In the context of a wave of strikes across government workers and simultaneous departmental reshuffles, mergers and abolitions the question may be more than an academic one but I am intentionally not going to discuss that issue as it may confront civil service unions (which would also no doubt include consideration of section 244(2) of the Trade Union and Labour Relations (Consolidated) Act 1992 (the 1992 Act), an issue unique to them rather than would apply to most unions.

The simple answer to the broader question is I don’t know, but you can well imagine any successor employer could think this is fertile ground upon which to seek an injunction against a planned strike.

Central to the issue is section 244 which defines the meaning of a trade dispute. Section 244(5) sets out who is a relevant worker for the purposes of the section:

A hypothetical

So let us expand this example with a hypothetical scenario. I acknowledge this scenario is very unlikely but is simplified for the sake of the key issue.

An employer, ABC Ltd, employs an unionised workforce and they have a dispute about work practices – they ballot and the union receives a mandate for industrial action. The directors of ABC Ltd take it upon themselves to establish a new company, ABC (Phoenix) Ltd, which has the same exact same structure. The directors of ABC Ltd then transfer all workers to the employment of ABC (Phoenix) Ltd on exactly the same terms and conditions of employment and except for the name change the company remains identical to the structure, scope, management, and operations of ABC Ltd. ABC Ltd (being a company that is not insolvent and had no creditors) thereupon dissolves and ceases to exist.

Still aggrieved at the working conditions the union presses ahead and serves the directors of ABC (Phoenix) Ltd with notice that it will commence industrial action based on the unquestionable trade dispute and authority for industrial action obtained within the now non-existent ABC Ltd.

Faced with that strike notice the “new” ABC (Phoenix) Ltd seek to injunct the union from striking because the mandate was for a strike against a different employer to them, namely ABC Ltd. The (new) employer would effectively be arguing that the union was seeking to impermissibly pierce the veil of incorporation and transfer a trade dispute and mandate from one employer to an entirely different one.

On the black letter law, the point there is little argument that at the point the strike notice is issued the workers are not employed by ABC Ltd since ABC (Phoenix) Ltd while effectively the same is a different legal personality. Similarly, the concept of “termination” would appear to be inconsistent with the transfer of employment.

What have courts decided in the past?

Something like this issue has been previously considered by the Courts. And in my reading of these cases, it seems likely that any such challenge would be ineffective and the union could quite properly pursue its trade dispute with ABC (Phoenix) Ltd.

In 1977 something similar to our example was considered by the Court of Appeal (Examite Ltd v Whittaker) and, in something of a shock, Lord Denning ruled for a union! At the time the legislation was the Trade Union and Labour Relations Act 1974 but the actual material text remains unchanged regarding workers and employers.

A company called Baldwins Industrial Services was in dispute with a union and an official strike commenced, which brought the company to a standstill. At this time a new company was incorporated (Examite Ltd) and took over the Baldwins business, and also some of its former employees. These transferred employees continued their industrial action in the new employer (now a Ltd company). Examite sought (and obtained) an injunction against the strike (pending the conclusion of the proceedings). The union appealed to the Court of Appeal. In the key passage, Lord Denning concluded that

The defendants’ action was a continuance of the existing trade dispute with Baldwins and therefore protected under s.13 of the Trade Union and Labour Relations Act from actions in tort. The words “employers” and “workers” in s.29 of that Act apply to employers whatever the particular hat those particular employers may wear from time to time. In cases involving trade disputes, the court ought to pull aside any curtain over limited companies and see what the real truth is. In the present case, the real truth was that the business of the employers was being carried on by virtually the same people both before and after the plaintiff company was formed.

Examite Ltd v Whittaker [1977] IRLR 312

Although unsuccessful employers clearly thought this was a good option and something similar occurred in The Marabu Porr [1979] 2 Lloyd’s Rep 331. In that case, a shipping company in dispute arranged for a different company to pay and employ under a different flag of convenience. The workers still sought to pursue industrial action and the employer sought an injunction. The Court of Appeal found that the separation between ’employers’ was an artificial one and that therefore the dispute was with both ’employer’ parties.

In both cases, the Court of Appeal found that where the different employer is a sham arrangement to avoid an industrial dispute then a liberal interpretation of “employer” is required (the discussion in Shipping Company Uniform Inc v International Transport Workers’ Federation (1985) is helpful summarising this ‘sham avoidance’ principle in industrial relations matters, albeit the decision went against the union in that case).

In an arguably less helpful case, in Dimbleby & Sons Ltd v NUJ (1984) which was a House of Lords case and one that, strangely did not consider either of the above judgments, the Court found that a dispute with a parent company did not (on the facts) extend to a subsidiary company where the reason was untainted by sham.

What has changed since then is the passing of the Human Rights Act 1998 and the obligation to interpret legislation to give effect to human rights, notably article 11 ECHR. It is already the case that the UK restrictions on the right to exercise industrial action are at the very margins of the State’s margin of appreciation (RMT v UK) – it seems that that factor, over and above the sham employer decisions in Whittaker and Marabu Porr would give a union a good basis for resisting an attempt to injunct strike action. Where the new employer is not tainted by sham and a bona fide transfer then the position would be much less tenable, but then, it would be a rare case that a strike would still be viable in that circumstance without refreshing a mandate anyway.


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