Lassman and others v Secretary of State for Trade and Industry [1999] ICR 416 (EAT)

The Continued Uncertainty surrounding the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) means there are often disputes over whether there is a transfer or whether the employees are redundant. This sometimes means the employees receive payments described as "redundancy payments", where it is subsequently determined or agreed that TUPE applied to the transaction.

Do redundancy payments break the employees' continuity of employment? That was the issue in the case brought by Mr Lassman and his ten colleagues.

In 1988 the company they worked for became insolvent. They were dismissed by the official receiver and obtained redundancy payments from the Statutory Fund operated by the Secretary of State.

The business was sold and the new owner employed Mr Lassman and his colleagues on the same terms and conditions. In 1995 that company became insolvent and the individuals were all dismissed. The insolvent company could not meet the redundancy payments, so the employees made a claim against the Statutory Fund.

An Employment Tribunal concluded that the redundancy payment broke the continuity of employment, so that the applicants were only entitled to redundancy payments calculated on the period since 1988. The Employment Appeal Tribunal disagreed. The issue turned on the wording of the section relating to continuity of employment for the purpose of redundancy payments. The Secretary of State accepted that continuity had not been broken so far as entitlement to statutory notice pay was concerned.

The entitlement to a redundancy payment arises only where there has been a redundancy dismissal. The effect of the transfer of undertaking was that the employees' contracts were treated as transferred automatically with no dismissal.

This meant that the payment could not properly be regarded as a redundancy payment and therefore could not break continuity. This confirms the approach in Senior Heat Treatment v Bell [1997] IRLR 614.

The government argued that the position was different when the government made the "redundancy payment" from the Statutory Fund. That meant that in 1988 the government was satisfied that there was a genuine redundancy dismissal, otherwise the payment would not have been made.

This was rejected by the EAT. Continuity is only broken where there is a redundancy payment in respect of dismissal. Here there was no dismissal. The contract continued because of TUPE. The applicants were entitled to the full amount of redundancy.

Employers may object (and the Secretary of State did) that this means that the employees had twice received redundancy payments from the State which covered the period of employment up until 1988. That is true, but a mistake by the employers or the government should not be allowed to deprive employees of rights which are given to them by statute and can only be taken away where the strict provisions of the legislation say so.

The political climate in 1988 - when the original payments were made - was also different. The Tory Government was very hostile to TUPE.

This made it politically difficult for that government to claim TUPE applied in these circumstances when it denied it applied in so many more. It was therefore expedient - although more expensive - to make redundancy payments from the Statutory Fund on the basis that TUPE did not apply.