Legal Updates

Employment – Continuity and Transfer of Trade

In the recent case of Urmston and others v John Hardman and Co [2006], the defendant was a company which operated a number of services for a solicitor’s firm dealing with personal injury claims. The defendant and the solicitor’s firm had offices in close proximity to each other.

Fee earners at the firm were held out to be employees, as well as conducting supervising duties in order to meet the requirements of the Law Society. Files were opened in the firm’s name.

Unfortunately, in September 2003, the firm found itself in financial difficulties. Eventually three employees, who were also fee earners, were dismissed in June 2004. They should have been given one month’s notice that they were to be made redundant. However, this did not take place. The employees were dismissed by letters which were printed on the firms headed stationery.

In this situation they should have been entitled to:

A redundancy payment.

• A payment in lieu of notice.
• A payment owing in terms of reduction.

The company was then incorporated into the firm which continued with its personal injury department. The employees that were dismissed then brought a claim in the Employment Tribunal for unfair dismissal against the defendant. The Employment Tribunal held, inter alia, that the reasons for their dismissals were connected with the transfer of undertakings from the company to the firm. This was deemed to be a valid transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 1981. The reasons which resulted in the changes in the workforce were not economic, technical or organisational. It was therefore found that the employees were unfairly dismissed as the dismissals were as a result of the transfer from the company to the firm.

The employer then appealed to the Employment Appeals Tribunal on the grounds that the tribunal’s reasons for the decision had been inadequate in a number of ways:

The findings of the tribunal with regard to the date of the transfer had been incorrect.

• The attribution of the dismissals to the transfer was unsatisfactory.
• The statement which was made by the Tribunal outlining that the dismissals were not necessary to make the business economically viable was untrue.

As a result of these points made by the employer, the appeal was based on the allegation that the conclusions reached by the tribunal were perverse in these particular circumstances.

The appeal was however dismissed. It was held that on the facts the decisions made by the Tribunal had been adequate. Taking the whole judgment made by the Tribunal into consideration, it was clear that the employer’s witness evidence had been rejected. This was well within the Tribunal’s power and therefore it had not reached a perverse decision.

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© RT COOPERS, 2006. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.