Control freak

Da Silva Junior v Composite Mouldings and Design Ltd

If someone is laid off work and then re-hired, the law says this can still count as continuous employment. But what happens if the original company goes into liquidation? In Da Silva Junior v Composite Mouldings and Design Ltd (IDS 866), the Employment Appeal Tribunal (EAT) said that employees are still protected if it can be shown that the same owner is still in charge.

Basic facts

Mr Da Silva started work for a company called Andream Ltd on 11 November 2005. The company got into financial difficulties and the majority shareholder, Mr Greenwood, dismissed all the employees on 1 December 2006. A liquidator was appointed on 20 December.

In early January 2007, Mr Greenwood acquired some of the assets of Andream from the liquidator and began trading as Composite Mouldings (which he had already set up on 20 November). Mr Greenwood used the same machinery at the same premises (albeit operating on a smaller scale), with the same employees as the previous business.

Mr Da Silva started work for him again on 14 January 2007, but was dismissed on 17 August. He claimed unfair dismissal but the tribunal had to decide first of all whether he had one year’s continuous employment in order to bring the claim.

Relevant law

Section 212(3)(b) of the Employment Rights Act (ERA) 1996 states that any week during which an employee is absent from work “on account of a temporary cessation of work” counts towards continuous employment.

Continuity of employment is also protected with an “associated” employer. However, section 218 (6) stipulates that the second employer must still be “associated” with the first employer by the time the employee starts work for the new employer.

According to section 231 any two employers will be treated as associated if “one is a company of which the other … has control” or “both are companies of which a third person has control”.

Tribunal decision

The employment judge found that Mr Da Silva’s employment had not been disrupted by the six week break as it constituted “an absence on account of a temporary cessation of work”.

However, the employment judge then decided that by the time Mr Da Silva started work for Composite Mouldings the two companies were no longer “associated” under the ERA, as Andream had gone into liquidation and “existed no more."

He did not, therefore, have the requisite continuity of service to pursue his unfair dismissal claim.

EAT decision

The EAT, however, disagreed. It said that although the company was in the hands of the liquidator by the time Mr Da Silva started work for the new company, the Insolvency Act 1986 makes clear that a company in voluntary winding up remains in existence until it is actually dissolved.

As there was no dispute that the period between his dismissal and re-engagement on 14 January constituted a temporary cessation of work, the focus shifted to what happened the next day. Were the companies still “associated” on 15 January?

The company argued that for the purposes of section 231, control of the company at that time was in the hands of the liquidator, not Mr Greenwood and Composite Mouldings could not therefore be an associated employer of Andream.

The EAT, however, was not convinced. It pointed to the fact that Mr Greenwood was the majority shareholder in Andream and the sole owner of Composite Mouldings, making him the controlling “third party”.

It said that “the fact that, during the period of the liquidation, the company spoke through the liquidator” did not affect the issue of control. This, it said, rested with Mr Greenwood - it was he who dismissed Mr Da Silva, it was he who called in the liquidator and it was he who re-hired Mr Da Silva.

As a result, Mr Da Silva’s continuity of employment had been preserved by the temporary cessation of work and his employment by an “associated” employer.