Employment Law: The meaning of “affected employees” under TUPE, 11/5/2013
I Lab Facilities Ltd v Metcalfe & Others April 2013 Employment Appeal Tribunal
The obligation to inform and consult employees under TUPE laws only stands in respect to a transfer that actually proceeds.
The claimants were employed by a company in the film and television industry called I Lab UK. This company had merged a few years before with another called RKT, specialising in post production work. Aside from pooling certain resources these businesses remained separate, with different staff, locations and functions. The claimants were part of the post production team. The company got into financial difficulty and went into liquidation. After some uncertainty the original business was sold to I Lab Facilities Ltd (in the same ownership) and the post production business was closed down.
Initially the plan had been that the successor company would take on some of the post production business too, and the employees were told of this arrangement. However in the space of a few weeks the situation changed and the eventual decision was that only the original business would be transferred.
The claimants argued that there had been a breach of the obligation to inform and consult “affected employees” of the transfer under regulation 13 of TUPE law. The Tribunal held that the employees were “clearly affected by the relevant transfer by being effectively excluded from it, having been informed that they would be a part of it” and duly awarded compensation. I Lab Facilities (as the only solvent business in question) then appealed on the basis that the claimants were employees in the business that was shut down, not transferred, and so they were not affected by the TUPE laws.
The reasoning of the original tribunal was flawed, as clearly if you have two self contained businesses, the sale of one will not affect the employees of the other. The claimants’ dismissal was a result of the decision to shut down that business, notwithstanding the earlier intention to transfer some of them. It was held that the TUPE laws come into effect once the transfer has been completed, which would make the breach or compliance with the rules final.
This case is useful in defining what TUPE laws mean by an “affected employee”. The Appeal Tribunal differentiates between the loss of employment directly linked to the sale of the business and the indirect effect of selling just one part. If TUPE is to be used then the direct cause of the loss of employment must be carefully analysed.
In this instance, statutory obligations come into effect after the completion of the fact (here, the sale of the business) as only then can something be objectively judged to have happened or not and a breach can be properly identified.