News & Views

Employee on PHI did not transfer

BY Donald MacKinnon
Employment law
BG Purple

It is now almost 35 years since the original Transfer of Undertakings Regulations were passed into law and yet these Regulations remains one of the more complex and heavily litigated areas of employment law.

In a transfer situation, it is not uncommon for disputes to arise over which employees should properly be considered as part of the transferring group of employees.  Generally, any employee who is assigned to the undertaking (or part of the undertaking) that is transferring should, in the absence of an objection, automatically transfer to the new employer.  Sometimes, however, the identification of those employees is not clear.

In the recent case of BT Managed Services Ltd v Edwards and anor, the EAT had to determine whether or not an employee on long term sick leave who only remained on the books in order to access the Company’s PHI scheme did not transfer to the new employer.  In this case, there was no dispute that the TUPE Regs applied to the transfer and Mr Edwards had originally worked for the part of the business that was transferring before going off sick in January 2008.  Under his employment contract, Mr Edwards was entitled to four years’ PHI payments provided he remained on the books.  In July 2009, the area of the business where Mr Edwards had worked was transferred to a new provider.  The new provider refused to accept the transfer of Mr Edwards’ employment to them.

The EAT found that Mr Edwards was not assigned to the part of the business that was transferring.  Crucial to their decision was the fact that it was accepted by all parties that Mr Edwards was not fit to return to work; not only at the time of the transfer but for the foreseeable future and there was little prospect of a return to work. 

The status of employees on PHI in this scenario has been unclear for some time and it is good at last to have some clarity on who does and does not transfer.  Employers in a similar situation should however be cautious against applying this decision to widely.  The mere fact that an employee is off on long term sickness absence will not necessarily mean that they are not part of a transferring group of staff if there is some reasonable and realistic prospect of a return to work in the future.

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