Recent Posts - TUPE

May 14, 2020
by Jeffrey
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TUPE & CJRS Update – 14 May 2020

Further guidance has been issued by HM Treasury for employers to assist in identifying those employees for whom an employer is eligible to claim furlough payments.

See latest guidance here

The guidance does not changes the earlier guidance but makes the position clearer. In respect of TUPE it states:

“Employee transfers under TUPE and on a change in ownership

A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.

Read more guidance on TUPE rules.

Read more guidance on business succession.”

April 15, 2020
by Jeffrey
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TUPE CJRS Latest Guidance & Treasury Direction to HMRC – 15 April 2020

The latest Guidance on the CJRS provides:

“A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 19 March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.“

Also under sections 71 and 76 of the Coronavirus Act 2020 the Chancellor of the Exchequer has issued a Direction to HMRC on the operation of the Coronavirus Job Retention Scheme.

For the purposes of TUPE, summarised below are the most important points which are set out in §§9 to 11 of the Direction.

To understand these points the reference to a “qualifying PAYE scheme” is a PAYE scheme registered on HMRC’s real time information system for PAYE on 19 March 2020.

The Direction deals with two scenarios.

First, (see §§ 9.1 to 9.3), is where the new employer (transferee) has no qualifying PAYE Scheme solely because its PAYE scheme was registered on the HMRC real time information for PAYE after 19 March 2020.

If: (i) an employee was on the payroll of the transferor on 19 March; (ii) the transferor has a qualifying PAYE scheme, and; (iii) there is a transfer after that date then the employee will qualify if:

Reg 102 of the PAYE regulations applies – i.e. the transfer is not treated as a cessation of employment.
TUPE applies so that the employment does not terminate on transfer .
The transfer does noes not operate to break the continuity of employment.

Second, (see §10), is where the new employer (transferee) already had a qualifying PAYE Scheme before 19 March 2019

If the transferee employer does not qualify to make a claim under §§9.1 to 9.3 of the Directions solely because it already had a qualifying PAYE Scheme then the entitlement to claim under the CJRS is determined as if the transferee employer had made earnings payments to the employee in the 2019-20 tax year shown on the real time return on or before 19 March 2020.

Comment

Previously the position under the Guidance v3 was that the CJRS applied to employees who transferred after 28 February 2020. Now under the Treasury Direction and Guidance v4 the Scheme applies to transfers after 19 March 2020. If an employee transferred on or before the 19 March 2020 then they will be on the transferee’s payroll on that date (assuming real time data had been provided) and therefore be a relevant employee for the purposes of the CJRS.

Link to Treasury Direction

Link to Guidance

April 9, 2020
by Jeffrey
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TUPE and the Coronavirus Job Retention Scheme – Updated 9 April 2020

The CJRS Guidance has now been updated to make it clear that any employee who transferred after 28 February 2020 is covered by the Scheme. The guidance now provides:

“Employee transfers under TUPE and on a change in ownership

A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28th February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.”

Links:

The Scheme Guidance for Employers

The Scheme Guidance for Employees

HMRC PAYE Manual

March 30, 2020
by Jeffrey
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TUPE and the Coronavirus Job Retention Scheme – Updated 7 April 2020

Updated see post of 9 April 2020

The guidance for the Coronavirus Job Retention Scheme (‘the Scheme’) provides that in order to be a qualifying employee within the Scheme, “Furloughed employees must have been on [the employer’s] PAYE payroll on 28 February 2020…”. If a transfer takes effect after that date, for example on 1 March 2020, are the employees qualifying employees for the purposes of the Scheme, after all they were not on the transferee’s payroll on 28 February 2020?

Under TUPE employment does not cease on transfer (see for example Mears Homecare Limited v Bradburn in the context of National Minimum Wage production obligations). In the context of PAYE this is reflected in regulation 102 of the Income Tax (Pay As You Earn) Regulations 2003 which provides that if the employee remains in the same business but the employer changes then the change will not be treated as a cessation of employment so that no P45 is issued. However, this does not mean that the employee is on the transferee’s payroll at a date earlier than the transfer.

Every employer has a HMRC Employer Reference number which is used for administering income tax and national insurance contributions on the payroll. This is referred to in the Guidance as the ‘ePAYE’ reference. The ePAYE reference is required to make a claim under the Scheme.

On a business transfer there are two possibilities with regard to the payroll. Either there is a ’merger’ or there is a ’succession’. A merger is where two or more PAYE schemes are brought together for the same legal entity. However, just because a business merges does not mean that the payroll merges. A succession is when the ownership of the business changes from one legal entity to another and the new owner takes responsibility for the pay records. In both cases there will be a new Employer Reference (ePAYE) number allocated by HMRC. In any case, just as if a new employee is recruited, the transferred employees will not be on the transferee’s payroll before the date they are employed.

Finally, it is important to note that the issue of whether an employee is or is not covered by the Scheme is primarily an issue between the employer and HMRC and will, ultimately, in cases of dispute, be a matter that is resolved in a tax tribunal and not an employment tribunal. As matters stand, an employer would have good grounds for not offering those employees who transfer after 28 February 2020 an opportunity to be furloughed but it would be sensible for the employer to seek guidance from the HMRC prior to doing so.

It is likely that the position in relation to transferred employees under Coronavirus Job Retention Scheme is simply an oversight by the Government and if there is revised guidance this may well change.

First Update 06 April 2020

The Revised Scheme Guidance now provides:

If you made employees redundant or they stopped working for you after 28 February

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.

What transferred employees can therefore do is ask the old employer (the transferor) to take them back and immediately furlough them. It is of note that the Guidance does not refer to employment having ceased (which of course it does not under TUPE) it only refers to the employee having been made redundant by or ‘stopped working’ for the employer (eg. transferor) after 28 February 2020.

Second Update 07 April 2020

Following exchanges between employment lawyers on social media, it became apparent that HM Treasury have confirmed to a conservative member of parliament, David Johnston MP, by email of 6 April 2020 that the the Scheme will apply to those transferred after 28 February 2020. The email exchange is set out below.

Links:

The Scheme Guidance for Employers

The Scheme Guidance for Employees

HMRC PAYE Manual

July 4, 2019
by Jeffrey
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Mears Homecare Limited v Bradburn EAT – 2 May 2019

The issue in this case is whether a transferor is required to answer a production notice served by a former employee under s. 10 of National Minimum Wage Act 1998 (NMWA). Central to this issue is whether the transferor is an ’employer’ within the meaning of s. 54(4) of the NMWA which provides: ” (4) In this Act “employer”, in relation to an employee or a worker, means the person by whom the employee or worker is (or, where the employment has ceased, was) employed.”

The Background

On 1 February 2017, the Claimants’ served 10 production notices under s.10, NMWA by which they requested wage information from M for the preceding 12 months. That period covered nine months during which the Claimants were employed by M and three months during which they were employed by the respective transferees.

M failed to respond to the production notices within the period of 14 days required by s.10(9) of the NMWA. The Claimants then brought complaints before the ET under s.11 of NMWA for a declaration and award in respect of such failure.

ET Judgment

The held that M was the employer within s. 54(4) of the NMWA because it was the “person by whom the employee or worker is (or, where the employment has ceased, was) employed.” There was no longer any contract of employment between M and the Claimants and therefore that employment had ceased. Furthermore, this was supported by the following; M had a continuing obligation to retain records under s. 9 of the NMWA and remained liable to criminal prosecution if it did not do so. There were sound policy reasons why the obligation to produce records rests with the person obliged to make and retain those records during the pay reference periods in question. There were also anomalies which would flow if the liability to answer the production notice transferred. A transferee could become liable even though it it did not have the records to produce; there was no joint liability provisions under TUPE to share the liability between the transferor and transferee.

EAT Judgment

M appealed on essentially two grounds:

(i) The ET erred because where there has been a relevant transfer the effect of Reg 4(1) of TUPE is that the employment does not cease.

(ii) The ET erred in failing to consider whether the obligation to keep and preserve minimum wage records is itself an obligation that transfers where there is a relevant transfer. The further obligation to produce records, which is parasitic on the obligation to maintain records, must therefore necessarily also transfer.

The EAT, Mr Justice Choudhury (President), held:

In respect of Ground 1 (paras 44 and 45): The ET incorrectly focused on the identity of the employer rather than the key question, which is whether the employment under a contract of employment had ceased. The Claimants did not cease to be employed at any stage. All that happened was that as a result of Reg 4(2) of TUPE, and the resultant statutory novation of the contract, a new employer seamlessly stepped into the shoes of the old. As such, the only part of the definition which applied was that relating to the current employer as at the date that the production notices were served. That employer was the transferee.

In respect of Ground 2 (paras 46 to 50). The obligation to maintain records under the NMWA transfers to the transferee by application of reg. 4(2) which provides that the effect of a relevant transfer is that “all of the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred” and “any act or omission before the transfer is completed shall be deemed to have been an act or omission of the transferee.” Furthermore, the requirement to maintain records under the NMWA was not unique. Employers had obligations to keep records in other circumstances. In addition there are other circumstances when transferees may be handicapped by not having access to records.

Link to EAT Judgment

Link to ET Judgment

May 13, 2019
by Jeffrey
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Dodič v Banka Koper ECJ – 8 May 2019

In this case the ECJ were asked to consider whether there was a transfer under Art 1(1) of the Directive in a Slovenian case in which domestic banking legislation mandated the transfer of client accounts to an authorised broker on the closure of brokerage.

The Facts

D was employed by a brokerage, BK. In December 2011 BK decided to cease to provide investment services and its stock exchange intermediary service. Slovenian banking law required that on ceasing to provide such services the brokerage company was required to make arrangements for the transfer of financial instruments and other assets managed for the clients and client accounts relating to debt securities and other services to another authorised brokerage. It was also required to transfer all documentation and its liabilities in relation to management and storage of relevant documents to the authorised brokerage. I.e. it could not simply shut up shop without arranging for the clients to be serviced by another brokerage.

In June 2012 BK entered a transfer agreement with AI in accordance with Slovenian law. However, it was also agreed that BK would itself work for AI as a dependent stock exchange intermediary. BK informed clients in July 2012 that it was ceasing to provide stock exchange intermediary services and asked for their consent to transfer to AI and informed the clients that if they failed respond they would be deemed to have consented. 91% of BK’s clients transferred to AI. BK was subsequently deauthorised by the stock exchange and authorised to provide serves as a dependent stock exchange intermediary only. BK terminated the employment contracts of all employees in its investment served including that of D in October 2012. D subsequently brought a claim in which he argued that he should have transferred to AI.

BK and AI resisted D’s claim on the basis that BK had no choice but to enable the transfer of those clients who consented as that was required by domestic legislation. Furthermore, the transfer did not apply to employees, premises or equipment and client could elect not transfer to AI but move their account to another brokerage.

The Decision of the Slovenian Court

The Solvenian court held there was no transfer within the meaning of Art 1(1) as the transfer agreement entered into by BK and AI did not entail a change of employer within Art 1(1). It considered as decisive the fact that BK did not transfer its clients to AI. The fact that almost all of its clients chose to move to AI was not a sufficient ground for concluding that there was a ‘transfer of an undertaking’ within the meaning of Directive 2001/23. Moreover, BK continued to carry out financial intermediary activities, including for AI, confirmed there was no transfer.

The Supreme Court of Slovenia referred three questions to the ECJ for a preliminary ruling which the ECJ summarised as follows:

The referring court asks, in essence, whether [Art 1(1)] must be interpreted as meaning that the transfer, to [AI], of the financial instruments and other assets of the clients of [BK], following the cessation of [BK’s] activity and under an agreement the conclusion of which is required by national legislation, constitutes a transfer of an undertaking or of part of an undertaking, even though (i) [BK’s] clients remain free not to entrust the management of their stock market securities to [AI] and, (ii) [Bk] continues to operate as a dependent stock-exchange intermediary and, in performing that role, cooperates with [AI].

The Judgment of the ECJ

The ECJ re-emphasised, by reference to the established case law: (i) the multi-factoral approach to determining whether or not there was a transfer and in a case such as this where the economic activity is based primarily on intangible assets, the transfer of those assets is of undoubted importance; (ii) that the decisive criterion was whether the entity retained its identity and; (iii) the concept of a legal transfer must be given a sufficiently flexible interpretation to provide for the protection of workers in the event of a change of employer.

On the specific facts it held that:

BK’s Office for Investment Services was an economic entity, as it had human and logistical resources enabling the exercise of an economic activity consisting in the provision of brokerage services and the performance of investment activities for instructing parties.
The fact that BK continued to operate as a dependent stock-exchange intermediary and, in performing that role, cooperated with instructing parties, including AI, was, in principle, irrelevant to the classification of the transaction as a ‘transfer of a part of an undertaking’.
Here the intangible assets, the financial instruments and other assets of the instructing parties, the clients, the keeping of their accounts, the other financial and ancillary services, as well as the maintenance of records, namely the documentation relating to the investment services provided to clients and the investment activities carried out for them, contributed to the identity of the economic entity. The transfer of those items was necessarily subject to the express or tacit agreement of the clients as, in a context such as that here, an undertaking that ceases its activity could not require its clients to entrust the management of their securities to the undertaking of its own choosing.
As BK’s clients were not bound by the transfer agreement entered into with AI, and could freely decide to transfer their securities to the latter, this cannot, in itself, preclude there being a transfer.
For the transaction to be a transfer it must be established that there was a transfer of clients. To that end, it was necessary to carry out an overall assessment of the facts, taking into account, in particular, the incentives offered to BK’s clients to entrust the management of their securities to AI. Whether the clients had an express choice or not as regards the transfer of their accounts to AI, or whether there was a default transfer of the records relating to their accounts was a relevant matter to be taken into account. Another factor to be taken into consideration was the provision of financial incentives such as covering transfer fees in the case of transfer to AI.
The fact that 91% of clients transferred was not, on its own, sufficient to establish a transfer as this only followed the transfer agreement.

The ECJ concluded by summarising the position as follows:

The transfer, to a transferee, of financial instruments and other assets of the clients of a transferor, following the cessation of the transferor’s activity, under a contract the conclusion of which is required by national legislation, even though the transferor’s clients remain free not to entrust the management of their stock market securities to the transferee, may constitute a transfer of an undertaking or of part of an undertaking if it is established that there was a transfer of clients, that being a matter for the national court to determine. In that context, the number of clients actually transferred, even if very high, is not, in itself, decisive as regards classification as a ‘transfer’, and the fact that the transferor cooperates with the transferee as a dependent stock-exchange intermediary, is, in principle, irrelevant.

Link to judgment

April 24, 2019
by Jeffrey
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Graysons Restaurants Limited v Jones EAT – 28 November 2017; CA – 17 April 2019

This case raises two short questions in the TUPE insolvency context. The second is relevant to TUPE generally.

First, is whether a claim for equal pay arrears is a claim for “arrears of pay”, and in circumstances where the claim has not yet been determined, whether it gives rise to a “debt” to which the employee is entitled on the “appropriate date” (here the employers insolvency).

If so, the second question is whether the whole of the arrears of pay accrued prior to the appropriate date is effectively extinguished or whether only that liability excluded under the statutory scheme in Part XII of the ERA is extinguished leaving the transferee to pay the balance.

The Facts

In 2007 equal pay claims were brought against Liverpool City Council by a group of women, the Claimants, who were employed as cooks and kitchen assistants at various schools throughout Liverpool (those claims had not been determined at this stage). Their employment transferred twice in 2007 and in 2009. The second employer become insolvent before being bought G. The Claimants’ contract of employment transferred to G. The Secretary of State would be liable to pay certain sums to employees out of the National Insurance Fund as their former employer had became insolvent.

The question was whether any of the sums, that may become due if the equal pay claims were successful, were payable by the Secretary of State (up to the 8 week limit) and whether or not the transferee would then be liable for the balance.

The ET Judgment

The ET referred to the Acquired Rights Directive and the Insolvency Directive and observed that their paramount concern is to safeguard and protect the rights of the employees either where there is a transfer or an insolvency of the employer.

The ET held:

That equal pay arrears are not a debt payable at the time of transfer (or on the appropriate date) where the equal pay claims have not been determined and quantified. The debt will only be due if the equal pay claims succeed and not before.
If wrong in relation to the above, any liability in excess of the eight week sum guaranteed by the statutory scheme in Part XII of the ERA, transfers to the transferee and is not extinguished.

The EAT Judgment

The EAT (Mrs Justice Simler) held:

The list found in s.184(1) ERA is exhaustive. However, equal pay arrears can be ‘arrears of pay’ within the meaning of s.184(1) ERA, and therefore a debt within s.182 ERA.
The ET erred in concluding that arrears of pay arising from an equal pay claim that is undetermined cannot be a claim for ‘arrears of pay’ within s.184(1) ERA. The sums relate to work performed prior to the insolvency and though not yet quantified, the Claimant’s will be in a position to identify the precise shortfall at some stage.
There is a presumption that equality clauses operated in the Claimants’ contracts since their work has been rated as equivalent to their comparators. If that presumption is not rebutted by the genuine material factor defences the Claimants had a legal entitlement to be paid in accordance with the equality clauses for work they performed before the appropriate date, provided they were not time-barred. To the extent that they were not so paid, they were entitled to arrears of pay. They are in no different position to suppliers of goods who were unpaid on the appropriate date, or employees who did not receive pay due under implied or disputed oral agreements for work done before the appropriate date.
The wider point relied on by G failed. Only liabilities for up to eight weeks of arrears of equal pay do not transfer to the transferee, pursuant to Reg 8(5), if they constitute sums payable under Part XII ERA by the Secretary of State because the necessary conditions in s.182 and 184 ERA are established. To the extent that the liabilities exceed the statutory limits in Part XII ERA, liability transfers to the transferee and are unaffected by Reg 8(2)-(6)

The Court of Appeal Judgment

Graysons settled the claims brought by the claimants and the appeal therefore only concerned the sums payable by the Secretary of State.

The Court of Appeal upheld the EAT judgment for the reasons given by Simler J. An interesting observation was made in relation to the argument that the claim brought by the claimants was a damages claim and not a debt claim. Bean LJ held “This seems to me rather far-fetched. It is not suggested that the present claims are for anything other than arrears of pay. The rules of pleading in ETs are not so technical as to require a claimant to be put to her election as between a claim for arrears of pay or a claim for damages. The vast majority of claims of this kind are for arrears of pay“.

Link to EAT Judgment

Link to Court of Appeal Judgment

March 4, 2019
by Jeffrey
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Hare Wines Ltd v Kaur CA – 22 February 2019

The Court of Appeal dismissed the transferee’s appeal in this case, for essentially the same reasons as the EAT.

The issue in this case is whether an employee dismissed immediately before the transfer was automatically unfairly dismissed because the principal reason for the dismissal was the transfer (Reg 7).

The Facts

K was employed by R1, the transferor, which got into financial difficulty in late 2014. HW agreed to purchase R1’s business. At a meeting held just before the transfer, on 9 December 2014, K was dismissed by R1. She was told the reason was that the business was ceasing to trade. However, 6 or 7 other employees transferred from R1 to HW. HW’s case was that at the meeting held on the 9 December, two days before the transfer, K had objected to transferring.

The ET Judgment

The ET had to resolve a factual issue. HW said that at the meeting on the 9 December K had objected to the transfer by saying she was not happy working with HW. K’s case was that she had a strained relationship with a manager, C, and that C did not want her to transfer and hence HW also did not want her to transfer. The Tribunal resolved this factual dispute in favour of K. It held but for her dismissal on the 11 December she would have transferred and therefore the reason for the dismissal was the transfer.

The EAT Judgment

HW appealed on the ground that the ET erred in law in determining the reason was the transfer or gave insufficient reasons for this decisions. Essentially HW’s case is that reason for the dismissal was personal to K’s circumstances and therefore not related to the transfer The EAT (Choudhury J) dismissed the appeal (see post here )

The Court of Appeal Judgment

The Court of Appeal (Underhill & Bean LJJ) were not impressed by the attempt to distinguish personal reasons for a dismissal from other reasons. It held that the whilst the problems between K and her manager, C, had been ongoing for some time, no action was taken until the transfer. The transfer was used as the opportunity to dismiss K because the transferee anticipated ongoing difficulties after the transfer. “It therefore decided that it did not wish her contract of employment to transfer and communicated that wish to the transferor. That was why she was told that she was not wanted. The reason for the dismissal was the transfer.”

Comment

It is trite to observe that an employee cannot be put in a better position because of a transfer then they would otherwise be. This appeared be at the heart of the transferee’s argument. That K’s contract could have ended at any time due to the ongoing conflict with the manager, C. She could not be put in a better position just because matters came to a head at the point of transfer. However, the difficulty with that argument, as the Court of Appeal observed, is that does not engage with the reason why it came to a head at that point. The transfer was used at the opportunity to deal with the issue. In those circumstances the transfer was at least the principal reason for the dismissal.

Link to EAT Judgment

Link to CA Judgment

October 17, 2018
by Jeffrey
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Urban Retreats Ltd v Harrods Ltd QBD – 12 October 2018

This case concerns the construction of a TUPE indemnity.

The Facts

The transferor operated a hairdressing and beauty salon in Harrods pursuant to a licence agreement. The licence terminated in disputed circumstances and a settlement agreement was executed which resulted in the employees of the transferee transferring to Harrods, the transferor. Under the agreement Harrods were required to make payments to the transfer and in doing so it withheld a substantial sum in respect of payments for salaries and commission owed to employees. It claimed to be entitled to do s under the terms of an indemnity in the licence agreement, which both parties agreed was unaffected by the settlement agreement.

The Indemnity

The indemnity provided that the transferor would indemnify the transferee against all employment liabilities, as defined, in connection with:

“(a) all salaries, emoluments or other sums payable … to or in respect of any member of staff … which fall due … prior to the date of termination … (b) any liability or obligation arising under or in connection with any member of staff … prior to the date of termination … (e) any other claim by a member of staff the responsibility for which passes to [the transferee] … and which has its cause … prior to the date of termination of this agreement.”

The salaries and commission payments were paid to employees in arrears. The transferee argued that this meant that as at the date of the transfer they were not due. Harrods, the transferee, argued that the commercial purpose of the clause was for the transferor to bear the employment costs of the staff up to the date of transfer, pointing out that it had the benefit of the employees up to that point and therefore should bear the costs.

The Judgment of the High Court

The transferee’s argument was preferred. The payments came within sub paragraphs (a), (b) and (e) of the indemnity. As for (a), the expression “that which fall due” had to be interpreted as including where the obligation to pay had arisen even though the date for payment had not yet arrived. Furthermore, the sums were within (b) because the employee costs were also “any liability“, even if not yet payable. There was nothing to support the transferor’s argument that “any liability” meant “any other liability“. Finally the sums withheld would also be within (e), so that everything prior to the termination date was the transfer’s obligation through the indemnity even if not yet paid.

Link to Judgment: Urban Retreats v Harrods

September 4, 2018
by Jeffrey
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Tabberer v Mears Limited EAT – 4 September 2018

This case is a rare example of changes to terms and conditions which were made after a transfer not being held to be void under Reg 4(4).

The Background
The claimants were electricians who were paid a travel allowance (‘ETTA’). This had been paid by the local authority employer since 1958 and had continued through various transfers until the claimants transferred to M on 1 April 2008. ETTA was an obsolete allowance which bore no relation to the way in which the claimants currently worked. After M ceased to pay the allowance a group of electricians challenged this in a case brought in 2010. M defended the case on the basis there was no contractual entitlement to ETTA and lost. The case was appealed to the EAT (see Salt & Others v Mears) and M lost again.

After the Salt decision, in July 2012, M wrote to each of the electricians and unilaterally decided to vary their contracts to cease the entitlement to payment of ETTA. The rationale was that it was generally recognised that the entitlement (albeit held to be contractual) was outdated and obsolete and it made no business sense to continue it. The claimants challenged the variation on the basis that reason or principal reason for it was the transfer and was void. They pointed out that the payment ceased from the date of the transfer.

The ET judgment
The ET dismissed the claims and held that M’s reason for varying the contract was both the adverse ET/EAT decisions in Salt and that it genuinely believed that the entitlement was outdated. It further held that the submission of a claim form was prerequisite for payment of ETTA which some claimants had not done.

The EAT judgment
The claimants raised the following issues on the appeal relevant to TUPE:
(1) That the decision of the ET ignored the fact that the subject matter of the Salt decision was the transfer and there was a clear and continuing link to the transfer.
(2) The interpretation of the ET rendered Reg 4(4) wholly ineffective and open to easy avoidance.
(3) The ET failed to recognise the harmonisation intent behind the decision.
(4) The decision failed to take account of the non payment of the ETTA from the date of transfer.

The EAT (HHJ Eady) restated that the question to be asked is: what is the reason? – What caused the employer to do what it did? (see Smith v Trustees of Brooklands College.) In applying this approach she went on to reject the claimants’ appeals for the following reasons:

(1) The decision in Salt provided the context for M’s decision not the reason for it.
(2) The decision was question of fact for the Tribunal.
(3) The concern about the outdated nature of the ETTA and that it made no sense, predated the transfer and had been expressed by previous employers.
(4) There was not an attempt to harmonise, simply a recognition of the unfairness that one group of employees received an outmoded allowance to which others were not entitled.

Link to EAT judgment