The precise date of a TUPE transfer can be important for determining an employee’s right to claim unfair dismissal and against which party, but the date may not be obvious where the transfer involves a series of transactions over a period of time, all the more so where part of the operations are based outside the UK as in the recent case of Rajput v Commerzbank.  The EAT confirmed in this case that the key question is when the responsibility (as employer) for running the business passes to the transferee. This will not necessarily be the last transaction in the series, which might only concern a minor detail; the date of transfer will not be delayed simply because the transferor retains “minor responsibilities for mopping up work long after responsibility has shifted to the transferee in substance”.  And where the business concerned is accepted to be a single economic entity treated as situated in the UK (and therefore within the scope of TUPE), the timing of the transfer of the entity’s non-UK operations must be taken into account when determining the date at which responsibility for running the business transfers.

In Rajput the transferor’s Equity Markets and Commodities business comprised three parts each operating in London and a number of other jurisdictions, and was transferred in several batches over a period of more than a year.  The claimant in a discrimination claim was dismissed part way through that period, after two of the parts had been fully transferred but before the transfer of the third part (which was mainly operating in Germany and accounted for about two-fifths of the purchase price) had been completed.  If the transfer had already taken place and the claimant’s employment transferred to the transferee prior to her dismissal by the transferor, that dismissal would be a nullity.  The tribunal had decided that the transfer date was when the first two parts had been transferred (therefore before the dismissal) on the basis that the “essential nature of the activity” carried out by the transferee had transferred by then, assuming that the non-UK based elements of the business should be ignored.

The EAT rejected the claimant’s contention that the transfer was not completed until the last transaction in the series, when “full and final responsibility” for carrying on the business had transferred.  There is no presumption that the transfer effected by a series of transactions occurs at the end of the series, and “full and final” was an inappropriate gloss on the concept – what matters is when responsibility for running the business transfers, ignoring minor responsibilities that may be retained by the transferor.  The tribunal had applied this test correctly (notwithstanding its reference to the “essential nature”, which the EAT thought was unhelpful but did no more than emphasise the need for a transfer of the activity in question).

However, the ET had erred in ignoring the entity’s operations outside the UK when looking at the issue of when responsibility transferred.  There was nothing in TUPE that required the tribunal to confine its consideration to the part of the organised grouping of resources based in the UK.  The case was therefore remitted to be reconsidered.

A second TUPE case this month reiterates that an employee’s right to participate in a share incentive plan is capable of transferring to a TUPE transferee, imposing an obligation to implement a ‘substantially equivalent scheme’. TUPE operates to transfer to the transferee the duties and liabilities “under or in connection with” the contract of employment of relevant employees.  In Ponticelli v Gallagher, the Inner Court of Session confirmed that participation in a share incentive plan, which was an integral part of an employee’s remuneration package for his employment, arose “in connection with” his employment contract and therefore transferred (notwithstanding that the employment contract itself did not contain a right to participate).  The transferee’s argument that this construction was wider than required by the Acquired Rights Directive was rejected, as was the suggestion that the court should balance the burden on the transferee against the employee’s rights.  It will be important for transferees to identify such schemes early in due diligence, to review their terms to identify the scope of any right of the employer to terminate the scheme (which would also transfer) and potentially to formulate the terms of a replacement scheme.  The change will also need to be addressed in the TUPE information and consultation process.


Anna Henderson
Anna Henderson
Professional Support Consultant, London