Employment Tribunal Rules Two Relevant Transfers Under TUPE Occurred on November 1st 2024

OUTCOME: Allowed

EMPLOYMENT TRIBUNALS (SCOTLAND) Case No: 4100395/2025 & [NAME] as per multiple ref 4100894 Held in Glasgow via Cloud Video Platform (CVP on 26 and 27 February 2026 Employment Judge [NAME] & 6 [NAME] Claimants

Represented by:

[NAME] [COUNSEL] -

Solicitor [NAME] [COUNSEL] Claimant

Represented by:

[NAME] [COUNSEL] –

Counsel [NAME] [COUNSEL] [NAME] & 3 [NAME] Claimants

In Person [RESPONDENT] (in [NAME]) First Respondent

No appearance and

No representation [RESPONDENT] [NAME] Respondent

Represented by:

[NAME] [COUNSEL] -

Solicitor [RESPONDENT] [NAME] Respondent Represented by: [NAME] [COUNSEL] -

Solicitor Secretary of State for Business and [NAME] Respondent Represented by:

[NAME] [COUNSEL] -

In House Representative

4100395/2025 & [NAME] 2

JUDGMENT OF THE EMPLOYMENT TRIBUNAL 1. There were relevant transfers under regulation 3(1)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 as follows: a. From the first respondent, in respect of the activities of its [NAME], to the [NAME] respondent, and b. from the first respondent, in respect of the activities of its [NAME], to the [NAME] respondent; and 2. Each relevant transfer occurred on 1 November 2024.

REASONS Background 1. This is a consolidated set of six claims against four parties. The first respondent employed each claimant up until 31 October 2024. The claimants alleged that it was a transferor in a relevant transfer under regulation 3(1)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’). 2. [NAME] were alleged to be transferees in circumstances where they each began operating one of the first respondent’s [NAME] and engaged some, but not all, of its employees.

3. The [NAME] respondent is an interested party as sums have been claimed from it by former employees of the first respondent following the first respondent entering into [NAME].

4. Following case management it was decided that this hearing would take place to determine whether one or more relevant transfers occurred by the operation of TUPE, and of so on which date(s).

5. Evidence was heard from the following individuals in this order: a. [NAME] [RESPONDENT], one of two former directors of the first respondent and now a director of [NAME]; b. [NAME] [APPELLANT], a claimant and ex-employee of the first respondent at its [NAME] who was not subsequently engaged by the [NAME]; c. [NAME] [RESPONDENT] who was in the same circumstances; d. [NAME] [RESPONDENT] [NAME] who had a split role with the first respondent between [NAME] but was taken on by the [NAME] respondent in the [NAME] from 1 November 2024;

4100395/2025 & [NAME] 3 e. [NAME] [APPELLANT], a claimant who had been employed by the first respondent in Glasgow but who was not engaged by the [NAME] on or after 1 November 2024.

6. A joint hearing bundle was prepared. Numbers appearing below in square brackets correspond to pages within it.

7. After evidence was given the parties were given the opportunity to make closing submissions. Those are discussed further below. Relevant law 8. The background law relevant to this hearing was agreed by the parties and so is referenced briefly here.

9. TUPE exists to protect employees in the event that the entity employing them changes ownership. If TUPE did not exist, employees could be dismissed with little or no forewarning or protection by simply transferring the constituent parts of the business, group or service to another legal person.

10. The original version of TUPE was implemented in 1981 pursuant to the (then) [NAME] 77/187. It was amended in 2006 to clarify the law which had by then developed substantially by way of case authorities and specifically to recognise the growth in service-based operations.

11. These claims were concerned with whether there had been an ‘original’ or ‘traditional’ type of business transfer rather than a qualifying service provision change.

12. In that context, what amounts to a ‘relevant transfer’ – one in which employees are protected in other words, is set out in regulation 3 as follows: A relevant transfer 3(1) These Regulations apply to— (a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an [NAME] which retains its identity; … (2) In this regulation “[NAME]” means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.

4100395/2025 & [NAME] 4 13. The key consequence for employees of such an undertaking or entity, and which would not happen otherwise, is set out in regulation 4: Effect of relevant transfer on contracts of employment 4(1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the [NAME] that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee. (2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer— (a) all the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and (b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that [NAME], shall be deemed to have been an act or omission of or in relation to the transferee. … 14. The remainder of the regulations deal with matters such as informing and consulting employees about a relevant transfer, the effects of insolvency, particular rules relating to pension rights and trade union involvement, and the enforcement of claims. Those do not have a bearing on this hearing.

15. A substantial body of case law, both European and domestic, has developed which remains part of UK jurisprudence post-Brexit. Parties referred to specific cases and those are discussed in more detail later in this judgment. Findings of fact The following findings were made, based on the evidence provided and on the balance of probability.

16. Under a set of franchise agreements the first respondent had exclusive rights to sell and fit the products of a [COMPANY] named [NAME] (referred to hereafter as ‘[NAME]’) in Scotland. The first respondent as a business provided a [NAME] and installation service to customers from four locations – Edinburgh and Glasgow free-standing [NAME] and concessions

4100395/2025 & [NAME] 5 within the premises of another furniture supply business in [NAME]. It used warehouse facilities in Aberdeen and Glasgow. All premises were leased.

17. The main activity of both the [NAME] and concessions (hereafter together referred to as the ‘[NAME]’ unless indicated otherwise) was to [NAME] furniture solutions based on customer requirements. This would involve a choice of furniture which was supplied exclusively by [NAME] to order. Although examples of the furniture were displayed in [NAME], it could not normally be purchased separately from the [NAME] service. There would typically be a lead time of weeks between the [NAME] being finalised and the order being placed, and the arrival and installation of the furniture. Customers would be asked to pay a deposit in advance of the order being completed. [NAME] featured the ‘[NAME]’ branding and aesthetic prominently.

18. The first respondent had [NAME], [RESPONDENT] and [RESPONDENT] who were also employees. [NAME] also had a manager, [NAME] and a [NAME] who provided after-sales [NAME] to customers including handling any complaints. There were dedicated warehouse staff also.

19. Around January 2024, upon finalisation of the first respondent’s annual accounts for the financial year to 31 March 2023, it became clear to the directors that the company had made a trading loss of around £77,000 compared to a profit in the region of £176,000 the year before. Throughout the following months they sought advice on the company’s financial position from first accountants and then [NAME].

20. By September 2024 the directors had decided that the first respondent could not trade out of its financial difficulties and should be placed in [NAME]. The firm [NAME] was formally instructed by correspondence dated 20 September 2024. Various options were discussed and a pre-pack sale was advised. This was for three reasons – (i) it would ‘maximise realisations…by ensuring continuity of the business and its brand’, (ii) it would ‘preserve the jobs of its 46 employees’ and (iii) the administrators should be able to realise property in order to make a distribution to one or more secured creditors.

21. The plan involved setting up [NAME], one each to take over management of the existing [NAME], and ceasing operations altogether in [NAME]. An administrator would be appointed and sell the assets of the first respondent to [NAME] in a ‘prepack’ transaction.

4100395/2025 & [NAME] 6 22. [NAME] were incorporated in Scotland on 23 September 2023 and around the same time a [COMPANY] account was opened for each. The [NAME] of each were [NAME] [NAME] and [NAME] [NAME].

23. The directors had weekly meetings with a representative of [COUNSEL] and kept her updated with developments. [NAME] agreed in principle to a prepack sale as envisaged. 24. [RESPONDENT] had advised the first respondent in relation to the legal process for appointment of an administrator. Whilst that was underway and from some time in the first week of October 2024, the directors advised staff to make the following changes to how they dealt with customer orders: a. To continue to process new customer orders through the existing ordering system, but to keep a separate record of them; and b. To prompt customers to make any payments using new options which led to the funds being deposited in the [COMPANY] account of either the [NAME], depending on which [NAME] the transaction related to.

25. Around 11 October 2024 the directors notified [COMPANY] that the company was being placed in [NAME]. The account was frozen and could not be used from then on. Franchise agreements 26. The directors on behalf of the first respondent signed an agreement with [NAME] to terminate the existing franchise agreements with effect from 13 October 2024. A condition of this was that the owners of the first respondent were to establish a [COMPANY] which would enter into new franchise agreements to operate the [NAME].

27. This was effected by the [NAME] respondent entering into a franchise agreement to manage the [NAME] and the [NAME] respondent doing likewise for the [NAME]. Only the first of those agreements was produced to the tribunal, but it was accepted by the parties that the Glasgow agreement was mutatis mutandis the same. Each gave the respective company the right to trade as a ‘[NAME]’ [NAME] for five years from 14 October 2024. This ensured continuity of a [NAME] presence and service from the [NAME]. 28. [NAME] [NAME] evidence was that it had been agreed with [NAME] that [NAME] would not begin to operate under their respective franchise agreements until possibly as late as December of 2024, when certain other steps had been taken. This appeared to include the recruitment of staff, the entering into of new leases for the [NAME]

4100395/2025 & [NAME] 7 and the purchase of existing stock, orders and other property from the first respondent. His understanding was that [NAME] began trading in their own right on 1 November 2024. This would have meant that between 14 and 31 October 2024 the first respondent was operating but without a franchise agreement in place. He understood that [NAME] were acting on behalf of the first respondent by serving its customers and taking payments. 29. [NAME] stipulated that there should be no more than six staff at each [NAME], excluding the directors. This also did not include warehouse staff. It appears from the evidence, discussed below, that a larger number of individuals was re-recruited. Appointment of administrator 30. There was a minuted board meeting of the first respondent on 25 October 2024. Appointment of an [NAME] as administrator was approved (hereafter referred to as the ‘administrator’). A notice of appointment dated the same day was submitted to [ADDRESS] and certified as received on 28 October 2024.

31. The directors believed that this was sufficient to change the status of the first respondent from solvent to ‘in [NAME]’.

32. It was not however until 8 November 2024 that the administrator was formally confirmed by the court as having been appointed [392-393]. Redundancy and engagement of employees 33. On 29 October 2024 the directors asked all employees of the first respondent by email to attend an online meeting the following day [369]. At that meeting [NAME] [NAME] provided information which was put in a letter which was sent to all staff the following day [370].

34. The briefing (and letter) referred to the financial difficulties the company had been experiencing and confirmed that it ‘is now entering [NAME]’. The letter stated that as a result all employees, including the directors, ‘will be redundant as of Thursday 31st October’. It went on to say that [NAME] and franchise agreements were being put in place, and that there would be a new operation but on a reduced scale. Staff would be recruited for that but there would be ‘significant changes’. 35. [NAME] [NAME] said that he and [NAME] [NAME] would be visiting each [NAME] on 30 and 31 October and would answer people’s questions. The option of a telephone or online meeting was also offered.

4100395/2025 & [NAME] 8 36. [NAME] were confirmed as the administrators and a contact telephone number was given for ‘once they are formally appointed’.

37. Each employee was told individually on 30 or 31 October whether they would be offered a role with either of the [NAME]. In total around 28 people out of 46 employees were offered new roles. The majority of those were offered the same role in the same [NAME] or Glasgow – in which they had been working, or in a warehouse as they had worked before. Four staff based in [NAME] were offered the same or similar roles but in Edinburgh. One other was offered a new field sales role.

38. Each person offered a role accepted it and became an employee of the [NAME] on 1 November 2024.

39. The [NAME] did not close other than in line with their normal business hours. They were open as normal on 31 October and again on 1 November. The [NAME] had the same appearance, inside and out and the majority of staff were the same. The only obvious sign that there had been a change in the party operating each [NAME] was that a notice to that effect was put in the window, specifying the name of the [COMPANY].

40. From 1 November 2024 each of the [NAME] began using their own [NAME] and customer ordering systems. Those operated the same way as the equivalent systems of the first respondent. Staff did not need training to use them. All customer orders placed were fulfilled by the [NAME] in question which was entitled to the corresponding payment.

41. The [NAME] closed on 31 October 2024. Deed of release and purchase of assets 42. [COMPANY] issued a deed of release to it dated 8 November 2024. This removed the impediment of the existence of a floating charge over the company’s assets, allowing the administrator to sell them.

43. On the same day the administrator, having just been appointed, and the first respondent entered into a sale agreement with the [NAME], and the directors, for the sale of the first respondent’s assets. In material terms the assets comprised stock and some fixtures and fittings within the [NAME], plus any goodwill which existed. It included all existing and unfulfilled orders of the first respondent. The parties’ submissions 44. All parties attending were given the opportunity to provide submissions. [NAME] [NAME], [NAME] [NAME], [NAME] [NAME] and [NAME] [NAME] did so. As the hearing dealt with essentially one key issue, namely whether (and if so when) there was a

4100395/2025 & [NAME] 9 relevant transfer (or more than one), the parties’ headline positions can be summarised as follows. 45. [NAME] [NAME] argued that there had been no transfer at all. His secondary position in the event of that not being found was that there had been transfers to [NAME] on 1 November 2024 but that there had already been a ‘terminal event’ within the scope of regulation 8(7) in the form of the steps taken to appoint the administrator which prevented them being treated as relevant transfers under regulation 3 with the normal consequences for employees in regulation 4. In response to submissions by other parties he noted that funds received by the [NAME] up to 31 October 2024 for both existing and new orders were separately documented so they could be accounted for in the [NAME] to follow. If there had been a transfer on 14 October 2024 then any dismissals would have been carried out at that time – but they had not been. 46. [NAME] [NAME] argued that there had been relevant transfers of parts of the first respondent to the [NAME] on 14 October 2024 when entitlement to supply [NAME] products to customers moved to each. He referred to [NAME] v [NAME] CV [1986] ECR 119 as authority for the point that all of the relevant factual circumstances should be considered in the round, including some of the factors listed in that decision. There should be a focus on what was the economic reality rather than taking a formalistic approach. This showed that on 14 October 2024 the first respondent’s franchise was terminated and transferred to the [NAME]. By then staff had already been instructed to use the [NAME]’ [COMPANY] accounts. Customers placing new orders were encouraged to pay into those. The first respondent’s account had been frozen and could not be used. It was always intended that a business of substantially the same nature would continue. The only changes of any materiality were the legal entities who would carry out the activities, the shedding of legal debts and a reduction in the workforce (although it is noted that two sites were also closed). The [NAME] were already stable economic entities before the transfer date. He noted that, [NAME] and [COMPANY] (t/a [NAME]) v [NAME] and [NAME] [2006] UKHL 29, a relevant transfer could only be deemed to occur on a single date and not over a longer period of time. It cannot be artificially changed by the parties’ will. In relation to the insolvency element of the case, an undertaking could only be subject to proceedings envisaged by regulation 8 from the formal date of an administrator’s appointment – in this case 8 November 2024. 47. [NAME] [NAME] had prepared a note of submissions and was content to rely on that. In it he stressed that, following [NAME] and [NAME] v [COMPANY] [2001] IRLR 144, the tribunal should first consider

4100395/2025 & [NAME] 10 whether there was an undertaking, and then if so look at whether it had been transferred. There had been an undertaking and as far as the [NAME] (where his client had worked) was concerned, it retained its identity. Only the [NAME] changed, but even then it had the same directors as before. He emphasised also that it had been a condition of [NAME] consenting to the termination of the first respondent’s franchise agreement that another entity enter into a new one. The activities were the same, the products and services were identical and there was no gap in trading. [NAME] [NAME] suggested that there had been a transfer on either of 14 or 31 October 2024. In favour of it being the earlier date, the first respondent had ceased being entitled to provide [NAME] products and services the day before and the only party which could now do that (in Edinburgh) was the [NAME] respondent. Incoming payments were also received by the [NAME] respondent from that date, and no longer by the first respondent. If those factors were not enough to show the occurrence of a relevant transfer then one certainly occurred no later than 31 October 2024. He touched on the insolvency issue also, to submit that the first respondent had not become subject to relevant insolvency proceedings until 8 November 2024. Thus, whichever was the true date of the relevant transfer, the first respondent was a solvent entity at the time. 48. [NAME] [RESPONDENT] relied on the position he had outlined in the [NAME] respondent’s grounds of resistance to the claims. He also substantially adopted the submissions of [NAME] [NAME]. In terms of the sale agreement entered into on 8 November 2024 it was essentially all of the assets of the first respondent which were sold, suggesting a wholesale transfer. He suggested that the transfer date was on or around 5 October 2024 when a decision was taken to divert incoming funds to the [NAME]’ [COMPANY] accounts. Even if the transfer occurred as late as 31 October 2024, the first respondent was still solvent at that time, and remained so until 8 November 2024. The administrators took no decisions on its behalf before then, and in particular it was the [NAME] which handled the employee meetings and took decisions over who to dismiss or re-hire. Discussion and decision Could there be one or more transfer? 49. The law in this area is substantially settled and all parties agreed on the fundamental aspects. If there was one or more relevant transfer then it would be of a type within regulation 3(1)(a). None of the claimants argued that there was a service provision change.

50. As per [NAME], the starting point was therefore whether there was an [NAME], meaning ‘an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is

4100395/2025 & [NAME] 11 central or ancillary.’ The business of the first respondent clearly was, and no party argued that it was not. It must also be stable as confirmed by the ECJ, although that word does not appear in regulation 3(2). This should be taken to mean a venture with a degree of permanence rather than one which performs well financially. The fact that the first respondent was running at a loss did not prevent it being ‘stable’ in this context.

51. There can be a relevant transfer of part of a business if it is sufficiently distinct and severable. Whether it is or not should be tested after the alleged transfer rather than before. Commonly in reported cases, a multi-site operation which has a number of its sites taken over by different owners or operators can legally involve the relevant transfer of each site – see for example [COMPANY] v [COMPANY] [2004] IRLR 304.

52. In this context the [NAME] emerged as distinct and severable economic entities. Each was operated by a separate company and purchased the existing stock, fixtures and fittings and customer book of the first respondent as it related to that [NAME]. Despite common owners and directors, they were run separately with their own employees, premises (and landlords) and customers. Any existing customers of the first respondent were transferred according to the [NAME] they had used. [COMPANY] had its own rights and obligations by way of a separate franchise agreement with [NAME].

53. In considering whether there has been a relevant transfer to more than one transferee, it is important to assess whether the previous undertaking has been fragmented to a degree that it can no longer be said to exist after the change in question. However, in this case there was a clear structure to the first respondent’s operations, covering each of four [NAME] locations and a separately let warehouse which served them all. [NAME] had a clear identity and, in the case of the [NAME], those were retained. They looked identical to the public, before and after. There was no suspension or disruption to trading. The majority of employees in each [NAME] continued to work there, simply becoming employees of the [COMPANY]. The number of employees was reduced partially because [NAME] stipulated that and to reduce indirect costs. In short, most if not all of the [NAME] factors were present. When could any relevant transfer(s) have taken place? 54. It appeared on the evidence therefore that at some point there had been a relevant transfer of part of the undertaking that was the first respondent to each of [NAME]. A key question was: if so, when did each transfer occur? [NAME] has settled that a relevant transfer can only occur on a single date and not over a longer period of time, even if effected by a number of steps or actions. Whether in each case there was a relevant

4100395/2025 & [NAME] 12 transfer and, if so, when were interrelated questions: if a date could not be identified then there could be no transfer falling within TUPE.

55. Important events occurred on different dates. This could mitigate against the occurrence of a relevant transfer if there was insufficient evidence of a tangible enough shift on one particular date.

56. Those claimants who stated their position suggested that there were relevant transfers on 14 October 2024, primarily because that was the first day of each of the new franchise agreements, marking the point when the first respondent ceased to have any licence to operate in the way in which it had been doing and the [NAME] gained equivalent rights in their respective city [NAME]. Also at or around this time it became impossible to access [COMPANY] account, and staff asked customers to make any payments into the accounts of [NAME]. In that way it appeared that the first respondent had ceased trading and [NAME] had commenced.

57. These factors appeared initially indicative, but the evidence as a whole made the position less clear-cut. The switch in use of back accounts was driven by a decision by the [COMPANY] to freeze the first respondent’s account and not because of any tangible change in how its day-to-day operations were being carried out. It was still serving the same customers who had attended [NAME], met with staff and agreed on a [NAME] package. Importantly, because the directors knew by early October 2024 that the company would be placed in [NAME], customer payments were separately recorded and continued to be accounted for as assets of the first respondent. This included not only for orders placed before the account was frozen, but new customer orders up to and including 31 October 2024. [NAME] only began taking credit for new orders, paying VAT on the items ordered from Denmark, and legally undertaking to fulfil them, from 1 November 2024 onwards. It had originally been envisaged by the directors and the UK representative of [NAME] itself that the date might have been later than that, and it was a further week before [NAME] had leases formally in place and had purchased the remaining stock and orders of the first respondent.

58. Returning to [NAME], according to the evidence the economic reality was that customers of the first respondent transferred to [NAME], but not until 1 November 2024. Up until then [NAME] were merely serving the first respondent’s customers on its behalf.

59. Those employees of the first respondent which were taken on by the [NAME] started under their new contracts on 1 November 2024

4100395/2025 & [NAME] 13 also. Whilst it is not impossible for employees to transfer from one entity to another under TUPE without knowing at the time they have done, the evidence in this case was clear. The majority of staff based in Edinburgh or Glasgow would be retained there and become employees of a [COMPANY]. A small number would not and be considered redundant and dismissed. A smaller number still of those engaged at the other two [NAME] would be retained, either by moving to Edinburgh or Glasgow, or by being given a field sales role. All of those changes were effected by cessation of the existing arrangement on 31 October 2024 and proceeding under the new one the next day. New employment contracts were issued and the employees were paid by the [NAME] from that date. Those employees did not receive notice or redundancy pay from the first respondent nor claim for it. What happens (or sometimes crucially does not happen) to the affected employees is another potentially relevant factor under [NAME] and [NAME]. For those which did not transfer, the reason was that the new businesses had to manage lower staff overheads to be viable and not because the nature of the business itself had changed.

60. The formalising of leases and purchase of assets from the first respondent on 8 November 2024 was not sufficient to tip the balance against relevant transfers having occurred as above. Again as per [NAME] and [NAME], the date of such events (or even if they occur at all) is not determinative. The factual reality by 1 November 2024 was that it was known that leases for premises and the purchase of assets would very soon be completed. It was only the procedural delay in appointing the administrator which held up the latter.

61. I could not agree with [NAME] [RESPONDENT] assertion that the first respondent became subject to ‘terminal’ insolvency proceedings at any relevant point in the timeline under consideration. [NAME], being a process aimed at preserving some or all of the relevant business as a going concern, is not one ‘with a view to the liquidation of the assets’ – see the judgment of the Court of Appeal in [COMPANY] v De'Antiquis [2011] EWCA Civ 1567 as referred to by [NAME] [NAME], which confirms. Conclusions 62. The evidence in these claims when properly assessed pointed to there having been two relevant transfers, each of part of the original undertaking which was the business of the first respondent as a whole.

63. The relevant parts of that original undertaking – the [NAME] - were sufficiently severable to represent stable economic entities in their own right.

4100395/2025 & [NAME] 14 64. The evidence pointed sufficiently clearly to those transfers having occurred to each of [NAME] respectively on 1 November 2024. 65. The claims will now be subject to further case management in order to identify the remaining issues and how they should best be determined. Date sent to parties: 10 April 2026