The Importance of Considering Obligations of Both Parties in TUPE Claims
The Employment Appeal Tribunal (EAT) has held that the existence of an ACAS settlement agreement prevented an award being made against a transferee, for failing to provide information to the transferor on a TUPE transfer.
Background
In the case of Clark v Middleton and another, Ms Clark worked for Ms Middleton, who was a sole trader trading as Black Dog Hydrotherapy. Ms Middleton planned to retire and told Ms Clark the business would transfer to Ms Slade-Andrews, who was another of her employees. The business was transferred in September 2019 to Black Dog Hydrotherapy Ltd (BDH), which was a company incorporated by Ms Slade-Andrews 11 days prior to the transfer. Ms Clark's employment transferred to BDH under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Relations between Ms Clark and BDH broke down because of changes BDH planned to make to staff contracts. Ms Clark resigned and brought a claim against Ms Middleton for failing to inform and consult under regulation 13 of TUPE. She also brought claims against BDH for unfair dismissal, unpaid wages and holiday pay. She did not bring any claim against BDH under TUPE.
Ms Clark settled her claims against BDH and they were withdrawn. She continued her claim against Ms Middleton, seeking 13 weeks' gross pay.
What Is the Obligation to Inform and Consult Under TUPE?
The obligation to inform and consult applies to any employer with employees who may be affected by the transfer or 'measures' intended to be taken in connection with it. The outgoing employer (the transferor) always has a duty in relation to its transferring staff, but may also need to inform and consult with non-transferring staff where applicable. The incoming employer (the transferee) may also have obligations in respect of its own workforce. The purpose of the duty is to ensure affected staff are provided with all pertinent information which might affect their employment, before the transfer takes place.
In respect of Ms Clark's claim, the duty to inform and consult was owed to her by Ms Middleton, as transferor. BDH was under a separate duty to provide Ms Middleton with the information she would have needed to comply with the obligation to inform and consult.
What Did Ms Middleton Argue?
Ms Middleton denied she had failed to meet her duty to inform and consult under TUPE. She said she had not been told, by BDH, of the measures it envisaged taking following the transfer of Ms Clarke's employment, so that BDH should be liable for any award rather than her.
What Did the Tribunal Decide?
The Tribunal found it had not been reasonably practicable for Ms Middleton to know about the envisaged measures BDH was intending to take following the transfer, as these had been kept from her. The Tribunal held that BDH might have been ordered to compensate Ms Clark were it not for the ACAS settlement agreement reached in respect of Ms Clark's earlier claims. The Tribunal observed that had Ms Clark presented a claim directly against BDH, or alternatively had a settlement not been reached in respect of the other claims, the outcome might have been different.
In respect of Ms Middleton, whilst the Tribunal agreed she had failed to inform Ms Clark that her new employer would be BDH rather than Ms Slade-Andrews, this was a "technical breach" which did not merit an award of compensation.
What Did the EAT Decide?
The EAT agreed that the existence of the ACAS settlement prevented an award being made against BDH. However it did not agree that Ms Middleton's failure to inform Ms Clarke of the true identity of her new employer was a mere technical breach that did not merit an award of compensation. The case has been remitted to a fresh Tribunal for consideration of what an appropriate award should be.
What Can Employers Learn from This Decision?
This decision highlights the importance of both transferor and transferee working together and communicating clearly in a TUPE transfer, so that all pertinent information is disclosed to employees in order to discharge the duty to inform and consult. In the event of a failure to inform and consult, claims can be pursued against either, or both, parties. Warranty and indemnity protection should be carefully considered as part of the transfer agreement so that employers are adequately protected in the case of any future dispute for the failure to inform and consult under TUPE.