In the end of April The Employment Appeal Tribunal (EAT) has handed down an interesting decision about the obligations of the employer to consult over a TUPE transfer where part of an insolvent business is sold as a going concern, but the other part of the business is not and the employees in that part of the business are consequently made redundant.
The case involved a company providing services to the film industry. The company provided two distinct services and there was little crossover between the two different groups of employees assigned to the two different services. Upon insolvency, the ‘viable’ part of the business (one service) was sold as a going concern while the other part was liquidated.
The employees of the part of the business that was liquidated brought a claim for breach of Regulation 13 of TUPE (the duty to inform and consult). They argued that they were ‘affected employees’ in connection with the TUPE transfer, as at an early stage, their part of the business too was subject to discussions over acquisition. In addition, they argued that the sale of the other part of the business (which everyone accepted was a TUPE transfer) effectively sealed their fate and resulted in their dismissals.
This argument succeeded at the Employment Tribunal. However, the EAT held that the claimants were not ‘affected employees’ within the meaning of Regulation 13 (1). The EAT concluded that their dismissals flowed not from the sale of the other part of the business but from the liquidation of their part of the business. Consequently the obligation to inform and consult under Regulation 13 was not triggered in this case.
Perhaps the more interesting aspect of the judgment was the additional finding of the EAT that, in any event, the duty to inform and consult with this group of employees was not engaged because, in the end, they were not subject to a TUPE transfer. On a fair reading of the relevant Regulations, this conclusion appears to be inescapable.
Therefore, where a proposed transaction to which TUPE is likely to apply falls through before completion, the effect is that the transferor and transferee will be treated in law never to have had any obligation to inform and consult with the affected employees, regardless of how deficient the consultation process may have been.
The judgment also acknowledged the possibility that parties who discover they have not complied sufficiently with the TUPE Regulations in respect of information and consultation might agree to delay the completion of a transaction, in order to comply with their obligations.
It is important to recognise that this contrasts sharply with the position in relation to collective redundancy consultation, where the obligation to consult is triggered by the proposal of 20 redundancies or more at one establishment within a 90 day period, regardless of whether the redundancies are actually carried out or not.
(Case name: I Lab Facilities Ltd v Metcalfe & Ors (Transfer of Undertakings : Consultation and other information)  UKEAT 0224_12_2504 (25 April 2013)
Full case can be found here.