22 September 2015

The Employment Appeal Tribunal (EAT) has recently considered the applicability of TUPE to a situation involving a majority shareholder which takes control of a subsidiary’s commercial activities after the subsidiary is wound up. This is not a new situation but does serve as a useful reminder of the potential applicability of TUPE and its consequences.

The EAT in Ferreria da Silva v Esado (see http://www.bailii.org/eu/cases/EUECJ/2015/C16014.html) considered the following facts. Air Atlantis had provided charter flights. The company was wound up and its main shareholder took control of some of the routes that Air Atlantis has operated. It also assumed control of certain leases, assets and staff. Aside from the staff taken on, Air Atlantis’ staff had been dismissed by reason of redundancy (following a collective redundancy programme). The Claimants sought reinstatement and compensation.

The EAT had referred the matter to the European Court. As TUPE stems from a European Directive, the EAT sought guidance as to the correct interpretation. The European Court held that in the above facts, TUPE did apply. The most important factor was that “the entity had retained its identity” – short way of finding there to be a relevant transfer under TUPE. The Court relied upon the fact that the activity (air transport) continued/ resumed. The fact that tangible assets transferred was also key. The Court did not find the fact that a new structure was created relevant and held that a 'functional link' between the assets and staff, and the activities which they carried out, had been preserved. That allowed the same activity to be continued.

The principles of this case are of universal application and should be considered whenever there is the potential for TUPE to apply. A relevant transfer can exist where there is an economic entity that retains its identity or where there is a service provision change. As the above case shows, the case law continues to develop and the circumstances when TUPE can apply is not always fixed. As with any issue in this area, specialist employment law advice is necessary to consider and minimise the risks that can arise. Give your usual team member a call to discuss.

To discuss further please contact one of our BTO employment lawyers on 0141 221 8012.