In some cases the date of the transfer can be of crucial importance. This is one such case. If the date of the transfer was the date that the employees relied on, it exposed the transferee to a very substantial claim for unlawful deductions from wages and protective awards for approximately 200 employees. By contrast such a claim would be substantially reduced if the later date contended for by the transferee was to the correct date.
LMH is a housing association managing 15,000 homes. It engaged Kinetic to undertake the repair and maintenance of its housing stock. By 2011 LMH was becoming concerned that Kinetic was in financial difficulty and may unable to perform the contract. It drew up a plan to create a wholly owned subsidiary, HMS, to take over the work undertaken by Kinetic. The 1 July 2011 was the target date by for HMS to be position to do so. On 8 June 2011 LMH served notice on Kinetic under the contract. The following day Kinetic went into administration and administrators sent home the employees as there was no money to pay them. HMS was not at that point operational but it needed the Kinetic staff to undertake the work when it did become operational. HMS consulted with the unions and reassured the Kinetic employees that it would employ them from the 1 July. A small management team commenced working for HMS on the 15 June, cleaning staff transferred on the 20 June but the remaining repair and maintenance employees were not employed by HMS until 1 July 2011.
At issue was the date of the transfer – was it 9 June 2011 or was it 1 July 2011?
The ET Judgment
The ET held that HMS ‘accepted responsibility’ for the employees from 9 June 2011 albeit that it did not pay them until 1 July. It accepted responsibility by its continued consultation and reassurance and by its engagement of the small management team followed by the cleaning staff. This acceptance of responsibility had the effect that the transfer (both ‘old style’ transfer and a service provision change) occurred on the 9 June 2011 and not the 1 July 2011. Further the ET held that the there only a temporary cessation of activities which had been of HMS’s choosing.
The EAT Judgment
Slade J held:
(1) The transferee’s submission that a transfer does not take place until the employees commence employment with the transferee was wrong. The transfer takes place when ‘the transferee assumes responsibility for carrying on the business’.
(2) The treatment of employees by the transferee does not determine the date of the transfer. It is the date of the transfer of the undertaking which determines when responsibility for the employees transfers. The employment of employees in a labour intensive business may be a weighty factor but it is not determinative of the date of the transfer.
(3) The ET erred in law as treating the date on which HMS assumed responsibility for the employees as being the date of the transfer. The date of the transfer is not the date that responsibility for employees is assumed by the transferee, it is the date that the responsibility for the activities of the undertaking is assumed by the transferee.
The case was remitted to the ET