The recent Court of Appeal case of Dynamex Friction Ltd & Anor v Amicus & Ors is a fascinating look at the impact upon employees where a company enters administration and the business subsequently passes to a phoenix company. In many cases the owners and controllers of the phoenix are the same individuals who drove the original company into administration in the first place.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 are designed to provide rights to employees where their employment transfers from one person or company to another. It provides that employees will have a claim of unfair dismissal if they were dismissed in consequence of the transfer. If the business had simply been sold on without the intervening administration, then the employees' employment would have transferred with it.

In this case however, when the company went into administration, the administrator decided that there wasn't enough money in the company to pay the employees so dismissed them all. He then sold on the business to a company which fell into the eventual control of the original director. Here the reason for the dismissal was not a transfer, it was because the administrator couldn't afford the wage bill.

The employees contended that their dismissal was the consequence of the transfer, as they alleged the overall process was a result of the ‘machinations' of the previous director and that he had planned it all along. Had this argument been successful it would have struck an important blow for the many employees who find themselves in this situation. The Court of Appeal however, by a majority, found that once it was established the dismissing officer made his decision independently, and for a particular reason, it was impossible to look behind that reason at any surrounding context or scheming.

Written by Joseph Neville, Pupil at New Walk Chambers, specialising in Employment Law.