A Temporary Cessation of Activity Does Not Prevent a Transfer of an Undertaking

In the case of Wood v London Colney Parish Council (EAT 2010), it was held that a temporary cessation of an activity does not prevent a ‘relevant transfer' for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).  

Mr Wood was a barman employed by a social club, but was dismissed on 12 August 2008 after the alcohol licence for the premises was withdrawn.  The social club then ran into financial difficulties and was eventually taken over by the Council on 16 September 2008.  A new alcohol licence was granted and the bar started business again on 6 October 2008 but with a new barman. 

The question for the EAT was whether there was a ‘relevant transfer' for the purposes of TUPE and therefore whether Mr Wood's employment transferred from the social club to the Council.  The EAT said that, although the bar had stopped trading for a period of time because there was no licence, it was clear that the Council had always intended to obtain a new licence and that the bar would operate in exactly the same way as it had previously.  It was held therefore that a ‘relevant transfer' for the purposes of TUPE had taken place on 16 September 2008 and that Mr Wood's employment ought to have transferred.

This is a warning to employers who might not think that TUPE applies where there has been a temporary cessation of the acquired business – for example, where a bar or restaurant is closed down for refurbishment on a change of ownership.  The key factor appears to be whether there is a clear intention of the new owner to operate the business in the same way as the old owner.