Pressure Coolers Ltd v Molloy

Under the insolvency provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006, the State guarantee covers qualifying employment debts which arose and were payable before the transfer. Regulation 8(3) modifies Part XII of the Employment Rights Act 1996 by deeming the transfer date to be the termination date and the transferor to remain the employer. That deeming fiction enables transferred employees to use the guarantee; it does not make the transferee’s later dismissal a pre-transfer debt. Accordingly, where an employee transfers during an administration and is then unfairly or wrongfully dismissed by the transferee, the transferee remains liable for the resulting basic award and notice pay.

An employee of Maestro International Ltd transferred to Pressure Coolers Ltd as part of a pre-pack administration sale of Maestro’s business as a going concern. Pressure Coolers dismissed him later on the same day. The Employment Tribunal found the dismissal unfair and discriminatory and initially allocated various liabilities between Pressure Coolers and the Secretary of State. On review, it held that the Secretary of State was liable only for qualifying sums due by the transfer date, leaving Pressure Coolers liable for the basic award and notice pay. Pressure Coolers appealed, arguing that regulation 8(3) made the Secretary of State liable for all Part XII debts by deeming termination to occur at transfer. The central issue was the proper construction of regulation 8(3) and its relationship with the State guarantee.

1. Appeals dismissed. Pressure Coolers was liable for the basic award and notice pay arising from the employee’s dismissal after the TUPE transfer. The Secretary of State’s appeals had already been dismissed on withdrawal.
2. Regulation 8 implements the insolvency derogation in article 5.2(a) of Council Directive 2001/23/EC. In a non-liquidation insolvency procedure, it protects the transferee from specified liabilities of the transferor while preserving a State guarantee for qualifying debts arising from the employment relationship and payable before transfer.
3. The relevant debts under Part XII of the Employment Rights Act 1996 are therefore frozen at the transfer date. The State guarantee does not extend to liabilities which arise after transfer. The employee’s post-transfer basic award and notice pay were liabilities of the transferee, not liabilities transferred from the insolvent employer.
4. Regulation 8(3) does not alter that result. Its deeming provisions treat the transfer date as the termination date and the transferor as the employer only for the purpose of adapting Part XII so that a transferred employee can satisfy the statutory termination and appropriate-date requirements. They do not cause post-transfer obligations themselves to accrue at the transfer date.
5. The Tribunal’s review power under rule 34(3) of the 2004 Regulations was sufficiently wide to permit confirmation, variation or revocation of the original judgment, even while an appeal was pending. However, substituting judgments without clearly identifying what had been reviewed and why was unhelpful and should not be followed as a matter of practice.

• Employment Appeal Tribunal: dismissed Pressure Coolers Ltd’s appeals against the substituted Employment Tribunal liability and remedy judgments. The original remedy appeal was also dismissed because the review judgment had substituted the original judgment.
• Ashford Employment Tribunal: found the dismissal unfair and discriminatory and, on review, allocated pre-transfer guaranteed debts to the Secretary of State and the post-transfer basic award and notice pay to Pressure Coolers.