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Adopting the purposive approach required by the TUPE Regulations, the EAT held that a transferee company was deemed to be an employer participating in the profit related pay scheme set up by the transferor, and was therefore liable to make payments to the transferred employees under their contracts of employment.
An appeal by an employer against a decision of a Chairman of the London (South) Employment Tribunal relating to the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). The respondents to the appeal were employees of W A Atkins (Services) Ltd ("Atkins Services"), part of the Atkins Group, and were engaged to carry out a works contract for Surrey County Council ("SCC"). Their remuneration package included a profit sharing bonus scheme ("the PRP Scheme"). The works contract between SCC and Atkins Services came to an end on 31 March 1997 following a tendering exercise which saw it transferred to the appellant company on 1 April 1997. It was common ground that there was a relevant transfer under TUPE and that the respondents worked between 1 April 1996 and 31 March 1997 which was the profit year for the purposes of the PRP scheme. The question on appeal was whether the respondents were entitled to payments from the appellant under the PRP scheme.
HELD: (1) The appeal proceeded on the assumptions that, whoever succeeded, the decision did not give rise to any general tax point concerning PRP Schemes, and any tax problems for companies in the Atkins Group or their employees. The appellant company indicated that if it lost the appeal it would make net payments to the respondents (although it would make gross payments if it was necessary or appropriate). (2) The answer to the appeal turned on the particular wording of the PRP Scheme in the particular circumstances of the case. The issue was not simply one of construction, but how the PRP Scheme was to be construed and applied having regard to the TUPE transfer, the terms of TUPE (including the deeming provisions contained in Reg.5 - see Marshall v Kerr (1995) AC 148) and TUPE's purpose. The decisions of the ECJ in Knud Wendelboe & Others v L J Music ApS in liquidation (case 19/83) and H B M Abels v The Administrative Board of the Bedrijfsvereniging voor de Metaalindustrie en de Electrotechnische Industrie (Case 135/83) indicated the general purpose underlying the Acquired Rights Directive and TUPE. Morris Angel & Son Ltd v Hollande & another (1993) IRLR 168 and Whent and others v T Cartledge Ltd (1997) IRLR 153 were examples of the effect and application of TUPE in different situations but did not provide clear or decisive support to either party. (3) When the required purposive approach was taken to the construction and application of TUPE in the present case the result was that: (i) immediately before the TUPE transfer Atkins Services had a liability or duty of a type that was within Reg.5(2) of TUPE to the respondents to make a payment, or procure the making of a payment to them under the PRP Scheme as part of their pay; (ii) the respondents were employed in a part of the undertaking that was part of the undertaking of the Atkins Group at the beginning of and throughout the profit period for the PRP Scheme; and (iii) the respondents remained employed in the undertaking at a date specified in the rules of the PRP Scheme; albeit that by that date they were not employed by a company within the Atkins Group. (4) The appellant company was therefore bound to make payments to the respondents pursuant to their transferred contracts of employment and the rules of the PRP Scheme.
Ms Melanie Tether instructed by Kidd Rapinet (Haslemere) for the respondents.