TUPE: information and consultation

Following a recent run of seemingly odd outcomes in TUPE cases, we are pleased to report that this month the Employment Appeal Tribunal has handed down a refreshingly clear and useful decision on how the consultation requirements under TUPE operate.  Specifically, the EAT looked at whether an employer is required to undertake consultation if a proposed transfer does not go ahead; and also whether employees in a part of an organisation which does not transfer are ‘affected’ by the transfer and are, therefore, entitled to be included in the consultation.  Sarah Lamont unpicks the detail.

The background

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) employers must inform and consult appropriate representatives of “affected employees” before the transfer in question takes place.  Specific prescribed information must be provided to employees “long enough before the relevant transfer to enable the employer of any affected employees to consult the appropriate representatives.”

‘Affected employees’ are defined in TUPE as those employees of the transferor or transferee who “may be affected by the transfer or may be affected by measures taken in connection with it.”

In I Lab Facilities v Metcalfe, the Employment Appeal Tribunal had to

• identify which employees were ‘affected’ by the transfer within the meaning in TUPE (and therefore in scope for the consultation exercise) and
• consider whether an employer could be liable for a failure to inform and consult, if the proposed transfer does not go ahead.

The facts

The claimants in this case were employed by ILab (UK) Limited (ILUK), a company which provided services to the film industry. Initially, it undertook ‘rushes’ work – producing rough-and-ready first versions of films, typically overnight, for immediate consideration by the client.  Subsequently, ILUK merged with another company called RKT, which specialised in post-production work – this type of work is also concerned with filmed material but the work is less immediate, with one consequence of that being that most of the work is done during the day.

While there was a degree of overlap and pooling of resources between the two businesses, they remained distinct after the merger: the original rushes staff and the post-production staff worked at different premises, doing different kinds of work, at different hours.

Shortly after the merger, ILUK got into financial difficulties and sold the rushes business to a third party company.  The post-production side of the business was closed down by the liquidator.

Initially it had been hoped that some of the post-production work would be taken on by the successor company which bought the rushes business, and the post-production employees were informed that some of them would be re-hired on new contracts. However, the situation changed and, ultimately, none of the post-production employees were transferred.

The claimants were all employed in the post-production business and brought an employment tribunal claim, on the basis that ILUK was in breach of its obligation to inform and consult under TUPE.

An employment tribunal upheld the claims, awarding the maximum protective award i.e. 13 weeks’ actual pay per employee.  The employment tribunal decided that the employees in question were ‘affected’ by the transfer because they had been excluded from it, and had been told that they were going to transfer. 

ILUK appealed.

The decision

The Employment Appeal Tribunal (EAT) overturned the tribunal's original decision and ruled that the post-production employees were not "affected" by the transfer and the obligation to inform and consult did not arise.

Although the EAT acknowledged that it is possible for the sale of part of a business to have an impact on the remaining part – for example, if the remaining employees did some of their work for the transferring part of the organisation.  But, that is not to say that employees are affected by a transfer simply because the transfer has left the remaining part of the undertaking less viable. In this case the transfer had no direct impact on the post-production employees and, consequently, no obligation to inform and consult those employees arose.

In the second part of its decision, the EAT also rejected the argument that the obligation to inform and consult arises wherever there is a proposal for a transfer, even if that transfer does not go ahead.

Because information and consultation must start "long enough before" the transfer to enable meaningful consultation to take place, the EAT felt that it could never be said definitively that the employer is in breach of their obligation until a transfer has occurred.  So, unless a relevant TUPE transfer has occurred, it is not possible for an employee to bring a claim alleging an employer’s failure to inform and consult under the TUPE Regulations.

What does this mean for me?

This decision provides useful and clear guidance that the information and consultation requirements under TUPE will not bite unless a transfer actually takes place.  Proposed transfers that do not go ahead, or which are postponed, will not be covered.

Note, however, that the EAT did draw a distinction between consultation under TUPE (for which an actual transfer is needed) and the consultation requirements where more than 20 employees are at risk of redundancy - in which case the consultation requirement arises at the ‘proposal’ stage and the obligation to consult remains, even if the redundancies do not go ahead.

The EAT has also clearly established that employees in a retained part of an organisation are not automatically ‘affected’ by the transfer, as defined by TUPE – even though it might have an effect on the them (in the ordinary sense).  A note of caution should, however, be sounded here: the EAT noted that employees in a non-transferring part of an organisation may well be affected by the transfer within the meaning of TUPE – for example, if employees in the remaining organisation are put at risk of redundancy because of transfer of part of the business, or if they have a job application pending in the transferring organisation.