Unicorn Consultancy Services Ltd v Westbrook and others [2000] IRLR 80
Allen and others v Amalgamated Construction Co Ltd [2000] IRLR 119

TUPE continues to exercise the courts at home and in Europe. Whereas previous decisions tended to focus on the scope of TUPE (do the Regulations apply in particular circumstances?), the more recent cases tend to focus on its effect (do particular terms transfer? What is the effect of a dismissal? etc).

We shall, in a future edition, review all the significant recent case law, but, in this edition, we look at two cases: one concerning the interpretation of a contract term after transfer, the other concerning a transfer between two companies in the same group.

Unicorn

The employees in this case worked on a contract for Surrey County Council which transferred from WS Atkins to Unicorn. They enjoyed the benefit of a profit-related pay (PRP) scheme based on the period 1 April to 31 March. They transferred to Unicorn on 1 April 1997, but Unicorn refused to pay their entitlement under the PRP scheme for 1996/97.

Unicorn's justification for the refusal to pay was a clause which provided "only those employed in the employment unit at the first of the month preceding the month in which payment of PRP is to be made will receive payment" (Rule 4.3). Payment was due to be made more than one month after the transfer and Unicorn argued that the employees were no longer employed in the "employment unit" of WS Atkins at that date.

The EAT concluded that this must be construed in the light of Regulation 5 of TUPE. The employees had all "earned" their PRP as they had all worked for WS Atkins throughout the complete profit period. Immediately before the transfer the employer had a liability to pay PRP as and when it became payable. Rule 4.3 should be construed as employment in the undertaking concerned and not as continued employment with the transferor company. This was also supported by the provisions of TUPE deeming anything done by the transferor before the transfer as having been done by the transferee and thus deeming Unicorn to be an employer participating in the scheme for that limited purpose.

This is a situation which also arises in public sector transfers where staff are entitled to bonuses based on the performance of the service or agency.

The Unicorn case was one where the transfer took place immediately after the completion of the profit period. The EAT pointed out that problems may arise in circumstances where the transfer takes place during the profit period. Practical problems would arise in ascertaining the profit and administering the scheme, but (depending on the wording of the contract) employees may still be entitled to PRP based on the performance of the transferor group.

There is a parallel with the position where transferred employees are entitled to pay rises in accordance with national negotiations to which the transferee employer is not a party. This derives from the Whent v Cartledge case ([1997] IRLR 153). Attempts by a contractor (Glendale Industries) to have that decision reversed have been dealt a fatal blow by a series of decisions in the Employment Tribunals and EAT, culminating in costs orders against the company.

Allen v Amalgamated Construction

This is a UK case which was referred to the European Court of Justice. It raises a number of issues.

The first part of the decision is the (perhaps unsurprising) conclusion that the Acquired Rights Directive applies to a transfer between two companies in the same corporate group which have the same ownership, management and premises and which are engaged in the same works.

There is also a helpful discussion on the criteria for establishing whether TUPE applies following on from Suzen and subsequent decisions. It confirms that it is not necessary for there to be a transfer of ownership of relevant equipment: in this case there was merely a transfer of use.

It contrasted the Rygaard case on the basis that in the Allen case complete works contracts were transferred and the transferee had acquired a body of assets. 
The Court confirmed that it is not necessary for the transfer of employees to coincide with the date of transfer of the works contract.

There is one comment which may prove to be of wider significance. The decision refers to the aim of the Directive to ensure rights of employees are safeguarded by "allowing them to remain in employment with the new employer on the same terms and conditions". This is in the context of a dismissal and re-engagement. It casts some doubt on the UK cases which suggest that a dismissal in those circumstances may be effective and appears to give confirmation that where the reason for the dismissal is the transfer itself, the dismissal is invalid and the employment contract continues with the new employer, rather than the new employer merely inheriting continuing liabilities for any breach arising from a valid dismissal.

The situation where there is a dismissal for an economic, technical or organisational reason is more complex and we shall return to this in future editions.