Under the TUPE regulations, the transferor must consult with ‘affected employees’ in good time before the transfer takes place. Each individual employee is entitled to compensation if there is a failure to consult, for which both transferor and transferee are jointly liable.
In I Lab Facilities v Metcalfe, one part of a business (Part A) was transferred as a going concern but the other part (Part B) was closed down. The EAT held that the employees in Part B, who were all made redundant, were not ‘affected employees’ and need not have been consulted prior to the transfer.
It is possible for employees to be ‘affected employees’ even if they are not assigned to the relevant undertaking or organised grouping of employees that is transferring. However, in this case, the transfer had no direct impact on the employees in Part B. Their jobs were in jeopardy because that part of the business was closing down, not because of the proposed transfer.
Point to note –
- Unhelpfully for employers, the EAT said that it cannot be determined with complete certainty whether an employer is in breach of the obligation to consult until after the relevant transfer has occurred. In this case, the Part B employees were initially consulted because the original plan was to sell off both parts of the business together. However, when the plan changed, they ceased to be ‘affected employees’.
- As liability for compensation is joint and the tribunal cannot apportion it between transferor and transferee, transferee employers could find themselves liable for the whole amount. The transferee should therefore ensure that the contract with the transferor contains adequate indemnities to cover post-completion claims.