Tribunal rules against firm in TUPE transfer dispute
An employer has lost an appeal over denying a worker the chance to participate in a share scheme after he transferred from another firm.
An Employment Appeal Tribunal (EAT) dismissed the appeal from employers who said the worker was not entitled to participate in a similar scheme at his new firm.
The former Share Incentive Plan (SIP) had operated prior to his transfer under a Transfer of Undertakings (Protection of Employment) or a ‘TUPE transfer’.
What is a TUPE?
In the case of Ponticelli UK Ltd v Gallagher, Mr Gallagher, who had been a member of a SIP in his previous job, transferred to Ponticelli under a TUPE transfer in May 2020.
According to the Department for Work and Pensions, TUPE applies to employees of businesses in the UK if:
- Employees’ jobs transfer over to the new company – exceptions could be if they are made redundant or in some cases where the business is insolvent
- It ensures employment terms and conditions transfer
- It makes sure continuity of employment is maintained.
The right to participate in a SIP was transferred to the new employer under TUPE, even though the employee’s entitlement to participate in the plan arose under an agreement separate from and not referred to in his contract of employment.
Mr Gallagher brought an Employment Tribunal (ET) claim against Ponticelli after it refused to provide an equivalent scheme when Mr Gallagher transferred.
He believed he was entitled to be a member of a SIP equivalent to that of his former employer’s scheme.
Tribunal decision upheld
The tribunal upheld Mr Gallagher’s claims that he was only able to participate in the SIP because he was an employee of the company, and it was a part of his overall financial package.
Ponticelli appealed to the EAT, where the firm argued that the rights and obligations in the SIP didn’t arise either ‘under’ Mr Gallagher’s contract or ‘in connection with’ his contract – and that, therefore, Regulation 4(2)(a) of TUPE didn’t apply.
Mr Gallagher accepted that the SIP didn’t arise under his contract but maintained that it did arise in connection with it.
The appeal was dismissed when the decision confirmed that TUPE can cover share scheme benefits even where the contractual documentation containing the right to participate is separate from the contract of employment.
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