The central issue in this case is whether there is a Reg 3(1)(a) transfer if an employee moves from an employment contract with a single employer to one with multiple employers, including the original employer.
C had been employed by Martlet Homes Ltd (‘Martlet’) from January 2005 as a multi-skilled decorator. On 1 January 2008, Martlet joined the Hyde Group and became a subsidiary of Hyde Housing Association Ltd (‘HHA’), itself part of the Hyde Group. Martlet began trading as ‘Hyde Martlet’, through the operation division of Martlet Build. The Hyde Group was responsible for centralised HR, including payroll; from August 2008 C was paid by HHA.
As part of a restructuring process which would take effect from 1 August 2013, in July 2013 the Hyde Group offered C a new role, in which he would be employed directly by the Hyde Group (meaning he would be jointly and severally employed by all members of the Hyde Group at any time, including Martlet). C subsequently brought an unfair dismissal claim.
The ET held that a relevant transfer had taken place on 1 August 2013, since:
- There was an economic entity within the meaning of Reg 3(2), which retained its identity after this date;
- Having multiple transferees did not preclude a transfer under Reg 3(1)(a); and
- It did not matter that the transferor was also one of the transferees.
Hyde appealed the decision that there had been a relevant transfer for the purposes of Reg 3(1)(a).
The EAT (HHJ Eady QC) held:
- The ET was correct to decide that a transfer to which TUPE applied could include one in which there were multiple transferees, ‘provided such a transfer does not result in such fragmentation of the entity as to mean it loses its identity’.
- However, a TUPE transfer does not exist where one of the employers is both transferor and transferee, and the original employer remains liable for C’s employment.
The EAT therefore allowed the appeal and substituted the ET’s decision for a finding that no relevant transfer had taken place.
In allowing the appeal, the EAT considered the construction of Reg 3(1)(a) in light of the 1977 Acquired Rights Directive, Arts 1 and 2 the 2001 Directive and the 1981 TUPE regulations. It concluded intention of the legislation was that the transferor and transferee to be separate entities.
HHJ Eady QC also noted the ARD’s protection had deliberately not been extended to cases where ‘the employee’s legal position vis-à-vis the employer was unchanged’. This policy decision was in her view the most significant principle in reaching the decision. As Martlet still retained legal liability for C’s employment (albeit jointly and severally) there could be no valid transfer.