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Dismissed employees held not to be ‘affected employees’ of a TUPE transfer

5th August, 2013

When a business or undertaking, or a part of one, is sold and this amounts to a ‘relevant transfer’ under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”), both the transferor and the transferee have a duty to inform and consult the appropriate representatives of any ‘affected employees’ with a view to seeking their agreement to the proposed measures before the transfer takes place. The transferor and the transferee are jointly and severally liable for any compensation which is awarded for failure to comply with this duty.

In I Lab Facilities Limited v Metcalfe and Others UKEAT/0441/10/JOJ, the Employment Appeal Tribunal (“EAT”) ruled that where an insolvent business was made up of two distinct parts, one of which was sold and the other was closed, the employees of the latter were not affected employees and were therefore not entitled to be informed and consulted in relation to the transfer.

The claimants were employed by I Lab (UK) Limited (“ILUK”), which provided services to the film and television industry and ‘rushes’ work. ILUK then merged with a company that specialised in post-production work. The core activities of the two previous businesses remained distinct; staff worked in separate premises and did different types of work at varied hours. ILUK subsequently went into liquidation. The following month the ‘rushes’ part of ILUK was sold to I Lab Facilities Limited (“ILF”). Although it had initially been hoped that ILF would also take on some of the post-production work of ILUK, part of the business was closed down and the employees were dismissed. The dismissed employees claimed that they had been unfairly dismissed, that their jobs should have transferred under TUPE to the new owner and that there had been a breach of the obligation to inform and consult in relation to the transfer.

The EAT allowed their appeal, holding that the two parts of the business were self-contained. The claimants were not therefore ‘affected employees’ of the transfer. The closure of the post-production arm of the business was what had affected them; not the transfer of the ‘rushes’ part. The EAT did not believe that the legislation was meant to cover this kind of indirect effect. Furthermore, as regards the earlier intended transfer of both parts of the business, the wording of the legislation is such that no complaint of a breach of obligations can be brought unless there has indeed been a relevant transfer.

For further information or advice in relation to your obligations when undertaking a TUPE transfer, please contact Helen Watson on 01244 405565 or send an email to [email protected].

 

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