Continuity

Oakland v Wellswood (Yorkshire) Ltd

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) state that employees' contracts transfer automatically to the new employer in the event of a transfer, except in certain insolvency situations. In Oakland v Wellswood (Yorkshire) Ltd, the Court of Appeal said that TUPE protection is not necessary if the employee can rely on section 218 of the 1996 Employment Rights Act for proving continuity of employment.

Basic facts

Wellswood Ltd was a fruit and vegetable wholesaler in which Mr Oakland had a 50 per cent share. After running into financial difficulties he approached a major creditor in September 2006. The creditor did not want to buy Wellswood as a going concern, but agreed to set up a new company to acquire its assets and to take on most of its employees, including Mr Oakland.

Insolvency advisors were appointed as joint administrators on 6 December 2006 and the assets of Wellswood were sold to the new company - Wellswood (Yorkshire) Ltd - the same day. Mr Oakland was dismissed on 23 November 2007 and claimed unfair dismissal.

The company argued, among other things, that regulation 8(7) of TUPE meant that his employment had not transferred over.

Relevant law

Article 8(7) of TUPE 2006 states that when a transferor is the “subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner”, regulations 4 and 7 do not apply.

Regulation 4 deals with the transfer of employment liabilities and contracts; regulation 7 with control of the dismissal of employees due to the transfer.

Section 218(2) of the 1996 Employment Rights Act (ERA) states that when an undertaking is transferred from one person to another, the employee’s period of employment with the transferor counts as a period of employment with the transferee and there is no break in their continuity of employment.

Tribunal and EAT decisions

The tribunal decided that regulation 8(7) of TUPE applied and Mr Oakland’s previous employment with Wellswood did not transfer, with the result that he did not have the necessary one year’s continuous service to claim unfair dismissal.

The EAT (see weekly LELR 111) agreed with the tribunal that the appointment of joint administrators was “with a view to the eventual liquidation of the assets” of the old company, by way of a creditors voluntary winding-up, as required under regulation 8(7).

This, it said, was in line with the policy behind regulation 8(7), “namely the 'rescue culture', whereby a purchaser … is not put off by the effects of TUPE protection. The outcome, as demonstrated in this case, was that some jobs were preserved and the creditors benefited from the best available option.”

The exception in regulation 8(7) therefore applied and Mr Oakland’s employment contract had not transferred over under TUPE.

Court of Appeal decision

Although appellants are not usually allowed to raise new points on appeal, the Court allowed the argument about section 218 for the first time because it was “a point of pure law requiring no factual enquiry” and therefore imposed no injustice on the other side.

In this case, Wellswood Limited had, by concession, transferred to Wellswood (Yorkshire) Limited. As a result, section 218 kicked in and Mr Oakland's period of employment with Wellswood had to be added to the period that he worked for the new company, giving him continuous employment of more than a year. That meant the tribunal could hear his unfair dismissal claim and he did not need to rely on regulation 8 of TUPE.