LOM Management Ltd v Sweeny

A transfer of a commercial lease does not, without more, establish a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. The claimant must prove that, before the transaction, there was an economic entity: an organised grouping of persons and assets pursuing an economic activity with a specific objective. The claimant must also show that the entity, or the relevant part of it, transferred and retained its identity.

The burden of establishing those matters lies on the claimant. A tribunal errs in law if it treats an assignation of a lease as a classic transfer without making findings on the existence and transfer of an economic entity.

The claimant worked as a duty manager in a public house operated by her parents. Her father assigned the commercial lease of the premises to the appellant. On returning from holiday, the claimant was told that she no longer had a job.

The Employment Tribunal held that the lease assignation was a transfer of undertakings and that the claimant had been unfairly dismissed because of the transfer. It awarded compensation. The appellant appealed, contending that the claimant had not proved a transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 applied.

The central issue was whether the assignation of the lease, on the facts found, established a transfer of an economic entity retaining its identity.

1. Appeal allowed. The Employment Tribunal's judgment was set aside and the claim was dismissed.

2. Under regulation 3 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, the initial question is whether an economic entity existed before the alleged transfer. That is a question of fact in the circumstances disclosed by the evidence. The claimant bears the burden of proving it.

3. An economic entity requires an organised grouping of persons and assets facilitating an economic activity pursued for a specific objective. It is also necessary to establish that the entity, in whole or in part, transferred to the alleged transferee and retained its identity. The Tribunal had not addressed either question.

4. An assignation of a commercial lease may occur in a case to which TUPE applies, but the lease transfer alone is insufficient. The claimant had to prove that a business intrinsically linked to the property met the definition of an economic entity and was transferred.

5. The facts found amounted only to the parents carrying on a business from the premises and the tenant assigning the lease to the appellant. There had been no exploration of the business arrangements or of the arrangements by which the appellant became tenant. Those findings could not support a conclusion that an economic entity existed or transferred. The claimant had therefore failed to establish that TUPE applied.

• Employment Appeal Tribunal: allowed the employer's appeal, set aside the Employment Tribunal's judgment and dismissed the claim.

• Employment Tribunal (Glasgow): held that the claimant had been unfairly dismissed following a transfer and awarded £3,360 compensation.