Schwarzenbach (t/a Thames-Side Court Estate) v Jones

For continuity of employment following a change of employer, the presumption in section 210(5) does not apply because section 218(1) confines it to employment by the same employer. The employee must establish continuity under section 218.

For associated-employer purposes, control under section 231 of the Employment Rights Act 1996 means legal control, ordinarily voting control. Day-to-day de facto control is insufficient by itself. Where ultimate ownership and voting arrangements are opaque, however, a tribunal may consider the surrounding facts, including practical control, to draw a permissible inference about ultimate legal control.

The Claimant brought an unfair dismissal claim. His employment with the Respondents lasted from June 2013 to January 2014 and was insufficient on its own to qualify. He relied on his immediately preceding employment by Culden Faw Ltd, alleging that it and the Respondents were associated employers.

The Reading Employment Tribunal upheld continuity under section 218(6) of the Employment Rights Act 1996. It inferred that the Respondents indirectly controlled Culden Faw Ltd through an opaque corporate structure. The Respondents appealed, contending that the Tribunal had wrongly applied the statutory presumption of continuity, used an impermissible de facto-control test, and made unsupported findings.

The central issue was whether the Tribunal’s factual inference established the requisite legal control despite its error concerning the presumption of continuity.

1. Appeal dismissed. The Employment Tribunal erred in treating section 210(5) of the Employment Rights Act 1996 as imposing on the Respondents a burden to rebut a presumption of continuity. By section 218(1), that presumption does not apply where continuity depends on a change of employer.

2. The error did not make the decision unsafe. Read fairly, the Tribunal did not decide the case by applying a presumption. It made findings from the evidence before it and inferred that the Respondents had ultimate legal control of Culden Faw Ltd.

3. Section 231 requires legal control, normally control of voting rights through the relevant shareholding. Day-to-day management or practical influence cannot alone satisfy that test. The Tribunal nevertheless could consider the practical realities as evidence from which to infer where ultimate legal control and voting control lay.

4. The chain of ownership did not end the inquiry. It did not disclose who controlled Black Bear Holdings SA, the ultimate known shareholder in the chain. The Respondents had not attended to give evidence and had supplied limited information, despite being better placed to clarify the corporate arrangements. The Tribunal was entitled to assess the surrounding evidence, including the common management and employment arrangements, and infer legal control in the Respondents.

5. That approach was permissible under Secretary of State for Employment v Chapman and Payne [1989] ICR 771. It was also consistent with Secretary of State for Employment v Cohen & Anor [1987] ICR 570: an employee may prove the necessary facts by permissible inference where documentary information is unavailable and the arrangements lack transparency.

• Employment Appeal Tribunal — dismissed the Respondents’ appeal and upheld the Employment Tribunal’s conclusion that continuity of employment was established.
• Reading Employment Tribunal — held that Culden Faw Ltd and the Respondents were associated employers and that the Claimant had sufficient continuity to bring his unfair dismissal claim.