Ferguson & Ors v Astrea Asset Management Ltd (TRANSFER OF UNDERTAKINGS)

Under regulation 4(4) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, any contractual variation whose sole or principal reason is a transfer is void. The provision is not confined to variations adverse to employees. That construction safeguards pre-existing rights without allowing the transfer to improve them.

In any event, EU law cannot be invoked to obtain an improper advantage through artificial contractual arrangements made for the transfer. Whether an employee is assigned to an organised grouping is an organisational question of fact. Time spent is relevant but not determinative. A contribution deduction requires findings that the employee’s conduct caused or contributed to dismissal, whereas a Polkey assessment asks whether a fair dismissal would have occurred after a proper process.

Lancer Property Asset Management Ltd managed a single property estate. On termination of its management agreement, its activities transferred to Astrea Asset Management Ltd under TUPE.

Shortly before the transfer, the four claimants, who controlled Lancer, procured enhanced contractual bonus, termination and notice terms. The Employment Judge held the terms void, held that Mr Lax and Mr Pull were not assigned to the transferring grouping, made a 100% contribution reduction to Mr Kevill’s compensatory award, made a Polkey finding, and awarded each claimant three weeks’ pay for Astrea’s breach of regulation 13(4).

The claimants appealed. The principal issues were the scope of regulation 4(4), EU abuse of law, assignment, contribution, Polkey, and the proper award for failures to provide measures information.

1. Appeal allowed in part and remitted. The EAT upheld the Employment Judge’s conclusions on the contractual variations, the Polkey deduction, and compensation for breach of regulation 13(4). It set aside and remitted the findings on assignment of Mr Lax and Mr Pull, and the 100% reduction under section 123(6).

2. Regulation 4(4) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 voids all purported contractual variations made for the sole or principal reason of a transfer. A broad purposive construction consistent with the Acquired Rights Directive protects existing employee rights; it does not secure improvements in those rights. The wording, the Directive’s purpose, the statutory exceptions, and the practical difficulty of identifying an employee-advantageous term all supported that result.

3. Alternatively, the claimants could not rely on the enhanced terms under the EU abuse-of-law principle. The arrangements did not safeguard existing rights but artificially improved them in anticipation of transfer. The Employment Judge was entitled to find that they had no legitimate commercial purpose and were intended to obtain an improper advantage at Astrea’s expense.

4. Assignment under regulation 4(1) is a factual, organisational inquiry. The Employment Judge’s reasoning impermissibly focused on the small amount of work performed for the estate, rather than whether the individuals were organisationally assigned to the transferring grouping. That issue, and consequential matters, had to be reconsidered on the existing evidence.

5. A section 123(6) reduction requires findings on whether, and to what extent, the employee’s conduct caused or contributed to dismissal. The absence of such findings made the 100% reduction unsustainable. By contrast, the Polkey finding stood: conduct need not be a technical contractual breach, misconduct, or conduct directed at the transferee if it would reasonably justify dismissal after a fair process.

6. Three weeks’ pay was a just and equitable sanction under regulation 16(3). The tribunal could consider both Astrea’s culpability and the practical consequences of the delayed measures information. On an individual complaint under regulation 15(1)(d), compensation could be ordered only for the employee who brought the complaint.

• Employment Appeal Tribunal: Appeal allowed only on assignment under regulation 4(1) and the section 123(6) reduction. Both matters were remitted to Employment Judge Goodman.
• Employment Tribunal: Employment Judge Goodman’s judgment dated 13 December 2018 was otherwise upheld.