Case update (3): TUPE – one to(o) many?

Summary: Is there a TUPE transfer when an employee’s employment is transferred from a sole employer to a group of companies which includes the original employer?

No, says the EAT in Hyde Housing Association Ltd and other v Layton available here.

Facts: The employee worked as a decorator for a company, Martlet, which in 2008 became a subsidiary of Hyde Housing Association, part of the “Hyde Group”. Hyde Group did not have a separate legal identity but was made up of a number of different companies.  Martlet remained the employee’s employer.

In 2013 there was an internal reorganisation and the employee was asked to agree to new terms and conditions under which he would be employed on a joint and several basis by the companies in the Hyde Group (including Martlet). The employee also lost his bonus entitlement. He refused to agree to the change and was dismissed on notice.

The employee was then offered re-employment on new terms which he agreed to. However, the employee maintained that his dismissal was unfair and he brought a Tribunal claim. As a preliminary issue, the Tribunal considered whether or not there had been a relevant transfer for TUPE purposes. The Tribunal decided that there had been and the employer appealed to the EAT.

The issue for the EAT was whether the ‘change in the identity’ of the employee’s employer as a result of the reorganisation amounted to a TUPE transfer i.e. did the fact that the original employer’s (Martlet) sole liability for the employee’s employment had moved to a joint and several basis with the other members of the Hyde Group amount to a change in identity of employer.

The EAT held that there was no change to the identity of the employer and therefore no TUPE transfer. Martlet retained liability for Mr Layton’s employment (even though its liability was now joint and several with other employers) and therefore the change of employer was not legally relevant for TUPE purposes.

For information, another argument put forward by the employer was that TUPE cannot apply when there is a transfer to several entities (rather than to one single entity). However, the EAT rejected this and decided there was no reason in principle why TUPE could not apply to transfer a person’s employment to multiple transferees, provided that the economic entity is not so fragmented that it loses its identity.

The employee has been allowed to appeal to the Court of Appeal.

Implications: This is helpful for employers – it is the first clarification from the EAT that just because an employer shares liability with other members of a group company it does not mean that there has been a change in identity of employer and therefore a TUPE transfer. Further, there is no reason in principle why TUPE cannot apply to transfer a person’s employment to multiple transferees, provided that the economic entity is not so fragmented that it loses its identity.  However, as the EAT has given the employee the right to appeal to the Court of Appeal, this may not be the final word – we’ll be sure to update you if it changes.