My last post concerned this case when an interim injunction was refused. I noted the case raised interesting arguments in relation to the interaction between TUPE and restrictive covenants and, in particular, the right to object under Reg 4(8).
At the the trial of the action the employee’s claim failed because he could not establish that there was a transfer. The key issue that eventually crystallised was whether the employee’s employer had in fact in changed. This arose in the context of a share sale.
The High Court Judgment
In a helpful analysis the High Court (Garnham J) considered the legal issues under 4 headings:
i. By whom was the employee employed
The Court noted that in Albron Catering BV v FNV Bondgenoten that it was not necessary for the employee to be employed by the transferor. He could be a seconded employee who had in effect a ‘non contractual employer’. This would be the case if the employee was seconded on a permanent basis although they remained contractually employed by the seconding employer. Here the judge held the employee was never seconded in this manner.
ii. Need for a change in employer
As may thought to be self-evident, it is essential in order to establish a transfer that the employer must change. The Court noted this was clearly set out in the Directive and the Regulation as well as in both ECJ case law (Berg v Besselen (C-144/87) and CLECE SA v Martin Valor (C-462/09)) and domestic case law (Brookes v Borough Care Services ).
iii. The significance of a share of shareholding
The Court noted that a change in the legal control of the employer does not itself transfer the business (Millman v Print (Factory (London) 1991 Ltd). However in some cases a change in share ownership may in reality mean there is a transfer of an undertaking.
iv. The indicia of transfer
The Court considered Millman, Jackson Lloyd Ltd v Mears Group plc and the ECJ case law referred to above and held that the fact that the transferred business has been integrated is a relevant factor but it is not the test. “[T]he critical elements of the test are whether the new party (i) has become responsible for carrying on the business, (ii) has incurred the obligations of employer and (iii) has taken over day to day running of the business. It seems to me that those elements of the test can be captured in more colloquial terms – “Has the new party stepped into the shoes of the employer?””.
The Court applied this test and held that there had been no change in the manner in which the business was operated before and after the share sale.