TUPE Consultation: Dismissed Non-transferring Employees Were Not “Affected Employees”

In I Lab Facilities v Metcalfe & Ors, an employer who did not consult employees who worked in a part of its undertaking that did not transfer was not in breach of its duties to inform and conform and consult employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

In I Lab Facilities v Metcalfe & Ors, an employer who did not consult employees who worked in a part of its undertaking that did not transfer was not in breach of its duties to inform and conform and consult employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

I Lab (UK) Ltd (I Lab) – a film production company – merged with another film production company RKT Post Production Ltd (RKT). The two companies were involved in distinctly different areas of film production and, as such, the two sets of staff remained at separate premises, performing work of a very different nature.

I Lab subsequently ran into financial difficulty and went into liquidation. The I Lab employees who pre-dated the RKT transfer and worked in the premises separate to the ex-RKT employees were transferred to I Lab Facilities (UK) Ltd (I Lab Facilities) as that part of the business was sold to it.

The ex-RKT employees’ area of the business was, however, closed down by the liquidator and all employees lost their jobs. Several ex-RKT employees brought proceedings, arguing that I Lab had breached its obligations under TUPE by failing to inform and consult them on the transfer.

Under TUPE, employers must only consult employees “affected by the transfer or may be affected by the measures taken in connection with it”, the crux of the case for the Tribunal to consider was whether the ex-RKT employees were “affected” employees for the purposes of TUPE.

Employers must inform and consult employees who are “affected” by the transfer. Affected employees are those:

• Who will or might be transferred
• Whose jobs are in jeopardy by reason of the proposed transfer
• Who have job applications within the organisation pending at the time of the transfer.

In this case, however, the EAT held that the Claimants were not affected employees. The two parts of the business were wholly self-contained and, as such, the sale of one section did not actually “affect” the other employees. It was incorrect to say that the employees were “affected” by the transfer by being excluded from it.

One part of the undertaking was transferring, and the other part was closing – these were separate actions and completely separate business. It is important to note that the duty to inform and consult with the “non-transferring” employees may still arise where they are likely to be affected in some way by the transfer; for example, if their work is to continue after the transfer, but the transfer will result in a reduction or change in the work that they do.

In a further twist, the ex-RKT employees had been initially told prior to the transfer that they “would be part of the transfer” (but then were not). It was held that such comments would not trigger the obligation to inform and consult under TUPE.

An employer does not necessarily have to start informing and consulting as soon as it envisages taking any sort of “measures” relating to a relevant transfer. There can be no complaint of a breach of the information and consultation rules unless there has actually been a relevant transfer.

This case is useful for employers, where part of a business is being sold, leaving other employees behind.  If the employees left behind are not directly affected by the transfer, the duty to inform and consult will not extend to them (albeit in those circumstances there may be collective consultation obligations in respect of redundancies, depending on the number of employees to be dismissed).