Where a car dealership or franchise is transferred to a new company or a car manufacturer grants a franchise then the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) are likely to apply.  There are various aspects of the application of TUPE but in this article I am focusing on Information and Consultation which has caused difficulty in the area.

However, a recent case has improved the position for those granting a car franchise or transferring dealerships and others who have to inform and consult. In the particular case Shields Automotive Limited was a Toyota dealer and the dealership and franchise was transferred to Arnold Clarke Automobiles Limited on 10 August 2010.

The TUPE transfer was foreseeable as early as March 2010.  However, at 2.00pm on 2 August the employees were told about the TUPE transfer and invited to elect employee representatives.

The election, having been called at 2.00 pm, provided for voting to be completed by 5.00pm on the same day.  The employer knew that one of the affected employees (Mr. Brolley) would be absent until the next day and the employer could not justify why it did not wait for him to return.

In addition there was a tie for one position and the manager simply chose one of them.  Another Claimant (Mr. Langdon) complained about the short time scale and had chosen not to vote.

The Employment Tribunal decided that Shields Automotive Limited had broken the information and consultation obligations contained in TUPE in the following ways:

  1. Not providing affected employees with enough time to cast their vote for an elected representative and
  2. deciding who would be the elected representative in the case of the tie without informing the affected employees.

The award made to employees for breach of TUPE in this respect is based on a principle of punishment rather than compensation.  The maximum award is 13 weeks’ pay which is the starting point and it is incumbent on the employer to seek to get that award reduced. The Employment Tribunal awarded seven weeks’ pay to Mr. Brolley and two weeks’ pay to Mr. Langdon.

However, the Employment Appeal Tribunal formed the view that the breaches were technical.  This was not a case where no information or consultation had taken place at all so they decided that Mr. Brolley’s award be cut to three weeks’ pay.

It would have been relatively easy for Shields Automotive Limited to have avoided the technical breaches thereby avoiding the cost and expense of this litigation. The value of this case for other employers is that if they make a good attempt to comply with the information and consultation obligations but make technical mistakes there will be a potential for reducing the awards made to the affected employees.