Employees need to have at least two years’ continuous service as set out in section 218 of the Employment Rights Act 1996 (ERA) in order to bring a claim of unfair dismissal. In Schwarzenbach t/a Thames-Side Court Estate v Jones, the Employment Appeal Tribunal (EAT) held that if it is not clear who has legal control of a company, tribunals can draw an inference from the circumstances in order to determine the issue.
Mr Jones worked for a company called Culden Faw Ltd (part of a complex chain of companies) from June 2011 to the end of May 2013 when his employment was terminated. He was immediately employed by Mr and Mrs Schwarzenbach trading under the company name of Thames-Side at the beginning of June 2013 until his dismissal in January 2014.
If calculated on its own, his employment with Thames-Side meant that he did not have sufficient continuity to bring a claim for unfair dismissal. However, he argued that as Culden Faw and Thames-Side were associated employers under section 231(a) ERA, his continuity of employment was protected.
Section 218 ERA states that if an employee has been working for one employer but then starts working for an associated employer, they will not lose their continuity of employment.
Section 231(a) ERA states that employers are “associated” if one company has direct or indirect control over the other.
The tribunal noted that both companies issued Mr Jones with almost identical letters of appointment. In addition, both sets of terms and conditions contained an identical sick pay provision which described sick pay as being “in the discretion of the family”. Both Mr Jones and another employee gave evidence to the tribunal that the “family” referred to was the Schwarzenbach family.
The tribunal concluded that, on the basis of the evidence, there was a “presumption of continuity” which the family had not been able to rebut. As Culden Faw Ltd was under the indirect control of Mr and Mrs Schwarzenbach at the time that Mr Jones was dismissed, he had sufficient continuity of service to bring a claim of unfair dismissal.
Although the EAT found that the tribunal was wrong to consider that the onus was on the Schwarzenbachs to rebut the presumption of continuity, it was still reasonable for it to decide that they were better placed than Mr Jones to clarify who ultimately controlled the company.
As the Schwarzenbachs had chosen not to clarify the issue of who was ultimately in legal control (they did not give evidence and had allowed only limited disclosure), the tribunal was entitled to infer from the evidence that the ultimate human beneficiary or beneficiaries was a member of the Schwarzenbachs’ family.
The EAT therefore decided that the tribunal’s conclusion (that Mr Jones had sufficient continuity) was not rendered unsafe by its incorrect assumption that there was a presumption of continuity. Given the lack of transparency in the corporate arrangements and recognising the real difficulties facing Mr Jones, the tribunal drew a permissible inference from the circumstances and had applied the correct legal test of control.
It therefore dismissed the appeal.
This case highlights the importance of establishing the relationship between associated employer companies. The legal control exercised, by associated companies, in circumstances where employment is alleged to have transferred between those associated companies, is crucial to the determination of continuity of employment.