Perrys Motor Sales Ltd and Perrys (Burnley) Ltd v Lindley

In the event of a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), the new owner acquires all the liabilities of the old owner. In Perry’s Motor Sales Ltd and Perry’s (Burnley) Ltd v Lindley (IDS 856), the Employment Appeal Tribunal (EAT) said that could include liabilities that “crystallised” on the transfer.

Basic facts

Mrs Lindley worked for Perry’s Motor Sales until 31 March 2006 when she resigned and claimed constructive dismissal (which was subsequently settled). She was then unemployed until 2 October 2006 when she started work for Vantage Garages, owned by VG Holdings Ltd.

However, on 1 March the following year her old employer bought all the shares in VG Holdings and changed the name of Vantage Garages to Perry’s (Burnley) a few days later. She was sacked on 27 March by an employee at Perry’s (Burnley), following an instruction from the senior management team at Perry’s Motor Sales.

On 27 April 2007 Perry’s Motor Sales acquired the assets and business of Perry’s (Burnley) as well as VG Holdings Ltd under the TUPE regulations.

As Mrs Lindley had not been employed for a year when she was dismissed, she could only claim unfair dismissal under section 104 of the 1996 Employment Rights Act (ERA). This states that it is automatically unfair for an employer to dismiss an employee because they brought tribunal proceedings to enforce a right under the Act.

Tribunal decision

The tribunal agreed with Mrs Lindley. It said that anything the old owner did before the transfer had to be treated as an act of the new owner under regulation 4(2) of TUPE. Liability for Mrs Lindley’s dismissal therefore passed from Perry’s (Burnley) to Perry’s Motor Sales. The reason for her dismissal was that she had previously brought proceedings against Perry’s Motor Sales and so it was automatically unfair under section 104.

Perry’s Motors Sales appealed to the EAT arguing that only existing liabilities could pass to them as the new owner under regulation 4(2). Before the transfer, Perry’s (Burnley) could not be liable for a claim for automatic unfair dismissal under section 104 as it had never been subject to proceedings brought by Mrs Lindley. As a result, no such liability could pass to Perry’s Motor Sales.

EAT decision

The EAT, however, disagreed. It said that Perry’s (Burnley) by its actions prior to the transfer could, under regulation 4 (2) (b) of TUPE cause a liability to crystallize on the part of Perry’s Motor Sales, at the point of the transfer, which was not a liability of Perry’s (Burnley) prior to the transfer.

The EAT concluded that their decision was “also in accordance with the purpose of the Regulations, to safeguard employees' rights on the occasion of a change of employer arising out of a transfer of an undertaking. In this case [Perry’s Motor Sales] engineered it so that, in connection with the transfer, the employment rights of the Claimant were entirely overborne by having her dismissed. This is not, as with the cases to which we were referred, an attempt by an employee, illegitimately and artificially, to extend the ambit of the Regulations so as to gain benefits on the footing of an artificial creation of a long running contract of service between her and the transferee”.