UK: Consultation In Relation To Transfers

Last Updated: 7 November 2013
Article by Davenport Lyons

Of course it is not just collective redundancy situations which require an employer to undertake consultation. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) also necessitates employers undertaking consultation and is another area that can cause difficulties. In two recent cases the EAT have considered first, whether employee representatives had been correctly appointed and secondly, whether the duty to consult applied to employees retained in the business after part of it was sold.

Under Regulation 13 of TUPE the employer is under a duty to consult the appropriate representatives of any "affected employees", which in turn is defined as "any employees of the transferor or the transferee (whether or not assigned to the organised grouping of resources or employees that is the subject of a relevant transfer) who may be affected by the transfer or may be affected by measures taken in connection with it".

Regulation 14(1)(a) states:

"(a) the employer shall make such arrangements as are reasonably practicable to ensure that the election is fair...

(b) all affected employees on the date of the election are entitled to vote for employee representatives..."

Making an election fair

In the first case, Shields Automotive Ltd v Langdon, the employer announced at 2pm that an election would take place and that nominations and voting had to be completed by 5pm the same day. This election took place a week before the proposed transfer but there was evidence to suggest it could have taken place earlier.

One employee, Mr A, did not vote as he was concerned about the tight timetable and one employee, Mr B, did not vote as it was his day off. The employee with the most votes was elected but there was a tie for second place. The employer decided which of the two tied employees should be the representative by rejecting one of the candidates as he did not work on the day that the consultation meeting was going to be held. The two employees who had not voted complained that the employer had failed to comply with Regulation 14.

The EAT held that the tribunal had been entitled to find that the employer had failed to comply with Regulation 14. All employees were entitled to vote and the employer had not shown that it was not reasonably practicable to allow all employees to vote. It was also a breach of Regulation 13(3) for the employer to decide a tie break when the representatives were supposed to be appointed or elected by the affected employees.

The EAT stated that the level of the protective award was to be determined by the seriousness of the employer's default. In this case the EAT upheld an award of compensation of two weeks' pay in the case of Mr A but reduced the award for Mr B from seven weeks' pay to three weeks' pay as it considered this award to be "manifestly excessive".

Who are "affected employees"?

In the second case on TUPE consultation - Lab Facilities Ltd v Metcalfe - the EAT held on the facts of the case that the duty to inform and consult under TUPE did not apply to employees retained in the business after part of it was sold.

The case concerned a business, ILUK, which was the result of a merger of two distinct businesses. Following the merger the two businesses retained their distinct features. When the business got into financial difficulties and went into liquidation the liquidator sold one part to I Lab and the other part was closed down. Employees in the part that had been closed down made tribunal claims against ILUK and I Lab alleging that they were in breach of the obligation to inform and consult under Regulation 13 of TUPE.

A tribunal allowed the claims and awarded 13 weeks' gross pay to the 10 employees concerned, totalling in excess of £80,000. As the only solvent party, this liability would have fallen to the transferee, I Lab, to pay. I Lab appealed.

The EAT overturned the tribunal's decision and held that the employees were not "affected" by the transfer within the meaning of Regulation 13. The employees were not affected by the transfer simply by being excluded from it. Even if the subsequent closure of the part of the business in which the retained employees worked could be said to be, in part, the result of the sale of the other part of the business, this indirect effect did not mean there was a duty to inform and consult. The tribunal's decision could not be defended on the basis that under an earlier plan some of the employees may have been included in the transfer and it was this change of plan that brought them within the ambit of the consultation provisions. The transfer has to actually occur before the consultation provisions come into play; the transfer that did occur did not "affect" the employees as they were not included in it.


The financial penalties for failure to comply with the consultation provisions under TUPE are the same as the collective redundancy provisions, with the maximum award being 13 weeks' gross pay to each affected employee. The case about the elections is some comfort to employers that more minor or technical breaches of the Regulations concerning elections will not be punished in the same way as wholesale failure to comply.

It should be noted that a duty to consult with non-transferring employees may still arise where it can be argued that they are affected by the transfer, for example, by doing work in or for the transferring business. Ultimately in the I Lab case the non-transferring employees were affected by the closure of the part of the business in which they worked, rather than the transfer itself. However, it should also be remembered that there may be consultation obligations under the collective redundancy rules in relation to the closing down of part of a business if 20 or more employees are involved. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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