Continuous Employment, Meaning Of

Key points

• To qualify for most statutory rights in employment, an employee must be in continuous employment and must have been continuously employed for a specified period. That period is expressed in months or years - a month meaning a calendar month; and a year, a year of 12 calendar months. The rules are laid down in Part XIV, Chapter I (sections 210 to 219) of the Employment Rights Act 1996 - reproduced as the Appendix to this handbook.

• Following the decision of the House of Lords in R v Secretary of State for Employment, ex parte Equal Opportunities Commission [1994] ICR 317, and the subsequent introduction of the Employment Protection (Part-Time Employees) Regulations 1995, part-time employees are nowadays entitled to the same statutory employment rights as their full-time colleagues, and are subject to the same qualifying conditions for access to those rights. See also the section titled Part-time workers elsewhere in this handbook.

The continuity of a period of employment

• Any employee who is in continuous employment will ultimately have been employed for a period sufficient to qualify for most (if not all) of the statutory rights outlined both in the Employment Rights Act 1996 and in related legislation (such as the Trade Union & Labour Relations (Consolidation) Act 1992). For example, an employee who has been continuously employed for one month up to the day preceding a workless day will qualify to be paid a guarantee payment in respect of that and (within prescribed limits) any subsequent workless days. A pregnant employee, who has been continuously employed for one year or more at the beginning of the 11th week before the expected week of childbirth, will qualify for up to 29 weeks additional maternity leave. An employee with one or more years' service at the effective date of termination of his (or her) employment has the right to pursue a complaint of unfair dismissal. An employee with two or more years' continuous service from the age of 18, has the right to be paid (or to claim) a redundancy payment; and so on.

• In computing an employee's period of continuous employment, any question whether the employee's employment is of a kind counting towards a period of continuous employment or whether periods (consecutive or otherwise) are to be treated as forming a single period of continuous employment, is determined week by week.

• But, where it is necessary to compute the length of an employee's period of employment in order to determine whether he (or she) qualifies for a statutory right which is dependent on a period of continuous employment, different rules apply, as is explained later in this section under the headings: When does a period of continuous employment begin? and And when does it end?

Weeks that count

• Every week during the whole or part of which an employee's relations with his (or her) employer are governed by a contract of employment counts in computing that employee's period of employment (ibid. section 212(1)). It follows that the continuity of an employee's period of employment with the one employer is not broken if the employee is re- employed by that same employer (whether in the same or a different job) during the week immediately following the week in which his previous employment ended - even if the employee has worked (albeit briefly) for another employer in the days preceding his re-employment (per Sweeney v J & S Henderson (Concessions) Ltd [1999] IRLR 306 (EAT)).

• Under normal circumstances a week which does not count in the computation of a period of employment breaks the continuity of that period of employment. If, for example, the employee in the previous paragraph had not been re-engaged by his former employer for a further week, the continuity of his period of employment with that employer would have been broken. However, as is explained later in this section, there are circumstances in which an interval of more than one week between two consecutive periods of employment with the same employer will nonetheless be treated as part of an employee's total period of continuous employment with that employer.

  Note

  The continuity of a period of employment will be broken if an otherwise legal contract is performed illegally (eg, by a fraud on the Inland Revenue) (Napier v National Business Agency Limited [1951]2 All ER 264) unless the employee was unaware, for example, that his (or her) employer had been acting unlawfully (Newland v Simons & Willer (Hairdressers) Limited [1981] ICR 521).

Weeks that do not count but do not break continuity

• Any week, during the whole or part of which an employee takes part in a strike, must be discounted when computing the employee's total period of continuous employment. However, the loss of that week does not destroy the continuity of that period of employment. See also Industrial disputes below.

• Weeks during the whole or part of which an employee works (or worked) outside Great Britain ordinarily count as part of that employee's total period of continuous employment, except in the case of a week (or part week) in which the employee was not an employed earner for the purposes of the Social Security Contributions & Benefits Act 1992 in respect of whom a secondary Class 1 National insurance contribution was payable under that Act (whether or not the contribution was in fact paid). In the latter situation, the week or weeks in question do not break the continuity of a period of employment but do not count as part of the employee's total period of continuous employment.

When does a period of continuous employment begin?

• To determine whether an employee has been continuously employed for a period sufficient to qualify for one or other of his (or her) statutory rights under the Employment Rights Act 1996, his period of continuous employment begins with the day on which he first started work with his employer and ends with the day by reference to which the length of his period of continuous employment falls to be ascertained (but see Industrial disputes below).

• This rule applies to all statutory employment rights which are dependent on a period of continuous employment, except in relation to an employee's right to a statutory redundancy payment. In the latter instance, any employee who started work with his (or her) employer before his 18th birthday is deemed to have started work on that 18th birthday (ibid. section 211(2)).

And when does it end?

• A period of continuous employment will end on the effective date of termination of the employee's contract of employment. For the meaning of effective date of termination
  
  However, continuity will be preserved if an unfairly dismissed employee is reinstated or re-engaged by his former employer (or by an associated or successor employer) at the direction of an employment tribunal.
  
  Section 210(5) of the 1996 Act cautions that 'a person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous'. This means that, when confronted with a tribunal situation, an employer must be prepared to produce evidence to support his (or her) assertion that the applicant employee (the complainant) had not been continuously employed for a period sufficient to qualify him (or her) to pursue a complaint of unfair dismissal before an employment tribunal or to lay claim to a particular statutory right (such as a redundancy payment or any other statutory right that he claims has been denied him).

• To pursue a complaint before an employment tribunal concerning an alleged breach of one or other of his (or her) statutory rights, an employee must complete Form IT1 (Originating Application to an Employment Tribunal) and send it to his (or her) nearest regional (ROET) or other office (OET) of the employment tribunals explaining the nature of his (or her) complaint. Within a week or two, a copy of that form will be forwarded to the employer (as well as to ACAS) together with Form IT3, inviting him (or her) to respond to the employee's complaint. It is at this point that the employer must be prepared to refute the employee's contention that he had (or has) been continuously employed for a period sufficient to qualify him for the right he now claims has been denied him. If the employer neglects to do so (either at this stage or at the subsequent tribunal hearing), the tribunal will proceed on the assumption that the disputed period of employment was continuous.

Circumstances that do not break continuity

• There are circumstances in which continuity of employment is not broken even though an employee's contract of employment has come to an end:

  • If an employee has been dismissed (or has resigned) on grounds of ill-health, his (or her) intervening period of absence will be treated as part of his total period of employment if, but only if, he is reinstated or re-engaged by the same employer within 26 weeks of the date on which his employment under his previous contract came to an end (the 'effective date of termination') (ibid. section 212(3)(a)).

  • If, on the other hand, an employee is dismissed on account of a temporary cessation of work, or in circumstances such that, by custom or arrangement, he (or she) is regarded as continuing in the employment of his employer (eg, seasonal workers), continuity of employment will be preserved if, at some later date, he is re- employed or reinstated by the same (or an associated) employer (ibid. section 212(3)(b) and (c)). Thus, if a factory is destroyed by fire and the workforce is necessarily dismissed pending rebuilding, the intervening period of interruption of employment will ordinarily count as a period of employment, notwithstanding that some or all of the workforce may have accepted work elsewhere while waiting to return to their original jobs (see Bentley Engineering Co Ltd v Crown & Miller [1976] ICR 225 when employment was interrupted in similar circumstances for 21 months and two years, respectively, without loss of continuity). See also the decision of the House of Lords in Ford v Warwickshire County Council [1983] ICR 273.

• In contentious cases, it will be (as always) a matter for the tribunals and courts to determine whether a break in employment preserves the continuity of a period of employment. In Ingram v Foxon [1984] ICR 685, it was held that an agreement between an employer and a returning employee - that the interval between the latter's dismissal and subsequent re-employment would form part of the employee's total period of continuous employment - could be categorised as an 'arrangement or custom' sufficient to bind the employer to that agreement. That decision was disputed by the EAT in Morris v Walsh Western UK Limited [1997] IRLR 562 and rejected by the EAT in Collinson v British Broadcasting Corporation [1998] IRLR 238 (EAT). In short, the concept of 'continuity of employment' is a statutory concept, and not one that can be vitiated by a compromise agreement or any other form of agreement between an employer and an employee. See also Reinstatement or re-engagement below.

Special provisions for redundancy payments

• The continuity of a period of employment is broken - but only for redundancy qualification and payment purposes - if an employee who has been paid a statutory redundancy payment is subsequently re- engaged by his (or her) former employer in circumstances which do not otherwise destroy continuity. This means that, although continuity is preserved for all other purposes - qualifying periods for unfair dismissal, additional maternity leave, notice, etc - the re-engaged employee will not again qualify for a redundancy payment until such time as he again satisfies the prescribed qualifying conditions for such a payment (in terms of length of service and age) (ibid. section 214).

  Note

  In Rowan v Machinery Installations (South Wales) Limited [1981] ICR 386, and again in Ross v Delrosa Caterers Limited [1981] ICR 393, it was held that section 214 of the 1996 Act applies to a statutory redundancy payment (as defined in section 162 of the 1996 Act). It does not apply to a severance or other form of 'redundancy payment' which an employer is not legally required to make.

• The same rule applies when an employee, who has previously been paid a statutory redundancy payment, is reinstated or re-employed by his employer (or by a successor or associated employer):

  1. following the intervention of an ACAS conciliation officer (and the conclusion of a COT 3 agreement); or

  2. as the result of a relevant compromise agreement; or

  3. as the result of an 'arbitral agreement' delivered by an independent arbitrator under the ACAS Arbitration Scheme; or

  4. in compliance with a tribunal order for reinstatement or re-engagement (see below).

  However, continuity will be preserved for all purposes (including entitlement to a statutory redundancy payment) if the terms on which the employee is reinstated or re-engaged include a provision that the employee repay the amount of any statutory redundancy payment previously paid to him (or her) - so long as the employee complies with that provision (ibid. section 219 as modified by the Employment Protection (Continuity of Employment) Regulations 1996).

Industrial disputes

• The continuity of a period of employment is not destroyed when an employee takes part in a strike (or is absent from work because of a lock-out). However, the number (or aggregate number) of days lost through strike action (or a lock-out) must be discounted when computing an employee's total period of continuous employment for the purpose of establishing his or her right (or otherwise) to one or other of the statutory employment rights listed in the 1996 Act. The date on which the employee's period of employment actually began must then be treated as postponed by the number of days in question (ibid. sections 211(3) and 216).

• For example, unless dismissed for an inadmissible or unlawful reason, an employee will not qualify to present a complaint of unfair dismissal to an employment tribunal if he (or she) had not been continuously employed for one calendar year or more at the effective date of termination of his contract of employment. When calculating an employee's period of continuous employment for this purpose (perhaps in response to a Form IT3), the respondent employer will first need to establish the number of days (if any) during which the employee took part in a strike or was absent from work because of a 'lock-out' - counting the number of days (in each case) between the last working day between the day on which each strike or lock-out began and the day on which the employee returned to work. If these add up to, say, five days, the employer must then treat the date on which the employee first started work as postponed by that same number of days. If the employee in question started work on 3 May 1999, he will be treated for these purposes as having started work on 8 May 1999. If his employment ended on 5 May 2000, he will not have completed the necessary one calendar year's service and will have forfeited his right to challenge the fairness of his dismissal before an employment tribunal.

Reinstatement or re-engagement

• If an employer (or a successor or associated employer) complies with a tribunal or court order to reinstate or re-engage an unfairly dismissed employee, the period of the employee's absence from work (ie, from the time his (or her) employment ended to the date on which he was reinstated or re-engaged) will count as part of his total period of continuous employment (ibid. section 219 and regulation 3 of the Employment Protection (Continuity of Employment) Regulations 1996 (qv)).

• In a situation involving an unfair redundancy dismissal, the continuity of employment, otherwise broken for redundancy qualification and payments purposes, will be re-established for those and all other purposes if the terms on which the employee is to be reinstated or re- engaged include a provision that the employee repay the amount of any statutory redundancy payment paid to him (or her) by his employer at the time of his dismissal, so long as the employee complies with that provision (ibid. sections 214 and 219, and regulation 4 of the Employment Protection (Continuity of Employment) Regulations 1996 (qv)). See also Special provisions for redundancy payments earlier in this section.

Continuity and a change of employer

• A change of employer does not break the continuity of a period of employment if the employer's business is acquired by, or transferred to, another owner or employer; or if the employer dies and his personal representatives or trustees continue to run the business; or if there is a change in the partners, personal representatives or trustees; or if the employee transfers from one employer to another when, at the time of the transfer, the two employers are associated employers (ibid. section 218).

• Two employers will be treated as associated 'if one is a company of which the other (directly or indirectly) has control, or if both are companies of which a third person (directly or indirectly) has control; and associated employer shall be construed accordingly' (section 231, Employment Rights Act 1996). A successor employer in relation to an employee, means a person who, in consequence of a change occurring (whether by virtue of a sale or other disposition or by operation of law) in the ownership of the undertaking, or of part of the undertaking, for the purposes of which the employee was employed, has become owner of the undertaking or part (ibid. section 235(1)).

Transfer of undertakings

• Under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981, as amended, an employee's contractual rights are safeguarded when the company (organisation or business) for which he (or she) works is sold or transferred as a going concern to another employer. This means that the new owner inherits the contracts of employment of the persons employed by the former owner immediately before the transfer or sale took place. He (or she) cannot pick or choose which employees to take over. They all go with the business - unless an employee makes it known, either to his existing employer or to the new owner, that he objects to becoming employed by the new owner. If this happens, there is no dismissal in law and the employee has no grounds for pursuing a complaint of unfair dismissal against either his former employer or the new owner of the business (ibid. regulations 5(4A) and (4B)).

• If the original employer dismisses one or more of his (or her) employees simply because he has sold (or is in the process of selling or transferring) his business (or in order to strike a better deal with the prospective purchaser), that employee will be treated in law as having been unfairly dismissed - unless the employer can show that the dismissal was for 'an economic, technical or organisational [ETO] reason entailing changes in the workforce'. The same applies if the new owner or employer sets about dismissing one or other of the employees he has inherited, unless he too can justify the dismissals in ETO terms. However, an employee dismissed in these circumstances will not qualify to pursue a complaint of unfair dismissal unless he (or she) had been continuously employed for one year or more at the effective date of termination of his contract of employment (ibid. regulations 5 and 8).

• It follows that the transfer or sale of an undertaking (company/partnership, business firm, or franchise) does not break the continuity of employment of the persons employed in that undertaking before the transfer or sale occurred. Indeed, section 4 of the 1996 Act imposes a duty on the new employer to issue a written statement to each of those employees giving his or her name (ie, the name of the employing organisation) and the date on which the employee's period of continuous employment began ('taking into account any employment with a previous employer which counts towards that period'). That written statement must be issued 'at the earliest opportunity and, in any event, not later than one month after the change' to which it refers.