Employment Law - Transfer of Undertakings - TUPE - Subsidiaries

The recent lawsuit of Millam volt Print Factory (London) 1991 Ltd [2007], involved a difference relating to the Transportation of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). The employee was employed by Print Factory Ltd (PF). The retention company of PF was taken over and subsequently sold to Meter Ltd by manner of a share sale agreement. The employee was informed that the personal identity of his employer was not changing, but was later told that his employment had been 'continued' under the TUPE Regulations.

Furthermore, the employees of PF were told at the clip of sale that it was M's purpose to fully integrate the concern of PF into their own. After the takeover, the pay as you earn written documents showed that Meter was the company which now paid the employee's wages. Meter also managed the contributory pension scheme. Even so, the companies were registered as being separate, and were being tally as two separate companies with Meter controlling PF's activities.

The employee was dismissed and so complained to the Employment Tribunal.

Subsequent to that dismissal, PF bought the concern of Meter and became the respondent to the complaint. A preliminary issue was ordered to be tried as to whether the employee's employment had by operation of the TUPE Regulations transferred from PF to Meter at the clip PF was sold by its parent company to M.

The court duly concluded that there was indeed a TUPE transportation from PF to M. PF then appealed to the Employment Appeals Court ("EAT"). The evidence for the entreaty by PF were that the court had erred in law in that it had 'pierced the corporate veil' in reaching its conclusion, which was not permissible. The EAT determined that the companies were, as a substance of law, tally independently. It was therefore apparent that PF retained its ain assets and its ain employees.

The EAT decided that the deficiency of independence, which was typical of a subsidiary, did not show that the retention company owned the subsidiary's concern and that, as a substance of law, it was the corporate physical thing that ran the business. In the absence of any sham, the tribunals were entitled to look no further. The EAT held that the entreaty succeeded owed to the fact that the consequence of the tribunal's determination was to 'pierce the corporate veil', which it was not entitled to do.

The employee appealed. The entreaty was dismissed.

The legal structure, although important, could not be conclusive in deciding the issue of whether, within that legal structure, control of the concern had been transferred as a substance of fact. The EAT had misdirected itself.

An issue of 'piercing the corporate veil' lone arose when it was established that activity x was carried on by company A, but for policy grounds it was sought to demo that in world the activity was the duty of the proprietor of company A.

In this case, the court did not happen that the activity was being carried on by PF, and then 'pierced the veil' to impute the activity as a substance of law to M. It was held that, as a substance of fact, the activity was being carried on by M, and not by PF. That concentration on the issue of corporate construction led the EAT not to give proper weight to the determinations of the tribunal.

Furthermore, despite the fact that the EAT was right in saying that a subsidiary's deficiency of independency did not show that the retention company owned the business, that observation did not give weight to the fact that the court establish the agreements in this lawsuit were not typical, to the extent that the concern was that of M.

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© RT COOPERS, 2007. This Briefing Note makes not supply a comprehensive or complete statement of the law relating to the issues discussed nor makes it represent legal advice. It is intended only to foreground general issues. Specialist legal advice should always be sought in relation to peculiar circumstances.