Linked transfer

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) state that a transfer occurs when an economic entity which retains its identity transfers to another person. In LOM Management Ltd v Sweeney, the Employment Appeal Tribunal (EAT) said that in the event of a commercial lease being reassigned, claimants have to also show that there had been a transfer of a business which was intrinsically linked to the property.

Basic facts

In December 2005, Ms Sweeney’s father became the tenant of a brewery-owned pub in Glasgow, known as MacConnell’s Bar, which he ran with his wife. They employed Ms Sweeney, a student, for 20 hours a week as the duty manager.

In mid December 2010, the brewery assigned the lease to LOM Management Ltd. Ms Sweeney was on holiday at the time and was told when she returned in January 2011 that she no longer had a job. She claimed that there had been a TUPE transfer which meant her employment had automatically transferred to the new tenant.

Tribunal decision

And the Tribunal agreed. It said “this was ... a classic transfer of undertaking in terms of Regulation 3 of the Transfer of Undertakings Regulations. The respondent was the incoming lessee and was therefore responsible for the compensation due to the claimant…”. As the reason for Ms Sweeney’s dismissal was the transfer, she had, therefore, been unfairly dismissed.

Relevant law

Regulation 3 states that TUPE applies to “a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity”.

Regulation 7 says that “where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated ... as unfairly dismissed if the sole or principal reason for his dismissal is:

a) the transfer itself, or
b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce.”

EAT decision

The EAT upheld the appeal, saying that it was not enough for Ms Sweeney just to show that one person had assigned a commercial lease to someone else.

She also had to show that there had been a transfer of a business which was intrinsically linked to the property and which satisfied the definition of an economic entity in the regulations. That is, a business which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.

Given the facts found by the Tribunal (that the tenant and his wife were in business together from the premises in Glasgow prior to mid December 2010 and that the tenant transferred the lease at about that time), they could not have concluded that there was an economic entity or that it transferred to the new tenant.

The Tribunal had not looked at the arrangements, agreements and / or circumstances surrounding the tenant and his wife’s business or those whereby LOM Management had become tenants of the premises.

All it had done was to establish that the lease was transferred from the tenant to them. The onus was on Ms Sweeney to show that TUPE applied and she had failed to do so.