EFFECT OF CONTINUATION OF CONTRACT ORDER ON TRANSFER OF UNDERTAKINGS (Hansard, 29 March 2004)

§ John McDonnell
I beg to move, That the clause be read a Second time.
I seem to be trying to write the next piece of Government legislation on employment relations. Let me zip through this new clause as well.
Several hon. Members have continuing problems with the operation of the Transfer of Undertakings (Protection of Employment) Regulations 1981. Section 129 of the Employment Rights Act 1996 provides for a special form of relief in the case of dismissal for trade union-related activities, and a person who claims unfair dismissal on those grounds may also make an application to the tribunal for interim relief. On an interim relief application, if the tribunal considers that the individual has better than even chances of success at the full hearing, the tribunal can make a continuation of contract order under section 129. That means that the contract is deemed to continue and the employer must continue to pay wages and other benefits due under the contract from the date of termination of the contract until the complaint of unfair dismissal is determined or settled.
That is an important remedy for those who are dismissed on trade union-related grounds, especially as claims for unfair dismissal can take many months to be determined in tribunal. However, in the recent case of Dowlingv. M E Ilic Haulage Ltd., the business was sold on after a continuation order was made. An application was made to join the transferee—the business that had bought the business—as a respondent, but the tribunal accepted the transferee's argument that the effect of a continuation of contract order was limited to the payment of pay and benefits, and continuity of employment; it did not mean that the contract continued, so the applicant's employment did not transfer on the business being sold and the transferee could not be joined as a respondent.
The Employment Appeal Tribunal has upheld the decision and there is no application to appeal. Therefore, as the law stands, where a continuation of contract order has been made, the employee is extremely 1361 vulnerable if the business is sold on. We must bear in mind the fact that the transferor may have only small funds or even be insolvent, whereas the transferee will generally be viable and able to meet any awards or even to reinstate the employee if he succeeds in his claims. The new clause stipulates that the continuation of contract order has effect for the purposes of the TUPE regulations. That, in turn, means that the transferee can be joined as a respondent, and if the application is successful, the employee can be reinstated to or claim compensation from the transferee.
Although it would make a minor amendment, the new clause could bring great relief and overcome a technical problem.

§ Mr. Sutcliffe
As my hon. Friend says, the new clause is designed to extend the effect of a tribunal order made under section 129 of the Employment Rights Act 1996. The effect of an order under section 129 for the continuation of a contract of employment is dealt with in section 130, which provides that the contract should continue in force for the purposes of pay, pension rights, continuity of employment and other such matters. The new clause would add another category to those specified in section 130 by providing that a contract that a tribunal orders to continue in force would do so for the purposes of the TUPE regulations. In my opinion, the addition is unnecessary. The TUPE regulations already have the effect of preserving rights that arise pursuant to the contract of employment. That protection extends to statutory employment rights arising pursuant to the contract of employment.
I sympathise with the spirit in which the clause was tabled, but, as I have already explained, there is no need for it. I respectfully ask my hon. Friend to withdraw it.

§ John McDonnell
I beg to ask leave to withdraw the motion .
Motion and clause, by leave, withdrawn.