The Claimants were directors of Lancer and beneficial owners of Lancer’s holding company; Messrs Ferguson and Kevill were also employees of Lancer and Messrs Lax and Pull were employed by companies which they controlled which contracted their services to Lancer; there were seven other Lancer employees. Lancer’s sole business was managing the Berkeley Square Estate on behalf of the owners under a management agreement.
The owners gave 12 months’ notice to terminate the agreement and appointed a new company to manager the Estate, Astrea. There was no dispute that this involved a TUPE transfer from Lancer to Astrea.
Shortly before the transfer, the Claimants arranged for their employment contracts to be substantially improved to provide for guaranteed bonus payments and generous new termination payments. The EJ found that these changes were made ‘by reason of’ the anticipated transfer and had no legitimate commercial purpose for Lancer but were designed to compensate the Claimants for loss of Lancer’s business, dishonestly taking undue advantage of TUPE by awarding themselves remuneration knowing it would be paid at the expense of Astrea. Astrea dismissed Messrs Ferguson and Kevill on or shortly after transfer and did not accept that Messrs Lee and Pull transferred under TUPE or alternatively also dismissed them.
The Claimants brought claims against Astrea based on TUPE for unfair dismissal and contractual termination payments and for ‘compensation payments’ for breach of reg 13(4) of TUPE under which Astrea was required to provide ‘measures’ information to Lancer. Following a five-day hearing the EJ found inter alia:
(1) that the new contractual terms were void ‘considering reg 4(4) TUPE in the light of the [EU] abuse of law principle’;
(2) that Messrs Lax and Pull did not transfer to Astrea under reg 4(1) because they were not assigned to the organised grouping of employees engaged in the management of the Estate;
(3) that Mr Kevill was unfairly dismissed by virtue of reg 7(1) but that his compensatory award should be reduced by 100% under s 123(6) of ERA and, under the Polkey principle, that he would have been (fairly) dismissed by Astrea within three weeks of the transfer in any event;
(4) that Astrea had breached reg 13(4) of TUPE by failing to provide ‘measures’ information in good time and that ‘appropriate compensation’ should be awarded to all four Claimants for that breach amounting to three weeks’ pay for each of them.
On appeal by the Claimants against these findings, the EAT decided that:
(1) (a) reg 4(4) of TUPE, properly interpreted in a ‘broad purposive’ way consistently with EU law, rendered void all contractual variations made because of a transfer and not just those adverse to the employee as contended by the Claimants;
(b) if that interpretation was wrong, on the facts Astrea could rely on the EU abuse of law principle to prevent Claimants relying on the new contractual terms since (i) the purpose of the EU rules (safeguarding employee rights) had not been achieved, but rather some other purpose (ie substantially improving the rights of the Claimants) and (ii) their intention was to obtain an improper advantage by artificially obtaining variations to their contracts of employment with Lancer in contemplation of the transfer;
(2) the EJ had erred in her approach to the issue whether Messrs Lax and Pull were ‘assigned’ to the organised grouping of employees managing the Estate so as to be transferred under TUPE, in particular by concentrating on how much work they were doing rather than on whether they were ‘organisationally’ assigned to the relevant grouping;
(3) (a) the EJ failed to consider properly whether, and to what extent, Mr Kevill’s conduct had ’caused or contributed to’ his dismissal for the purposes of s123(6) of ERA; but
(b) the EJ had been entitled to make the Polkey finding which she did notwithstanding that the ‘reason’ for the putative dismissal would have been conduct before the transfer and may not have amounted to any legal wrong;
(4) (a) on a proper interpretation of reg 16(3) of TUPE on the facts of the case the EJ was entitled to find that ‘appropriate compensation’ for Astrea’s breach of reg 13(4) amounted to three weeks’ pay;
(b) on a proper interpretation of reg 15(7) it would not have been open to the EJ to award compensation to the other transferring employees who might have, but did not, bring claims under reg 15(1)(d).
The appeal was therefore dismissed save in relation to the issues at (2) and (3)(a) which were remitted to the EJ to reconsider.
Citations:
[2020] UKEAT 0139 – 19 – 1505
Links:
Jurisdiction:
England and Wales
Employment
Updated: 27 November 2022; Ref: scu.650920