Service Agreement Fails to Terminate Employee Shareholder Status

Curzon Green’s London Employment Lawyers were instructed in the first (and quite possibly the last) appellate judgment on employee shareholder status under S.205A of the Employment Rights Act 1996.

Employee shareholder status was a form of employment status in force between 1 September 2013 and 1 December 2016. It allowed employees to give up some of their employment rights (such as a statutory redundancy payment or to bring a claim for unfair dismissal) in exchange for shares in their employer’s company. The Appellant in this case, along with other senior members of the New Look management team, became an employee shareholder in 2015. Employee shareholder agreements were executed following assurances by New Look that they would gain tax advantages, and that once the tax advantages had been realised the employment protections would be reinstated. Over the next 3 years the Appellant’s employment terms were varied upon a number of promotions and a new directors’ service agreements were executed by the management team in 2017. None of these contractual variations explicitly gave him (or his fellow directors) back the employment rights signed away for the tax benefits of employee shareholder status in 2015, even though their “entire agreement” clauses indicated to the Appellant that any previous agreement(s) would be superseded.

The EAT accepted that in principle, legally, employee shareholder status may be terminated if the parties enter into a subsequent inconsistent contractual arrangement. However, on the facts in this case (as decided by the Tribunal) the subsequent service agreement was not inconsistent with employee shareholder status and the Appellant cannot bring a claim against New Look for unfair dismissal following his termination as its Managing Director UK & ROI and Interim CEO, accordingly.