If a share incentive plan is not in an employee’s contract, can the benefit of it transfer under TUPE?
Yes, held the EAT in Ponticelli UK Ltd v Gallagher.
The Claimant joined his employer’s share incentive plan, which was a voluntary scheme not in his contract. His employment transferred under TUPE in May 2020. The new employer refused to provide the Claimant with a plan of ‘substantial equivalence’ to protect his rights under TUPE regulation 4(2), arguing the plan did not arise ‘under’ or ‘in connection with’ his contract. At tribunal, the Claimant sought a reference under s12 ERA 1996 to determine that he was entitled to an equivalent plan, which the tribunal granted.
The EAT upheld the tribunal’s decision, although the plan was not in the Claimant’s contract, it clearly arose ‘in connection with’ it, as part of his broader financial package, and the right to a plan of substantial equivalence transferred under TUPE. The Claimant was entitled to an updated statement of particulars of employment setting out that right as ‘any other benefit’ under s1(4)(da) ERA. Noting the two distinct tests, the EAT made a minor amendment to the tribunal’s decision to reflect that the rights transferred arose from the share incentive plan rather than the contract itself.
The EAT commented on the long-standing and controversial Court of Appeal decision in Chapman v CP Computer Group regarding stock option rights not transferring under TUPE, which was not applicable here - that commentary may be of interest to practitioners.
Thanks to Ed McFarlane for preparing this case summary.