Employment cannot transfer automatically from one employer to another without a relevant TUPE transfer

Out-Law News | 18 Apr 2012 | 9:34 am | 2 min. read

An individual's employment cannot be automatically transferred to another employer without following the proper procedures under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations, a tribunal has confirmed.

In its decision, the Employment Appeal Tribunal (EAT) said that a marketing consultant, Ms Gabriel, remained an employee of business services company Peninsula as she had not agreed to her contract transferring to the company it had set up to administer its 'Taxwise' department. She was therefore able to bring a separate sex and race discrimination claim against Peninsula as her 'general employer'.

As there was no suggestion that the transfer had taken place under  TUPE, the position remained that "a contract of service cannot be novated by substituting a new employer without the express or implied consent of the employee," Judge Peter Clark said.

Employment law expert Sarah Banatvala of Pinsent Masons, the law firm behind Out-Law.com, said that it was not surprising that the EAT had overruled the original employment tribunal on this point.

"As TUPE was not pleaded the EAT had to look at the position under common law; this has long made clear that an employee needs to agree to have their employment transferred from one employer to another," she said. "Had TUPE applied, the result would have been different as - subject only to the employee's right to object - she would have automatically transferred to [Taxwise] under normal TUPE principles."

Gabriel had been moved to Peninsula's 'Taxwise Department' and onto the Taxwise payroll following Peninsula's acquisition of the company. Although employees were notified by email that their employment contracts were later transferred to a new company, Taxwise Services Ltd, along with all the trade and assets of the department, Gabriel did not receive the email and was otherwise unaware that her legal employer had changed.

The judge at the original employment tribunal had dismissed Gabriel's sex and race discrimination claims against Peninsula, stating that she was no longer employed by the company and had missed a statutory time limit for bringing her claim.

TUPE law protects the rights of employees when their company is taken over by a new owner or the work that they provide is outsourced, brought back in house or there is a change of service provider. Under certain conditions, employment contracts will automatically transfer to the new employer. Contracts transferred in this way are treated as if they were originally made between the employees and the new employer, with no effect on length of service.

Under TUPE, employees have the right to object to their transfer to a new employer by informing either their previous employer or the new employer. Employees who do so will have their employment with the old employer terminated by operation of law with effect from the transfer date. However, there is deemed to be no dismissal and employees are not entitled to any compensation.

Gabriel will now return to the Employment Tribunal which will consider her race and sex discrimination claims against both Peninsula and Taxwise Services.