Morris v Walsh Western UK Limited [1997] IRLR 562 (EAT)
Clark & Tokeley Limited v Oakes [1997] IRLR 564 (EAT)
Continuity of employment remains important for employees. Many benefits depend on length of service. These may be statutory entitlements - such as the right to claim unfair dismissal or a redundancy payment - or contractual entitlements such as holiday or the amount of severance payments.
Often the issue of continuity arises where there is a change of employer. This will usually lead to a break in continuity unless there has been a transfer of a business, or the new employer is part of the same group of companies as the old employer.
A month's break
Continuity of employment may be an issue even where there has been no change of employer. That was the situation facing Mr Morris who was dismissed, re-employed one month later and told to treat the intervening period as unpaid leave.
Despite this, the Industrial Tribunal and the Employment Appeal Tribunal both concluded that his service had been broken. This prevented him from bringing a claim for unfair dismissal only a few months after he had resumed work.
The EAT decision has a slightly unusual feature in that neither party turned up to argue the case, although Mr Morris made written representations. The EAT had to decide whether his re-employment meant that he had been absent from work through a custom or arrangement which meant his employment should be treated as continuing.
This arrangement or custom must be in place before the absence takes place. This EAT said that the arrangement after the event to treat the absence as unpaid leave was not enough. It also rejected the argument that Mr Morris should be treated as though he had been unfairly dismissed at the start of the absence, would have applied to an IT but had effectively been reinstated so continuity should be preserved.
This has important practical consequences for employees. If they are dismissed, but their employer re-employs them without full reinstatement and payment for the period of absence, they should consider an unfair dismissal claim for the original dismissal.
This may prompt the employer to argue or accept that there has been no effective dismissal and no break in continuity. If not, it enables the employee to complain of the unfairness of the original dismissal and obtain redress for any loss of statutory or contractual rights which has resulted.
Transfer of business
Most recent decisions on continuity have concerned a change of employer, where the UK legislation complements, but neither derives from nor replicates, the Acquired Rights Directive and Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).
Mr Oakes was dismissed by a liquidator one week before they sold a business which was in voluntary liquidation. Other insolvency practitioners were also involved and at the request of a receiver Mr Oakes continued to attend work, unpaid, to carry on the business which was in the process of transfer.
He was taken into employment by the new owners of the business on the day it was sold. They then dismissed him less than two weeks later.
The positive part of the EAT's judgment, from an employee's perspective, was that Mr Oakes was to be treated as employed in the business "at the time of the transfer".
This is not confined to the moment in time at which the agreement on transfer is signed, but can be spread over a longer period over which the process of transfer takes place. Mr Oakes dismissal took place during the course of this process and consequently his continuity was preserved.
This very helpfully avoids the narrow approach adopted by the EAT in Longden v Ferrari [1994] IRLR 157 when considering the TUPE Regulations in similar circumstances. The EAT in Oakes makes the distinction that TUPE refers to the date on which the transfer was "effected", which meant its completion rather than the process of transfer.
This means that employees who are taken on by the new employer are in a better position to argue continuity than employees who argue that they should have been taken on under TUPE, but have not been re-employed.
This distinction seems artificial and unjustified, particularly when one remembers that TUPE is based on a European Directive designed to safeguard employee rights. Bearing in mind that TUPE specifies that a transfer may take place over one or more transactions, an employee who is employed at the start of that process should be protected, not merely only employees who are employed when the first transaction is completed.
The current interpretation of TUPE on this point is an encouragement to employers to attempt to evade TUPE by dismissing before the transaction is concluded. It is contrary to the policy of TUPE to exclude protection in those circumstances.
The employee's protection should not depend on the difficult task of establishing that the dismissal was unfair and invalid because it was connected to the transfer to the new owner.