TUPE Tuesday: Information and Consultation claims

Hello and welcome to our TUPE podcast series.

To round up this year of TUPE Club, we've put together a series of mini podcasts, which we will be releasing every Tuesday for the next four weeks. Each podcast will bring you up to date on one of the key appeal level TUPE cases and, in the final podcast, we'll look at what developments might be coming down the tracks in 2023.

I'm Siobhan Bishop, a Principle Associate in the Employment, Labour & Equalities Team here at Gowling WLG and this is the first in a mini-series, and we'll keep going until 6 December. The first three will look at just one key case from the Employment Appeal Tribunal.

This week, I'm looking at a case on Information and Consultation under TUPE. In the second week we'll cover a case on service provision changes and whether the activities pre and post transfer were fundamentally the same. In the third week, we'll cover the issue of providing a share incentive plan post transfer, even where there is no contractual right to participate in the scheme and finally, in the fourth week, we'll look at what's coming down the tracks (Retained EU Law (Revocation and Reform) Bill 2022-23).

At the end of our TUPE Tuesday series, you'll be up to date with the key TUPE developments this year and ready to watch out for new developments next year. As always, if you have any questions, please get in touch with us.

So, for the first week, we're looking back at a case where the Employment Appeal Tribunal looked at TUPE Information and Consultation claims and the use of a COT3.
So, this was the case of Clark v Middleton. And the background facts of this case are a little unusual in that this was an animal hydrotherapy business, which had been run by a sole trader. The sole trader decided to retire and one day later transferred the business to a company, which was operated by another individual, who had been her employee.

Before the transfer, there had been some discussion about the retirement of the original sole trader, however, no-one told Ms Clarke that a new Transferee company would be intending to make contractual changes following the transfer. When Ms Clarke found this out, which wasn't until after the transfer, she resigned.

Ms Clarke brought a claim against the original sole trader, the Transferor, in relation to a failure to inform and consult over measures envisaged by the Transferee. She also brought claims against the Transferee for unpaid wages, holiday pay and unfair dismissal.

However, ultimately the Claimant withdrew her claims against the Transferee following an ACAS settlement (with the Transferee) which covered the Transferee's failure to provide information to the Transferor on the proposed measures following the transfer.

Looking at the withdrawal wording, it said:

"…the Claimant's claims against the Transferee are no longer being pursued and are hereby withdrawn. We would have no objections to all claims against the Transferee under [the relevant case number] being dismissed. The Claimant's claim against Transferor is still being pursued."

So, let's just remind ourselves of the relevant TUPE issues?

Under TUPE, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE):

• The Transferor employer must inform employee representatives about any measures that it envisages the Transferee will take in relation to the transferring employees in connection with the transfer and that's set out in regulation 13.
• Of course, in order to do that, the Transferor must have that information and the Transferee must provide that information about the measures it envisages taking after the transfer. The Transferee must give the Transferor this information with enough time to allow the Transferor employer to perform that obligation and tell those representatives about the measures (reg 13(4)).
• If the Transferee does not give this information, the Transferor employer will have a defence to a claim for breach of that obligation in respect of consulting on the information which the Transferee failed to provide (reg 13(4)). However, if the Transferor wants to rely on that defence, it must give notice of that defence to the Transferee. When the Transferor gives the Transferee that notice, that automatically makes the Transferee a party to the case. And following that, the tribunal can then order the Transferee to compensate the employees appropriately (under reg 15(5)).

So what happened at the first stage at the Employment Tribunal?

When the claim against the Transferor was heard, the tribunal found that there had been a failure to inform and consult.

However, the Transferor succeeded in its defence under reg 15(5) (the Transferee failed to provide the information) and so the award of liability was instead made against the Transferee (reg 15(8)).

Nevertheless, the remedy for failure to inform and consult that passed to the Transferee was, in this case, covered by the agreed settlement of "all claims" against the Transferee, including this contingent claim.

This was following an ACAS conciliation; Ms Clark had settled all claims against the Transferee.

The Transferor did not know that there would be a transfer to a limited company in this case and this is what she should have informed Ms Clark about. The Employment Tribunal however said that this was a technical breach because there was a late incorporation of the Transferee Company and Ms Clarke probably knew about it anyway.

And therefore, the Tribunal made no award against the Transferor and even though the claim could have been brought against the Transferee, as claims against the Transferee had been withdrawn (following the COT3 settlement through ACAS) and it was not appropriate to make an award against the Transferee.

There was an appeal to the Employment Appeal Tribunal.

And the EAT ultimately decided that:

• A claim that a Transferor failed to inform/consult under regulation 13 before the transfer, can only be brought against the Transferor;
• There is no freestanding claim against the Transferee, even though it's the Transferee's failure to provide the required information, which resulted in the Transferor's breach under TUPE (under regulation 13(4));
• At the relevant time, Ms Clark was employed by the Transferor and only that Transferor had a duty to comply with regulation 13;
• The EAT did say that the Tribunal had been correct to find that because the Transferee had been released from the proceedings (because of the settlement with ACAS and COT3), no award could be made against the Transferee.
• However, the identity of the Transferee is of fundamental importance to an employee, and so it was not merely a technical breach and the employment tribunal was wrong to not make an award because of that failure.

So, here there was a claim against the Transferor for failure to notify the transferring employee of the identity of the Transferee company (rather than the individual who set it up). This was not a mere technicality and the ET was wrong to award nothing for this breach.

The name and identity of the unique legal person who will be the employer does matter. The duty to notify an employee (or usually their appropriate representatives) of the fact that a transfer is to take place (under regulation 13(2)(a)) includes notifying the identity of the Transferee, including, if it is a limited company, the name of that company.

And the result was that (a different) employment tribunal will have to revisit this issue and decide the remedy.

So in conclusion here, even though there was an ACAS settlement and a COT3 was used in this case, the principle would also apply to a Settlement Agreement.

The key thing to remember is that where parties are settling claims, they need to take care with the description of the claims being settled.

Even where, as in this case, it is known that the new employer is likely to be a newly-formed company, and who its owner will be, it is still key to know the name and identity of the unique legal person who will be the employer.

In particular, the Employment Appeal Tribunal confirmed that the duty to notify employees (or usually their appropriate representatives) of the fact that a transfer is to take place includes notifying them of the precise identity of the Transferee, including, if it is to be a limited company, the name of that company.

So it's a case of getting your facts right and being careful that your description of any settlements are wide enough to include all possible claims, including contingent claims.

Thank you for joining us this week and please join us again next week for our second "TUPE Tuesday" podcast where we'll look at a case on the difficult issue of a service provision change and when the activities pre and post transfer are fundamentally the same. In the meantime, if you have any questions, please do contact one of the team. Thank you.