Freedman v Career Energy Consultancy Services Ltd (Transfer of Undertakings : Transfer)

A tribunal must determine employment status from the practical reality of the relationship. A contractual label of consultant or self-employed person, invoicing arrangements, and responsibility for tax are relevant but not decisive. Where the individual continued to perform the same work and the company retained effective control, the only permissible conclusion on the evidence was that employment continued.

A transfer of the business, its clients, assets and staff to a new company was a TUPE transfer even though the written share-purchase agreement did not itself record the business transfer. The employee therefore had continuity of service and the tribunal had jurisdiction over unfair-dismissal and holiday-pay claims.

The claimant appealed against the Employment Tribunal's decision that, although he had been employed by the respondent from 21 December 2009 to 25 February 2010, he was not an employee at the relevant date. It had therefore declined jurisdiction over his claims for unfair dismissal and holiday pay on the basis that he lacked qualifying service.

The claimant contended that the business had transferred from the former company to the respondent and that his employment had continued despite a board minute replacing his service agreement with a consultancy arrangement. The central issues were whether there had been a TUPE transfer and whether the claimant remained an employee after February 2010.

1. Appeal allowed. The Employment Tribunal was plainly wrong to decline jurisdiction over the unfair-dismissal and holiday-pay claims.
2. The evidence established that the business had transferred to the respondent with the liquidator's consent. Its clients, assets, freelance consultants and employed staff moved to the respondent and its activities continued. The fact that the share-purchase agreement did not itself provide for a purchase of the business did not displace that evidence. There was accordingly a transfer within the Transfer of Undertakings (Protection of Employment) Regulations 2006, and the claimant had continuity of employment.
3. The Tribunal was also wrong to find that the claimant's contract of service ended when he became a consultant. Employment status depended on the surrounding reality, not the parties' description of their arrangement. The claimant continued to do the same work. The material changes were that he invoiced through a company and was treated for tax purposes as self-employed, while the new chief executive exercised control over his responsibilities and could dismiss him. Applying the Tribunal's own multi-factor approach, the only proper conclusion was that he remained an employee.
4. The case was remitted to a differently constituted Employment Tribunal to determine whether the dismissal was unfair, whether holiday pay was due, and any appropriate compensation.

• Employment Appeal Tribunal: Allowed the claimant's appeal and remitted the merits of the unfair-dismissal and holiday-pay claims to a different Employment Tribunal.
• Employment Tribunal, London Central: Reasons sent on 21 June 2011. It held that the claimant was not an employee at the relevant date and declined jurisdiction over the claims.