Transfer of Undertakings case - TUPE - involving civil servants, secondment and the date of the transfer.

The House of Lords has handed down its decision or ‘judgment’ in a case that has been running for many years. The case involves the transfer of undertakings regulations or TUPE and is called ‘Celtec Ltd v Astley and ors’. The decision is complicated but the facts are reasonably easy :

The employees in question were civil servants employed within the Department of Education. In the early 1990s, the Department of Education created Training and Enterprise Councils (TECs) to take over its responsibility for training. A large number of civil servants were seconded from the Department of Education to the TECs. They seemed all to believe, naturally, that they remained employees of the Department of Education. Three years later, they were offered the opportunity to return to the Department of Education, or stay with the TECs and be transferred into the employment of the TECs. In 1993 the employees in question resigned from the Department of Education and signed new contracts with the Training and Enterprise Council ‘Celtec’.

The TUPE transfer (when the TECs actually opened for business) was found to be in September 1990. When the Claimants were made redundant in 1998, they claimed redundancy payments based on continuity of employment back to the beginning of their employment with the Department of Education, not from the start of their employment with Celtec. Celtec argued that they were only entitled to continuity of employment from 1993 i.e. when they resigned from the Department of Education and signed new contracts directly with Celtec.

They brought an action under S.11 of the Employment Rights Act 1996, asking a tribunal to determine whether, by virtue of the transfer of the undertaking in which they worked, their continuous service with Celtec should include their previous service in the Civil Service.

The first question asked was when the transfer took place. The original employment tribunal decided that the transfer took place over several years, from the time the first TEC secondment began in 1990 until the last secondment ended in 1996. The Tribunal found, therefore, that the employees could count their service with the Department of Education towards the total.

On appeal, the Employment Appeal Tribunal made a different decision. It decided that the transfer was not in stages but was complete when the new employer took over actual occupation and control of the old business. In this case this was in 1990, 3 years before the employees resigned from the Department of Education.

The next court in the saga was the Court of Appeal which restored the tribunal’s decision. After that Celtec appealed to the House of Lords. The House of Lords sent the matter to the European Court of Justice to ask whether there was a particular point in time at which the transfer of a transferor’s rights and obligations is deemed to have been effected, and, if so, how that point in time is to be identified. The European Court of Justice’s answer was that the date of transfer is the point at which the responsibility as employer for the carrying on of the business unit transferred moves from the transferor to the transferee. It further held that contracts of employment existing on the date of transfer are deemed to transfer, regardless of what has been agreed by the parties.

As the European Court of Justice decided that the transfer must have taken place at one point in time, that point must have been September 1990. The employees in question, throughout their various court cases, had maintained that they “were seconded [by the Department of the Environment to Celtec] rather than directly employed in the period September 1990 to 1993”. The European Court of Justice having held that a transfer of an undertaking takes place at “a particular point in time”, the employees now asked to change their claim and submit that they were neither seconded by the Department of Environment nor therefore civil servants in the period September 1990 to 1993, but were on the contrary employed by Celtec from September 1990 onwards. They were allowed to do so.

The House of Lords, having been answered by the European Court of Justice, heard Celtec’s appeal and applied the European Court of Justice’s ruling. It therefore dismissed the appeal and decided that the transfer was in 1990. This was when the employees were seconded to the TECs. This meant that contrary to the intention of the parties the employees continuity of employment was with the TECs even though they thought that they were still employed by the Department of Education.

As a result of the transfer, the claimants had continuity of employment going back to the point at which they joined the Civil Service.

There are some interesting possible outcomes of this judgment. Some of the Department of Education employees decided to end their secondment in the period between 1990 and 1993 and return to the Civil Service. Until now these employees will always have thought that their service in the Civil Service was continuous. According to this judgment, however, their continuity was broken in 1990 when they were seconded and they started again afresh when their secondment ended. Whether this point will be taken by the civil service pension scheme administrators is not decided but somehow the author thinks not!

Another strange point about this judgment is that the decision that the transfer took place in 1990 is contrary to the intention of the parties. This case has come up with the concept of ‘you and your employer genuinely believe you are employed by X Limited, but actually, you are employed by Y limited’. This can only cause confusion and further litigation.