Briefings
Employment: Court of Appeal held TUPE transfer can exist alongside share sale
This month we examine two recent cases. The first is a case from the Court of Appeal decided under the Transfer of Undertakings (Protection of Employment) Regulations ("TUPE") in which it was held that employees of a subsidiary had automatically transferred to a holding company following a share transfer. The second case is a decision from the House of Lords which established that a letter sent by an employer warning of the consequences of some of its employees continuing with their equal pay claim, amounted to victimisation.
Can TUPE apply on a share sale?
It has long been the case that TUPE does not apply to share sales. This is because in order for TUPE to be triggered there needs to be a change of employer - where shares are transferred it is only the ownership of the company that changes, not the identity of the employer. This position has not changed under the new 2006 TUPE regulations. However, in Millam v The Print Factory (London) 1991 Ltd, the Court of Appeal held that employees of a company whose shares had been purchased by a holding company had transferred to the holding company under TUPE.
In this case, the shares of Fencourt Printers Limited (who employed Mr Millan) were sold to McCorquodale Confidential Print Ltd. In normal circumstances, TUPE would not apply. However, the Tribunal in this case (whose decision the Court of Appeal reinstated) found that following the acquisition of the shares, the business of Fencourt had been integrated into McCorquodale's business to such a degree that the business entity itself (including, by virtue of TUPE, the employees), and not just the shares, had in fact transferred to McCorquodale. This was by reason of McCorquodale exercising a large amount of control over Fencourt and in fact running Fencourt's day-to-day activities. Despite the two companies being separately registered and operating as two separate legal entities, the Court of Appeal held that this was not conclusive in deciding whether, as a matter of fact, control of the business had transferred.
This case turned on its own facts and does not change the general rule that TUPE does not apply to share sales. However, it does demonstrate that caution may be required on certain share acquisitions (particularly where the intention is to integrate the businesses) to ensure that the buying company does not unwittingly acquire the target company's employees.
Letter sent to employees amounted to victimisation
An employer may be liable for different forms of discriminatory conduct. One is victimisation, which can occur when an employer treats an employee less favourably than it treats another employee by reason that the first employee has raised complaints of discrimination or brought discrimination proceedings (including proceedings under the Equal Pay Act).
In the instant case, St Helens Borough Council v Derbyshire and others, a group of school dinner ladies had brought an equal pay claim arguing that they should be paid the same rates of pay as road sweepers. During that litigation, the employer wrote a letter to all staff (not only the claimants themselves) stating that, if successful, the cost of the claims would mean that the provision of school meals to the children would have to be scaled back and that this would lead to redundancies among the workforce. A second letter was sent to the claimants only, urging them to settle and referring to the first letter. The claimants then brought a second claim, arguing that the letters amounted to victimisation. It is this claim that ultimately went all the way to the House of Lords to be determined.
The House of Lords sympathised with the employer for wanting to settle the claims, but agreed with the Tribunal that they had gone too far in trying to achieve that (perfectly legitimate) aim and that the letter had caused detriment to the claimants. This was particularly so because the letter had been sent to all staff and caused fear of the reproaches of colleagues as well as of public odium. In the Tribunal's words, the letter "spelt out a danger that the applicants might deprive children of school dinners, and that they might cause redundancies among their colleagues". This amounted to intimidation, which affected the claimants (but not others) and was thus less favourable treatment. The Tribunal's decision that the employer had victimised the claimants was therefore reinstated. Separately, the claimants in this case proceeded with their equal pay claim and were successful (though we have no reports on whether or not the consequences threatened by the employer have materialised).
This case is a reminder that once a complaint of discrimination has been raised by an employee (and this is not restricted to actual proceedings but also includes claims raised internally, such as through a grievance) an employer will need to exercise caution in its treatment of the employee in question. Any less favourable treatment which is by reason of the complaint being raised may be caught by the victimisation provisions. This is regardless of whether the first complaint is warranted. Thus, an employer may end up being penalised twice.
New members of the Employment Group
Our Employment Group continues to expand. We have recently been joined by two assistant solicitors, Laura Penny and Daniel Myers. Later this month, Greg Campbell will join as partner. This will bring the Group to 14 lawyers (of which four are partners), two trainees and one paralegal.