Transferring Employees Unable to Sue Transferee for Pre-Transfer Information Failures

Transferred employees cannot make a claim against their new employer for failing to provide their old employer with information about measures it proposes to take after the transfer.

Where there is a business transfer or change of service provider to which TUPE applies, employers have to provide information to their affected employees about the transfer and consult about proposed measures. For transferring employees, that means that the outgoing employer is responsible for providing the information. However, as most measures will be taken after the transfer by the incoming employer towards the transferring employees, the incoming employer has an obligation to provide the outgoing employer with information about any measures it proposes to take post-transfer. This enables the outgoing employer to tell the transferring employees of those measures. In Allen and others v Morrisons Facilities Services Ltd, Leeds City Council terminated three contracts and awarded them to two new contractors, one of which was Morrisons. A number of employees who had transferred brought a claim against Morrisons for a breach of its obligation to provide information about proposed measures.

The employment tribunal dismissed the claim, finding that although Morrisons may have given the outgoing employer misleading or inaccurate information, the claimants could not claim against the transferee in these circumstances. Any claim had to be brought against the transferor.

The Employment Appeal Tribunal agreed, noting that TUPE does not impose any obligation on a transferee to provide information to transferring employees. Instead, the obligation is to provide information to the transferor. The only way for a transferring employee to obtain redress against the transferee is if the transferor argues that there were special circumstances excusing its failure to comply with its information and consultation obligations (the transferee’s failure to provide information) and makes the transferee a party to the proceedings by notifying it that it intends to take that position. The transferee cannot be made a party by any other means.

If the transferor had given the employees all the information it had about proposed measures, or if relying on the special circumstances defence had taken all reasonably practicable steps to obtain such information from the transferee, it would not be in breach of its obligations and any claim against it would fail.

This means that a transferring employee only has a right of redress where the transferee provides inaccurate information about measures in limited circumstances. The claim has to be brought against the transferor. However, if the transferor can show that it has given the employees all the information it has about the proposed measures it envisages that the transferee will take, it has complied with its obligations and the claimant has no redress. It is only if the transferor argues that it was not reasonably practicable for it to comply with its obligations due to the transferee’s default, that it has taken all reasonably practicable steps to obtain such information from the transferee, and has given the transferee notice of its intention to rely upon that defence, that there is a chance of redress against the transferee. This results in the transferee being joined to the proceedings, enabling a tribunal to make an award of compensation against the transferee.

In this case the claims against the outgoing employer had all been settled or withdrawn. Whilst it might take a brave transferor employer not to rely on the special circumstances defence where the transferee is at fault, it is possible to envisage circumstances where the transferor will agree with the transferee that it will not do so, in the hope that the transferor is found to have complied with its obligations, resulting in the employee having no remedy against the transferor or transferee. No doubt the transferee would be required to give appropriate indemnities but in this scenario it might make commercial sense to do so.