The EAT has held that there was no TUPE transfer where an employee's employment transferred from a sole employer to a group of companies which included the original employer. Whilst it was possible for there to be a transfer to multiple transferees, there must still be a change in the legal identity of the employer. Here, the original employer retained responsibility for the employee after the alleged transfer, meaning there was no change in the legal identity of the employer and so no TUPE transfer (Hyde Housing Association Ltd and others v Layton).

Background

Under the TUPE regulations, a standard business transfer occurs where there is a transfer of an undertaking, business or part thereof (situated immediately prior to the transfer in the UK) to "another person" where there is a transfer of an economic entity which retains its identity.

European case law has emphasised the need for there to be a cessation of employment by one employer who is replaced by a new employer.  Whilst intra-group transfers may be caught by TUPE, there must still be a change in legal identity of the employer (Allen v Amalgamated Constructions Co Ltd).  The exception to this approach is where there is no legal change in the identity of the employer but, in practice, there has been a transfer of the day-to-day control of the business (Print Factory v Millam).

This case considered whether there was a relevant transfer where an employer moved from a single employer to a group of employers, which included the original employer.

Facts

The claimant was employed by Martlet.  Martlet joined a group of companies called the Hyde Group and became a subsidiary of Hyde Housing Association (HHA).  Martlet continued to employ the claimant although HHA paid his salary (acting as Martlet's agent). 

The Hyde Group wished to restructure their property services.  As part of that process, it wanted the claimant (and other employees) to be employed on a joint and several basis by all the members of the Hyde Group.  It proposed to engage the claimant on new terms and conditions.  However, the claimant refused to sign the new employment contract.

Nevertheless, the restructure went ahead.  After the restructure there was no change in the day-to-day operation of business: the claimant performed the same role, reported to the same managers, wore the same uniform and drove the same van bearing the same logo.  Shortly after the restructure, the Hyde Group terminated the claimant's employment and offered to re-engage him on the new terms and conditions.  Whilst the claimant accepted, he initiated an unfair dismissal claim.

The Tribunal had to decide the preliminary issue of whether there had been a TUPE transfer from Martlet to the Hyde Group.  It held that the reference to "another person" could mean than one entity, meaning that there could be a transfer to a group of companies.  It also held that there had been a change in the responsibility for the business from Martlet to Martlet plus the other members of the Hyde Group.  They noted that if Martlet exited the group, the claimant would still be employed by the Hyde Group.  In conclusion, it decided that there had been a TUPE transfer.

The Hyde Group appealed, essentially arguing that in order for TUPE to apply there must be a transfer to a separate person and this could not include Martlet.  They also argued that this was not a case where there had been de facto transfer, because the  day-to-day control of the business had not changed following the restructure.

Decision

The EAT allowed the appeal.  Whilst they agreed with the Tribunal that a transfer to multiple transferees was possible, they held that there could be no TUPE transfer where the transferor remains the employer.

In reaching this decision they considered the approach to service provision changes and noted that the TUPE regulations envisaged different entities carrying out the activities pre and post transfer.  The EAT thought it unlikely that there would be different approaches to the different tests.  The EAT also looked at the background to European Acquired Rights Directive.  They noted the focus on the need to protect employment in circumstances where there was a change of employer and that changes in control where no there was no change in legal identity of the employer had been specifically excluded. 

On the facts of this case, following the restructure, the control of the business where the claimant worked remained with Martlet.  Martlet retained liability for the claimant's employment and so the legal position was unchanged by the restructure.  The fact that Martlet's liability moved from sole liability to joint and several liability did not change the position.

Comment

Whilst TUPE may apply on intra group transfers, this decision confirms that this will not be the case where the legal identity of the employer does not change post-transfer.  That said, the EAT recognised that there may be cases where the factual reality is different from the legal labels used, which may mean that TUPE applies, but they said this was not the case here. 

Given the novelty and importance of the issue, the claimant was given permission to appeal to the Court of Appeal.

Hyde Housing Association Ltd and others v Layton