Who is an “affected employee” for the purposes of TUPE?

The recent case of Unison v Somerset County Council (1) Taunton Deane Borough Council (2) and South West One Ltd (3) has provided some much needed guidance as to who is an “affected employee” for the purposes of a TUPE transfer. Sarah Lamont explains more.

19/01/2010

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Sarah Lamont

Partner

The recent case of Unison v Somerset County Council (1) Taunton Deane Borough Council (2) and South West One Ltd (3) has provided some much needed guidance as to who is an “affected employee” for the purposes of a TUPE transfer. Sarah Lamont explains more.

“Affected Employees”

Regulation 13(6) of the Transfer of Undertakings (Protection of Employees) Regulations 2006 provides that:

"An employer of an affected employee who envisages that he will take measures in relation to an affected employee, in connection with the relevant transfer, shall consult the appropriate representatives of that employee with a view to seeking their agreement to the intended measures."

A key limitation on this duty is that an employer need only consult with ‘affected employees’, not all employees.  Rather unhelpfully, TUPE (Regulation 13(1)) defines affected employees vaguely as:

"…any employees of the transferor or the transferee… who may be affected by the transfer or may be affected by measures taken in connection with it…"

The Department for Business, Innovation and Skills guidance on this area only provides a little more clarity:

"…affected employees might include:

  • those individuals who are to be transferred, 
  • their colleagues in the transferor employer who will not transfer but whose jobs might be affected by the transfer; 
  • their new colleagues in employment with the new employer whose jobs might be affected by the transfer."

The ‘special circumstances’ defence

The only real defence provided for in the Regulations if there was a failure to consult is set out in Regulation 13(9), which provides that:

"If in any case there are special circumstances which render it not reasonably practicable for an employer to perform a duty imposed on him… he shall take all such steps towards performing that duty as are reasonably practicable in the circumstances."

However, as with many of the exceptions to TUPE, the Tribunal has construed this very narrowly.

Consequences of a failure to consult

Failure to comply with this Regulation could mean that a Tribunal awards 13 weeks’ pay to every affected employee.  Unlike many Tribunal awards, the weekly amount is not capped and this penalty could therefore be significant.  It is therefore important to assess who is an ‘affected employee’ so that they can be properly consulted.

Can recent Case Law help?

In the case of Unison v Somerset County Council (1) Taunton Deane Borough Council (2) and South West One Ltd (3) Somerset County Council and Taunton Deane Borough Council decided to transfer some of their administrative work to a new joint venture company, South West One Ltd.  This joint venture company would be controlled and operated by IBM.

A lengthy and, in the view of the EAT, "exemplary" consultation took place between the councils and their employees (including with their union, Unison) about this transaction.  A staffing agreement was reached which applied to the employees who worked in the relevant parts of the two councils (the "in-scope employees").  These employees were given the choice whether to transfer under TUPE, or to remain as employees of the council and be seconded under a retention of employment model.  All but one of the nearly 900 employees elected to remain a council employee.  However, future recruitment by the joint venture company remained a contentious issue.  It was finally agreed that future vacancies at the joint venture company would first be advertised to the in-scope employees.  After this, vacancies would then be open to all other employees of both councils.  Only after vacancies had been offered to the councils’ employees would the positions be advertised externally.

At the eleventh hour prior to completion, the councils and IBM agreed to a slightly vary the agreement in relation to future vacancies.  IBM would now be allowed, after advertising vacancies to in-scope employees first, to recruit externally provided the proportion of council employees seconded to the project remained at 70% or more.  Unison was informed but no further consultation took place.

Unison brought a claim, arguing that the councils (and the joint venture company) failed to comply with the duty to consult in relation to the last minute revisions. Unison contended that these constituted measures taken in connection with the transfer about which there had not been consultation.  The key issue was whether there were any ‘affected employees’ who needed to be consulted.  The rights of the in-scope employees remained unchanged.  It was only council employees who may have wanted to apply for future vacancies who were affected.

Decision

The EAT dismissed the application, concluding that:

"Affected employees" are those who will be or may be transferred or whose jobs are in jeopardy by reason of the proposed transfer, or who have job applications within the organisation pending at the time of transfer. We do not think that the definition extends to the whole of the workforce, nor to everyone in the workforce who might apply for a vacancy in the part transferred at some point in the future.

The EAT found it fairly easy to come to this decision as to include those who may make an application in the future could have unworkable consequences.  Further, such employees were too remote to be properly considered ‘affected’ at the time of transfer.

Despite finding that there was no obligation to consult as the vacancies would still be offered first to in-scope employees, the EAT also found that any lack of consultation by the councils was covered by the special circumstances defence, as set out above.  This provides a rare example of where this defence has been successfully argued. 

The EAT also supported the Tribunal’s view that in the alternative, even if they were wrong about that, they might well have awarded no compensation for what, if anything, were minor failings.

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