No Obligation to Inform and Consult in Respect of Employees Employed in Part of Business Not Transferred

Where part of a business was transferred under TUPE and the other part was closed down, employees in the part closed down were not entitled to be informed and consulted about the transfer under TUPE.

In I Lab Facilities Ltd v Metcalfe and others, the business of ILUK comprised two distinct parts (although there was a degree of overlap and some pooling of resources and access to each other’s clients).  On 30 July 2011 ILUK went into liquidation.  One part of the business was sold and the other part was closed down by the liquidator and the employees in that part were made redundant.  Those employees brought tribunal proceedings alleging that they (or their representatives) should have been informed and consulted about the transfer. 

The employment tribunal upheld their claim but its decision was overturned by the EAT on appeal.  The obligation to consult applies in respect of “affected employees”, defined as employees of the transferor or transferee (whether or not assigned to the business transferred) who may be affected by the transfer or measures taken in connection with it.  The EAT held that the employees employed in the part that was closed down were not “affected employees”.  They were affected by the closure of the part of the business in which they worked, but not by the transfer of the other part. Even if the closure was indirectly the result of the transfer, the employees would not be “affected employees” if the transfer had no impact on them. 

The EAT also held that there can be no breach of the duty to inform and consult if a transfer does not ultimately go ahead.

The decision in this case turns on the fact that the transfer of the other part of the business had no impact on the claimants’ jobs.  The definition of “affected employee” clearly envisages that employees who are not assigned to the part of the business being transferred may be “affected employees” in respect of whom the duty to inform and consult arises.  The EAT emphasised that it was not saying that there can never be an obligation to inform and consult in relation to an employee of the transferor who has not transferred.  For example, employees may be affected by a transfer if they do some work in the part of the business transferred as the loss of part of their work will affect them. 

The BIS guidance also identifies three categories of “affected employees” (1) those individuals who are to be transferred; (2) their colleagues in the transferor organisation who will not transfer but whose jobs might be affected by the transfer; (3) their new colleagues in employment with the transferee whose jobs might be affected by the transfer.  Employers should not therefore assume that there is no obligation to consult in respect of employees who do not transfer.  The scope of information and consultation obligations turns on a correct identification of employees whose jobs may be affected by the transfer.  In this case, the claimants’ jobs were not affected by the transfer but by the closure of the part of the business in which they worked.