Veils of a different sort have been in the news lately re Jack Straw and others.
In the corporate world courts can only remove a business’s limited status-known as lifting the veil-in very limited circumstances.
One of these is where there exists a sham agreement.
The Employment Appeal Tribunal (EAT) has held in The Print Factory (London) 1991 Ltd v Millam that there needed to be clear evidence of a sham agreement before the corporate veil could be pierced.
Here it was alleged there was a sham company agreement since the parent controlled most of the subsidiary’s activities and the employment tribunal agreed so making the parent liable instead of the subsidiary for dismissing the employee. The tribunal had looked at the fact that 50% of the employee’s work was for the parent ultimately and therefore concluded the employee’s real employer was the parent and not the subsidiary in fact.
However on appeal this was quashed.
The EAT’s view was that it was quite common for subsidiaries to be controlled by the parent and here the subsidiary had its own employees, tax registrations, accounts and assets which all undermined the sham argument.
This decision provides a loophole for TUPE transfers in that sellers can legitimately ensure that employees are employed by another entity to that being transferred.
