TUPE: duty to inform and consult does not apply if transfer never takes place

The Employment Appeal Tribunal has handed down a helpful decision on identifying the affected employees with whom information and consultation must take place on a TUPE transfer.

The law

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) employers have a duty to inform and consult with the appropriate representatives of any "affected employees".

Affected employees are defined as those employees of the transferor or transferee who,

"may be affected by the transfer or may be affected by measures taken in connection with it".

The facts

The claimants in this case were employed by ILab (UK) Limited (ILUK), a company which operated in the film industry. Initially it did only rushes work but it subsequently merged with RKT, a company which specialised in post-production work.

While there was a degree of overlap between the two businesses, they remained distinct after the merger with the original rushes staff and the post-production staff working at different premises, doing different work, at different hours.

ILUK got into financial difficulties and sold the rushes business to a third party company while the post-production business, formerly carried out by RKT, was closed down by the liquidator.

Initially it had been hoped that some of the post-production work would be taken on by the company which bought the rushes business and the employees were informed that some of them would be re-hired on new contracts. However, the situation changed and in the event none of the post-production employees were re-employed.

No appropriate representatives were appointed in order for ILUK to inform and consult under TUPE.

The claimants were all employed in the post-production business and alleged that ILUK was in breach of its obligation to inform and consult under TUPE.

The issue which the employment tribunal had to decide was whether there was any obligation for ILUK to inform and consult with representatives of its post-production employees?

The company argued there was no such obligation because they worked in the part of the undertaking which was never transferred (having been shut down by the liquidator) and so were not affected by the transfer.

An employment tribunal rejected the employer's argument and upheld the claim, awarding the maximum protective award i.e. 13 weeks actual pay per employee.

The EAT decision

The EAT overturned the tribunal's original decision and ruled that the post-production employees were not "affected" by the transfer and the obligation to inform and consult did not arise.

The EAT acknowledged there may be some less clear cut situations where the sale of one part of the business has an impact on the remaining part, for example, if this had been loss making and was only kept afloat by the part of the business being sold there may be an eventual knock-on. However, the EAT said it did not believe that, this kind of indirect effect was intended to be covered by the legislation. In this case the transfer had no direct impact on the post production employees.

However, the EAT stressed this does not mean there can never be an obligation to inform and consult in relation to any employees who are not transferred. But, that is different from saying that employees are affected simply because the transfer has left the remaining part of the undertaking less viable.

Perhaps more surprisingly, the EAT rejected the argument that the obligation to inform and consult arises wherever there is a proposal for a transfer.

The time at which the employer must comply with the obligations to inform and consult is not when they first "envisage" that they will take relevant measures, but rather, "long enough before" the transfer to enable meaningful consultation to take place. It can therefore never be said definitively that the employer is in breach of their obligation until a transfer has occurred.

The EAT disagreed with the argument that it is irrelevant whether or not that transfer does in fact take place. It was very clear that,

".there can be no complaint of breach of the obligations . [to inform and consult] unless there has indeed been a relevant transfer".


This decision gives welcome clarification on the question of who the "affected employees" are for the purposes of informing and consulting under TUPE.

It is also helpful to have confirmation that, unlike the obligation to inform and consult on collective redundancies (which arises when the employer "is proposing" to dismiss) the legal duty on the employer under TUPE does not bite for sure until the transfer actually takes.

This suggests that where an employer aborts a transfer they cannot be liable for any failure to begin informing and consulting. Conversely, an employer who does not realise that TUPE applies until late in the process can avoid liability by delaying the transfer in order to complete informing and consulting with the appropriate representatives of the affected employees.

However, employers involved in TUPE transfers should not be lulled into a false sense of security by this decision, there may still be cases where employees who are not intended to transfer to the transferee are nevertheless directly affected by the transfer. In these cases the obligation to inform and consult with their appropriate representatives will still apply.


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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