Providers need to be alive to the risk of contractors becoming insolvent and how to limit the resulting inevitable disruption.
Joint contracts are used in the social housing sector for a variety of reasons and this decision will give comfort to those organisations already using them, as well as simplifying the set-up of these sorts of contracts.
Mr Layton, who was a multi-skilled decorator, had been employed by Martlet Homes since 31 January 2005. Martlet is a registered provider of social housing and it joined the Hyde Group with effect from 1 January 2008, becoming a subsidiary of Hyde Housing Association Limited. Mr Layton’s employment remained with Martlet.
Hyde Housing Association then started to act as Martlet’s agent for payroll purposes. However, the Claimant continued to be employed just by Martlet up to 1 August 2013. On 18 July 2013 the Hyde Group wrote to Mr Layton offering him a new contract of employment. This stated that his employer was to be all the members of the Hyde Group jointly and severally. Mr Layton did not sign the contract initially. He was then given notice of the termination of his employment with effect from 16 October 2013 and offered re-engagement on the new terms. He accepted the offer of re-engagement with effect from 17 October 2013. He continued working in the same team, carrying out similar services and activities, with the same line managers, wearing the same Hyde Martlet uniforms, badges and driving the same vans with their logos on.
Mr Layton claimed unfair dismissal (including automatic unfair dismissal because of a TUPE transfer). The Employment Tribunal therefore looked at whether there had been a transfer for the purposes of TUPE to decide whether this part of his claim could go ahead.
The Employment Tribunal decided that there was a TUPE transfer. Hyde Housing Association appealed. The Employment Appeal Tribunal (EAT) decided that the control of the relevant business unit remained in the hands of Martlet and the Claimant’s employment relationship also remained with Martlet after the addition of the other employers. Martlet also retained liability for Mr Layton’s employment, even if this was now shared with other members of the Hyde Group. The EAT therefore decided that there was no transfer but gave Mr Layton permission to appeal to the Court of Appeal.
This will be a welcome decision for employers using joint contracts. It is further confirmation that this type of contract is recognised by the courts. It also confirms, for the time being at least, that the simple addition of joint employers where there is no movement in control over the business unit or in the employment relationship, does not result in a TUPE transfer. Employers will not therefore need to comply with the requirements of TUPE in setting up joint contracts in these circumstances.
The position is less clear where, in reality, there has been a change in the control of the business unit or in the employment relationship. In that situation, a Tribunal might still reach the conclusion that there had been a transfer under TUPE.
This would mean that the employers would need to comply with information and consultation obligations to employee representatives or trade unions. Given that Tribunals have the power to impose a penalty of up to 13 weeks’ gross pay per affected employee where information and consultation obligations have not been complied with, employers would be wise to take a cautious approach in circumstances where control or the employment relationship is moving in reality.
Whilst there is also an obligation on the transferring employer to provide employee liability information to the receiving employer, it is unlikely to be an issue in joint employment relationships because, in most cases, the employers will either be members of the same group or will have made provision of employee information a condition of entering into the joint employment contract.
For More Information
About setting up joint employment contracts and how they work, please contact Doug Mullen.
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