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Issue 17 (December 1997)
Ombudsman challenges lower earnings limit
Tribunals can demand exchange of statementsTUPE - what next?Age discrimination can be breach of contract
Disability discrimination
Changing hours: the limits of flexibility
Automatic for the workers
Senior Heat Treatment Ltd v Bell (1997) IRLR 614
At the heart of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) is the automatic transfer of staff to the new employer. This is usually the outcome which the majority of employees would prefer, but not always.
Employees who do not wish to transfer have very little option. If they object to the transfer of their employment they are treated as though they have resigned. They cannot claim unfair dismissal or a redundancy payment.
It is possible to reach agreements with employers which enable the employees to leave and receive a redundancy payment, but the Senior Heat Treatment case is an example of where the employers got it wrong. Employees were given the option of (a) redeployment with the existing employer (Lucas Bryce), (b) transfer under TUPE to the new employer (Senior Heat Treatment), or (c) "opting out" of the transfer and receiving a redundancy payment.
Employees who accepted option (c) and received a redundancy payment were then offered jobs with Senior Heat Treatment, which they started without any gap in service. They were dismissed by Senior Heat Treatment a few months later. The Industrial Tribunal said that they were covered by TUPE, that they had continuity of service through the transfer to Senior Heat Treatment and that they were entitled to redundancy payments based upon their total length of service with the two companies.
The Employment Appeal Tribunal upheld the Industrial Tribunal decision. The actions of the employees in "opting out" did not amount to an objection which would be counted as a resignation.
At the time the employees exercised the option, Lucas Bryce knew that the employees had accepted jobs with Senior. In those circumstances, "opting out" could not amount to an objection to transferring to Senior.
This is a sensible interpretation. The employees had no principled objection to transferring: they did in fact take up employment with Senior. This more pragmatic approach is preferable to the approach in Hay v George Hanson (see Issue 3 of LELR: Scots EAT flings a spanner in the TUPE works) where the Scottish EAT took a very broad view of what amounted to an objection and, in the process, deprived the employee of all rights. An employee should only lose the protection of automatic transfer when she or he unequivocally objects to taking up employment with the new employer.
This left the issue of the redundancy payment. The employees had already received a payment when they left the service of Lucas Bryce. Did this prevent them claiming a redundancy payment based on their accumulated service with the two companies? No it did not.
The reason is that there was no redundancy when their employment with Lucas Bryce ended: their jobs transferred under TUPE. This meant that the payment they received was not a statutory redundancy payment and therefore did not break their continuity of service when calculating their redundancy entitlement with Senior. The employees were entitled to the full redundancy payment from Senior and the so-called "redundancy payment" from Lucas Bryce could not be set off against this.
In this case, Senior were looking to take on the benefit of the employees and their experience without the burden of accumulated redundancy rights. They were not able to do so, nor were they able to take the benefit of the payment made by Lucas Bryce.
Employers will not be able to circumvent TUPE in this way and will only be able to avoid the transfer of rights and liabilities where dismissals prior to the transfer are for economic, technical and organisational reasons. In other words, the adjustment of liability between the old and the new employer is a matter for any contractual arrangements between the two employers.