The Court of Appeal has recently confirmed that, where an employee fails to object to a TUPE transfer, his employment will transfer to the purchasing company, even in a situation where he has given his notice of resignation prior to the transfer but where such notice expires post transfer.
In the case of Marcroft v Heartland (Midlands) Limited (“Heartland”), Mr Marcroft was employed by PMI, an insurance broker, spending approximately 85% of his time engaged with commercial insurance business. On 15 September 2009 Mr Marcroft submitted his notice of resignation and it was agreed that this notice would expire on 26 October 2009.
On 25 September 2009 Mr Marcroft was advised that negotiations were underway to transfer the commercial insurance arm of PMI’s business to Heartland. Mr Marcroft was never formally consulted about the transfer and he did not raise any objections. It was agreed that Mr Marcroft did not need to attend the office during his notice period as there was very little commercial insurance work to be done but that he would be on call from home. Between 25 September 2009 and 2 October 2009, the date the TUPE transfer took effect, Mr Marcroft did little work save for finalising some accounts and fielding some calls. Mr Marcroft’s notice expired as agreed on 26 October 2009 and, following this, he accepted a job with a competitor. Heartland then tried to enforce restrictive covenants in Mr Marcroft’s contract of employment on the basis that his contract of employment, and therefore the benefit of the restrictive covenants, had transferred to it.
This issue was dealt with at first instance by Manchester County Court. The Judge found that Mr Marcroft had spent the majority of his time working in the commercial insurance section of the business and that, even after handing in his notice and working in a reduced capacity, PMI had remained entitled to rely on him. Accordingly, the Judge found that Mr Marcroft had been assigned to the transferring part of the business. The Judge further found that a failure to properly inform and consult employees about the transfer would not invalidate the transfer taking place. Therefore, it was held that Mr Marcroft’s employment had transferred to Heartland who could then seek to enforce the restrictive covenants.
Mr Marcroft appealed on 2 points; firstly on the basis that, at the time of the transfer, he had only been assigned temporarily to the transferring undertaking and that therefore he was excluded from transferring, and secondly that his right to object to the transfer had not been accommodated by Heartland.
The Court of Appeal accepted that the Judge at first instance had not specifically addressed the issue of temporary assignment but held that, nonetheless, he had considered the relevant facts and had reached the correct decision on this point. The Court of Appeal specifically observed that it cannot be correct that, simply by virtue of handing in his notice, an employee becomes temporarily assigned and so loses the protection of TUPE.
On the second point, the Court of Appeal noted that Mr Marcroft had been informed about the transfer but he had never raised any objection. Furthermore, whilst there is a duty on employers under TUPE to provide its affected employees’ representatives with particular information about an impending transfer, this does not include information about the right to object to the transfer. Most significantly, the Court of Appeal confirmed that failure to inform and consult employees about a TUPE transfer cannot be sufficient to prevent the transfer of the employees’ employment, otherwise the legislative protection of TUPE could easily be circumvented by employers deliberately failing to adhere to the information and consultation regime. Accordingly, the Court of Appeal held that Mr Marcroft’s employment had transferred to Heartland and so dismissed his appeal.
This case serves as a useful reminder to clients, on either side of a TUPE transaction, that those who have given notice of resignation but who are still employed at the time of transfer should not be disregarded when assessing what liabilities will pass.