Case update: Associated employers, continuous employment and the importance of being transparent with the Employment Tribunal

16 December 2015

In the case of Schwarzenbach t/a Thames-side Court Estate v Mr D Jones the employee proved that his two most recent employers were “associated employers” and therefore, taking into account the two periods of successive employment, he had the requisite period of continuous employment to bring an unfair dismissal claim.

The claimant was employed by the respondent for around six months, before his dismissal in January 2014. Therefore, from this employment taken alone, he did not have sufficient continuity of employment to bring a claim for unfair dismissal. However, the claimant argued that his employment with a previous employer, from June 2011 until May 2013 (the working day before the claimant started working for the respondent), should be taken into account, on the grounds that he had been employed by two “associated employers”.

Section 218 of the Employment Rights Act 1996 provides that where X is employed by A and B in succession, the change of employer will not break continuity of employment where A and B are “associated employers”. Employers are “associated” if one company, or a third party, has direct or indirect control over the other (legal control in the sense of a majority shareholding as opposed to de facto control in the sense of how the company is run). The employment tribunal held that the two employers were associated employers and therefore the Claimant had sufficient continuity of employment to bring an unfair dismissal claim. The respondent appealed this decision.

The EAT dismissed the appeal. Although the employment tribunal erred in its approach, by placing the burden of proof on the respondent, whereas the burden of proof should fall on the claimant to prove continuity of employment where there is a change of employer, the EAT found that the correct decision had been reached. This was, in part, because there was a lack of transparency from the respondent in terms of its corporate structure – the respondent did not attend the tribunal hearing and provided only limited disclosure. Therefore it was permissible for the Tribunal to draw inferences from the surrounding evidence (including matters relating to de facto day-to-day control) in order to determine the question of legal control.

In summary, even where the burden of proof is not on the respondent to rebut a presumption, given that employers usually have better access to relevant documents than employees, employers should take care to ensure that they comply with their disclosure obligations and are transparent with the Tribunal. Otherwise there is a risk that an adverse inference may be drawn.

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