The Court of Appeal, in Oakland v Wellswood (Yorkshire) Ltd (2009), decided that the Employment Appeal Tribunal [(2008) UKEAT 0395_08_0511)] erred in finding an employee did not have sufficient continuity of service to bring a claim of unfair dismissal against his employer after a transfer of undertakings from a company in administration. It was held that pursuant to section 218 of the Employment Rights Act 1996, the employee’s continuity of employment was not broken by the transfer and therefore a claim for unfair dismissal was permissible.
We have always advocated extreme caution in relying on the EAT decision due to its conflict with the guidance from BIS (BERR) and (in our opinion) with common sense. Once the full transcript of the decision is available, we will provide further guidance on this point. Until then, our advice remains that each transfer should be judged on its own facts. The EAT decision cannot safely be relied upon as authoritative guidance that TUPE will not apply on a pre-packaged sale.
Mr Oakland was employed by Wellswood Ltd (Old Co). Three years after Old Co. commenced trading, it entered into administration. The joint administrators, immediately upon their appointment, sold Old Co.’s assets to New Co., who also took on some of Old Co.’s employees, including Mr Oakland.
The administrators concluded that it was not possible for Old Co. to be rescued as a going concern and that any further period to allow the business and assets to be marketed for sale would have further reduced the funds available for its creditors. It was anticipated that Old Co. would later move from administration into Creditors’ Voluntary Liquidation (CVL).
Mr Oakland brought a claim for unfair dismissal after he was dismissed by New Co., but it was rejected by the Employment Tribunal (ET) on grounds that he had been employed by New Co. for less than a year. The ET found that Old Co. was the subject of insolvency proceedings and given the nature of the immediate sale and proposed move to CVL, that those proceedings were initiated with a view to the liquidation of Old Co.’s assets. Consequently, the ET stated that pursuant to reg.8(7) TUPE 2006, Mr Oakland was precluded from relying on the transfer provisions under the Regulations to establish the necessary continuity of employment. The EAT upheld the finding.
Mr Oakland appealed on grounds that having regard to section 218 of the Employment Rights Act 1996 (ERA 1996), the transfer of undertakings from Old Co. to New Co. had not broken the continuity of his employment and that the issue of the application of reg.8(7) TUPE 2006 did not arise and was moot.
Court of appeal held:
(1) Mr Oakland’s submission on appeal had not been raised before either the ET or the EAT. However, there was no question of injustice and that New Co. had adequate notice of the point so Mr Oakland was allowed to raise it.
(2) It was clear that Old Co. had transferred its business to New Co. and that pursuant to s.218(2)(b) of ERA 1996, the transfer did not break Mr Oakland’s continuity of employment. Mr Oakland could bring a claim for unfair dismissal against New Co.
(3) Incidentally the Court of Appeal commented that it was inappropriate, without the benefit of full argument, to reach any conclusion on whether an administration necessarily meant that the relevant TUPE provisions automatically did not apply pursuant to reg.8(7) TUPE 2006. Although the Court of Appeal has avoided ruling on whether TUPE applies on a pre-packaged sale of a business, it does appear that obiter comment supports the view that the EAT decision may have been wrong.
For further information, please contact the Restructuring and Insolvency Team.