TUPE: Transfer of Liabilities

The effect of TUPE is to transfer rights, powers, duties and liabilities under or in connection with any contract of employment to the new employer under Regulation 5(2)(A). W S Atkins (Services) Limited had employees whose pay package included a profit sharing scheme. Atkins were party to a contract with Surrey County Council for carrying out certain works. This ended in 1997 when the new contract was re-tendered and won by Unicorn Consultancy Services Ltd. It was agreed that there was a TUPE transfer from Atkins to Unicorn.

The issue was whether the liability to pay out under the profit sharing bonus scheme transferred from Atkins to Unicorn. The EAT decided that it did transfer. The Court reviewed the precise wording of the scheme and heard arguments that arguably the employees had no rights under the scheme, particularly because although the employees had earned the money they were not employed in what was described in the agreement as the employment unit (impliedly referring to W S Atkins) in the month proceeding the payment.

The EAT made it clear that in the light of the TUPE Regulations they must consider these issues in view of the purposive approach of TUPE (that is, to protect an employee's rights). All the employees had earned the relevant pay, because they had worked in the employment unit throughout the relevant period and they were employed in that unit at the relevant date even though they were not employed any longer by a company in the Atkins Group, but were now employed by Unicorn.

In making this decision the EAT did agree that there may be problems in other factual circumstances in taking this approach, and singled out an example that it may have been difficult to come to such a decision if the TUPE transfer had taken place during the relevant period of profits, and all the profits had not been earned, because in that situation only part of the profits would have been earned by the Atkins Group and the rest would be outside the Group.

Therefore it could be said that although employees are not to be denied these rights simply by an artificial interpretation of documents, TUPE should not be allowed to unduly enhance the rights of employees under such a scheme which could not have been contemplated when it was first entered into.
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