Founder's unfair dismissal claim struck out: no continuous employment before TUPE transfer
A former CEO who founded the business could not show he was an employee of the transferor company, so his unfair dismissal claim was struck out for lack of continuous service.
1 min read · Last updated 19 May 2026
Case details
- #tupe-transfer
- #employee-status
- #director-as-employee
- #continuous-employment
- #strike-out
Key facts
- The claimant founded Awesome Merchandise in 2005 and was a director and majority shareholder of Awesome Merchandise Limited (AML).
- AML went into administration on 25 August 2022 and its assets were purchased by the respondent in a pre-pack sale.
- The claimant never had a written contract of employment with AML and was removed from its payroll in January 2018.
- The claimant was paid by a US subsidiary from 2018 until after the transfer.
- The claimant signed a new employment contract with the respondent starting on 25 August 2022.
- The claimant's ET1 initially stated his employment started on 25 August 2022, and he only later claimed TUPE transfer.
Timeline
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Business founded
The claimant founded Awesome Merchandise as a sole trader.
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AML incorporated
Awesome Merchandise Limited (AML) was incorporated.
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Removed from AML payroll
The claimant was removed from AML's payroll and began being paid by the US subsidiary.
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Respondent incorporated
Print .Inc Group Limited was incorporated with the claimant as sole director and 75% shareholder.
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Board meeting and new contract
At a board meeting, it was resolved to enter into an employment contract with the claimant, and his father was appointed director.
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TUPE transfer
AML went into administration and its assets were sold to the respondent. Employees transferred under TUPE, but the claimant was not included.
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New employment started
The claimant began being paid under his new contract with the respondent.
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Starter information submitted
The claimant provided new starter information to HMRC, declaring this was his first job since 6 April.
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ET1 issued
The claimant issued a claim for unfair dismissal, stating his employment started on 25 August 2022.
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TUPE assertion first made
The claimant first asserted that he had transferred under TUPE, after a strike-out warning.
The legal issue
Whether the claimant was an employee of the transferor company immediately before the TUPE transfer and assigned to the part that transferred, so as to have continuous service for an unfair dismissal claim.
The outcome
The tribunal struck out the unfair dismissal claim at a preliminary hearing.
The founder could not prove he was an employee of Awesome Merchandise Limited (AML) before the transfer. He had no written contract, was removed from AML's payroll in 2018, and was paid by a US subsidiary from then on. His own ET1 initially stated his employment started on 25 August 2022, and he only later claimed TUPE transfer after a strike-out warning.
No compensation was awarded as the claim was struck out.
Lessons & takeaways
- If you are a director or founder, ensure you have a written contract of employment and are on the payroll to prove employee status.
- A TUPE transfer only preserves continuity if you were an employee of the transferor immediately before the transfer.
- Your own initial claim form can be used against you if it contradicts a later assertion of continuous service.
- Being a director and shareholder does not automatically mean you are an employee for employment law purposes.
This case shows the importance of formal employment documentation, even for founders and directors. The claimant, a former CEO and entrepreneur who founded the business in 2005, argued that he transferred to the new company under TUPE when the business was sold out of administration. However, he had never had a written contract of employment with the original company and had been removed from its payroll years before the transfer.
What the tribunal looked at
The tribunal had to decide a preliminary issue: was the claimant an employee of the transferor company immediately before the transfer? The burden was on him to prove it. The evidence showed that from 2018 he was paid by a US subsidiary, not the UK company. He also initially told HMRC and the tribunal that his employment started on the date of the transfer, not before. The tribunal found his later claim of continuous service since 2009 was unsupported by documentary evidence.
What could have been done differently
If the founder had maintained a written contract and remained on the UK payroll, even as a director, he might have been able to show employee status. Instead, his informal arrangement left him without the protection of continuous service. The case is a reminder that employment rights depend on legal status, not just the role a person performs.
Why this matters
The result means the claimant cannot pursue his unfair dismissal claim because he did not have the two years' continuous service required. For others in similar positions — particularly founders or directors of small companies — the case highlights the need to formalise employment arrangements if they want to rely on employment rights like unfair dismissal.
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