I Lab (UK) Ltd, a film and television company, was facing insolvency and consequently considered the sale of the two parts of its business. The sale as initially planned would have resulted in the TUPE transfer of the workforce of both parts of the business. As time went on, it was decided only to transfer one part of the business, with the second part being closed down. The employees in the part of the business which was closed down were dismissed as redundant. However, they subsequently brought claims for breach of the information and consultation obligations under TUPE as it was initially foreseen that they would transfer. Under the joint liability provision, the claim was against the transferee as well as the employer as the employer was by this time insolvent.
In the Employment Tribunal, the employees’ claims that they were “affected employees” and should have been informed and consulted with were upheld. The EAT disagreed and upheld the Respondent transferee’s appeal; the employees were not “affected employees”. There were two reasons for this.
First, the EAT accepted the Respondent’s argument that it was wrong to suggest that the employees “were … affected by the relevant transfer by being excluded from it”. The sale and transfer of one part of the business does not affect the other part of the business. This is the case even where the closure of one part of the business (“B”) can be said to be, in whole or in part, the result of the sale of the other part of the business (“A”) – for example if B had been loss-making and had only been kept afloat by being subsidised out of the profits of A. B’s employees are not in such a case “affected” by the transfer within the meaning of TUPE.
The EAT was keen to stress that they are not to be taken as saying that there can never be an obligation to inform and consult in relation to any employee of the transferor who is not transferred. A proposed transfer may well affect such employees if they do some work in or for the undertaking (or part) whose transfer is proposed (albeit not “assigned” to that part): the loss of part of their work may well affect them. But that is different from saying that they are affected simply because the transfer has left the remaining part of the undertaking less viable.
Secondly, the EAT held that there could be no claim for lack of information and consultation if there was no eventual transfer of the employees proposed to be transferred:
“It is necessary to appreciate that the time at which an employer must comply with the obligations under regulation 13 (2) and (6) is not defined by reference to when he first “envisages” that he will take the relevant “measures”. Rather the obligation is to take the necessary steps “long enough before” the transfer to allow consultation to take place. That being so, it can never be said definitely that the employer is in breach of that obligation until the transfer has occurred. Test it this way. Suppose the day before the proposed transfer the transferor wakes up to the fact that he has failed to inform or consult under regulation 13 and decides to postpone the transfer for (say) a month and to consult in the meantime – and does so. How in such a case could it be said that he had, in the terms of regulation 15 (1), “failed to comply with a requirement of regulation 13”? In our view the scheme of regulations 13-15 means that there can be no complaint of a breach of the obligations under them unless there has indeed been a relevant transfer.”
This decision feels like common sense and has prevented the widening of who is deemed to be an “affected employee” and able to claim under the TUPE information and consultation regulations. This is clearly welcome news for employers with the regulations already being quite burdensome, particularly on large transactions.