When an individual’s employment transfers under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), all the liabilities of the old employer are passed onto the new employer, including unfair dismissal and discrimination claims. In Sean Pong Tyres Ltd v Moore, the EAT held that this provision did not apply to a claim brought by an employee whose employment had not transferred over.
Basic facts
After resigning on 19 April 2021, Mr Moore lodged a tribunal claim for constructive unfair dismissal against Sean Pong Tyres as a result of the behaviour of another employee, Mr Owusu, who had allegedly discriminated against him and harassed him contrary to the Equality Act. If proven, the company was liable for the actions of its employee.
Despite attending a preliminary tribunal hearing on 9 September 2021, it was not until the start of the final hearing in January 2022 that the company raised the defence that the ownership of the business had, in fact, transferred under TUPE to another company, Credential, on 1 July 2021. It argued that Mr Owusu’s employment had therefore transferred over on the same day and that, by virtue of regulation 4(2)(a) of TUPE, liability for the alleged discrimination and harassment had also passed to Credential. The company asked to amend their application to add Credential as a party to the claim.
Relevant law
Regulation 4(2)(a) states that “all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee” on the completion of a relevant transfer.
Tribunal decision
The tribunal rejected the application for two main reasons. Firstly, it held that it raised an entirely new issue requiring evidence from both Sean Pong Tyres and Credential about whether there had, in fact, been a TUPE transfer in July 2021. This would result in a significant delay and could prejudice Mr Moore’s case. Secondly, the company had failed to explain why it had not raised this defence earlier in the proceedings.
The tribunal then went on to find that Mr Moore had been unfairly constructively dismissed and directly discriminated against and harassed. It awarded him almost £7,500 for unfair dismissal and just over £14,500 for the discrimination claims.
The company appealed, arguing that as Mr Owusu’s employment had transferred to Credential, its liability to Mr Moore as the claimant employee was a “transferor’s liability … under or in connection with” the contract of the tortfeasor employee (the wrongdoer, Mr Owusu) under regulation 4(2)(a) of TUPE, despite the fact that Mr Moore’s employment had not transferred over.
EAT decision
Emphasising that the underlying purpose of TUPE is for the complex of rights and obligations connected with a transferring employee’s contract to transfer with that employee to the transferee, the EAT held that conversely it could not be part of the purpose for the complex of rights and obligations in connection with a non-transferring employee to transfer to the transferee.
Whilst acknowledging the “novel” aspect of the company’s appeal, the EAT dismissed it, holding that the phrase “in connection with” in regulation 4(2)(a) required a connection between the liability and the contract to be direct. In other words, it could only apply to employees employed immediately before the transfer (and those unfairly dismissed prior to the transfer) whose contracts were transferred to the transferee. As Mr Moore’s employment had not transferred over to Credential, it followed that the company’s liability for his claims could not have transferred over.
The EAT went on to say that if regulation 4(2) TUPE were construed as Sean Pong Tyres asserted, Mr Moore would have to bring a discrimination claim against a party that he had no legal right of action to claim against. The EAT noted that under the Equality Act 2010 the obligation is on the employer not to discriminate. The employer could be liable for the acts of their employees. Credential was never Mr Moore’s employer because he did not transfer to them and so he would have no cause of action against them as an employer under the Equality Act.