entirely lawful; the fact that certain activities carried out from time to time may not have fulfilled regulatory requirements and were therefore unlawful did not mean that it was operated for an unlawful purpose.