The EAT has concluded that employees working in part of an undertaking that did not transfer were not "affected employees" for the purposes of an employer's information and consultation obligations under Regulation 13(1) TUPE.  It also found that there can be no complaint for breach of those obligations unless a relevant transfer has occurred.

Background

Regulation 13(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") provides that both a transferee (buyer) and transferor (seller) may be under a duty to inform and consult with representatives of any "affected employees". 

In the case of Unison v Somerset County Council [2010], the EAT found that "affected" employees included (1) those who will or may transfer; (2) those whose jobs are in jeopardy by reason of the proposed transfer; or (3) who have job applications pending within the organisation at the time of the transfer.  A complaint can be made to an employment tribunal if there has been a failure by an employer to comply with a requirement of Regulation 13.

I Lab Facilities v Metcalfe & Others

I Lab UK ("ILUK") provided services to the film and television industry.  It had two parts to its business - the "rushes" work (which involved producing a first version of a piece of filming, often overnight) and the recently acquired "post production" work (which was much more sophisticated and less time pressured).  The core activities of the two businesses were distinct although there were some limited overlaps between them.

Shortly after the acquisition of the post production business, ILUK faced insolvency and considered the transfer of both parts of its business.  In the event, the liquidator sold only one part - the "rushes" work - to I Lab Facilities ("ILF").  The post production part of the business was closed and the employees dismissed.

The dismissed employees brought a number of tribunal claims, including that there had been a breach of the information and consultation obligations under Regulation 13(1) TUPE.  The ET found that they were "affected employees" with the result that the company should have informed and consulted with them about the transfer and made a protective award.  ILF appealed.

EAT Decision

The EAT upheld the appeal, finding that the Claimants were not "affected employees" for the purposes of Regulation 13 merely by reason of the fact that they were excluded from it.  It concluded that where an employer has two self-sufficient parts of its business, the sale of one of them does not "affect" employees in the other part even if the remaining part is closed.  In this scenario, the employees are "affected" by the closure of their part, rather than the transfer of the other part.  The EAT did caution however that a transfer of one part of an undertaking may affect the employees of the other within the meaning of Regulation 13, but that could not be implied purely on the basis that the transfer left the remaining part of the business less viable.

The Claimants had also argued that they were "affected" because it had originally been proposed that both parts of ILUK would be transferred.  The EAT, however, rejected this argument, finding that it was clear that no claim could be brought in respect of a transfer which did not take place.  The trigger for the claim in a TUPE scenario is the transfer.

Comment

It is helpful that the EAT has provided guidance on this issue.  In practice, whether employees are affected by measures taken in connection with the transfer will always depend on the facts of the particular case.  In many situations there is more of an overlap between a business which is sold or outsourced and the retained business and in these circumstances a reorganisation of the retained business is likely to require consultation.