A Company in Liquidation Can Be an Associated Employer

In Da Silva Junior v Composite Mouldings & Design Limited (CMDL) [2008] UKEAT/0241/08 the Employment Appeals Tribunal (EAT) held that when a former employee of a company which was in voluntary liquidation was employed by another company with the same majority shareholder as the company in liquidation, his continuity of employment was protected. Continuous employment is relevant for the purposes of certain statutory claims in the United Kingdom, including unfair dismissal.

It was concluded by the EAT that the two companies were "associated employers" for the purposes of section 218(6) of the Employment Rights Act 1996 because they were controlled by the same shareholder when the employee began his employment with the second employer. The first employer being in voluntary liquidation at that time did not mean that it no longer existed or that it was controlled by the liquidator rather than the majority shareholder. Mr Da Silva therefore had the requisite one year's service to bring an unfair dismissal claim against CMDL.

This case is a reminder that employers will not be able to claim a break in continuity of employment (and so avoid claims for unfair dismissal) by liquidating a company and subsequently setting up a new company to employ its former employees.