Bid to object to transfer fails because TUPE did not apply
22 September 2017
The High Court has considered an employee’s attempt to escape a lengthy period of garden leave by objecting to a TUPE transfer when his employer was going through a change in ownership. This was a creative attempt by the employee to avoid his contractual notice obligations, but he ultimately failed due to the lack of one key ingredient - a TUPE transfer.
Facts of the case
Mr Berry was employed by ICAP Management Services Ltd (“IMSL”) as chief executive officer of its global e-commerce division. He resigned from his role in July 2016, giving 12 months’ notice in accordance with his employment contract, in order to take up another role with a competitor, BGC Services (Holdings) Ltd (“BGC”).
Mr Berry’s intention to join to BGC was no secret. BGC made a public announcement shortly after his resignation confirming that he would become its managing director, subject to his outstanding obligations to IMSL.
Following a share sale which was completed on December 2016, ultimate ownership of the shares in IMSL transferred from ICAP plc to Tullett Prebon plc. Mr Berry asserted that a TUPE transfer had taken place and that he objected to it.
The effect of an employee objecting to a TUPE transfer is to terminate that employee’s employment on the transfer date. Mr Berry therefore saw the change in ownership as an opportunity to bring his garden leave to an early end. He claimed that his employment had terminated as a result of his objection and proceeded to start work for BGC in February 2017.
In order to enforce its garden leave protection, IMSL obtained interim injunctions from the High Court in March 2017 expressly prohibiting Mr Berry from being employed by BGC or assisting it in any way and from contacting IMSL’s clients or employees or making use of its confidential information. The case then returned to the High Court the following month to determine whether the interim injunctions should continue or be set aside.
One of the key issues to be determined was whether there had in fact been a TUPE transfer when Tullett Prebon plc bought the group of companies to which IMSL belonged.
High Court’s judgment
Where the shares in a company are simply sold from one party to another, there is only a change of ownership of the employer, not an actual change of employer. In this case, ICAP plc sold its shares in an ICAP holding company to Tullett Prebon plc, so ownership of the holding company and its subsidiaries (including IMSL) transferred to Tullett Prebon. Crucially, only the shares changed hands and there was no separate purchase of assets or merger of ICAP entities with Tullett Prebon entities.
The High Court therefore ruled that Mr Berry’s employer remained IMSL at all times confirming that “a simple acquisition of control of shares does not constitute a transfer within TUPE”. Tullett Prebon did not step into the shoes of Mr Berry’s employer at any stage and IMSL continued to be responsible for its own business and its own employees after the sale of shares.
On that basis, the High Court concluded that there had been no TUPE transfer and, so there was nothing to which Mr Berry could object. As he remained subject to his contract of employment with IMSL the judge granted the injunction being sought by IMSL to enforce its garden leave protection.
It is often simple to conclude that TUPE does not apply to a particular share sale scenario because, for example, there is genuinely nothing that will change other than the names of the shareholders. Care must be taken, however, when a share sale is accompanied by some form of restructure or reorganisation. If, for instance, the new owner takes steps after completion to integrate its newly acquired company with other group companies or take over day-to-day control of its business in some other way, TUPE issues may well arise (as indeed they did in a previous case - Jackson Lloyd Ltd & Mears Group plc v Smith and others UKEAT/0127/13). As the High Court stated, “a share transfer is not in itself a TUPE transfer, but may occasion such a transfer”.
The judgment provides a helpful reminder of the key things to look out for when considering whether integration activities following a share purchase might lead to a TUPE transfer - described by the judge as “indicia of transfer”. Essentially, if a new party will become responsible for carrying on the business, take on the obligations of the employer and take over the day-to-day running of the business, TUPE should be front of mind.
ICAP Management Services Ltd v Berry  IRLR 811 – judgment available here