The EAT has recently reconsidered the way in which awards for failure to inform and consult on a TUPE transfer are assessed.
Under TUPE both the transferor and transferee have a duty to inform (and, as necessary, consult) appropriate representatives of affected employees before the transfer. The information to be provided must include the fact and date of the transfer, key implications of the transfer and any measures which are envisaged to be taken in relation to the affected employees. The duty to consult only arises where there are measures envisaged. A failure to inform and consult can result in a maximum compensation of thirteen weeks' actual pay for each affected employee as the employment tribunal considers just and equitable having regard to the seriousness of the employer's failure to comply with its duties.
The employment tribunals' approach to the assessment of compensation has largely followed the Court of Appeal's principles set out in the case of GMB v Susie Radin Ltd in 2004, even though this was a case concerning collective redundancies. The Court of Appeal stated that the purpose of the award is to provide a sanction for the employer's breach of its obligations and the tribunal should focus on the seriousness of the employer's default. It also stated that where there has been no consultation at all it is appropriate for the tribunal to start with the maximum award and then establish if there are any mitigating circumstances which would justify awarding less than the maximum. The case of Sweetin v Coral Racing (2006) followed this approach and a maximum award of 13 weeks' pay was ordered.
In December of last year we reported on the case of Cable Realisations Ltd v GMB Northern (2009) in which only the provision of information was at issue when assessing compensation (as there was no statutory obligation to consult). Nevertheless, the EAT highlighted the importance of the information being provided early enough for voluntary consultation to take place if this was desired. As a result of the employer's failing although the EAT confirmed an award of 3 weeks pay in line with the principles set down in the Susie Radin the case highlighted that employers do not automatically face compensation of 13 weeks' pay per affected employee.
The EAT has reaffirmed this position in the recent case of Todd v Care Concern in which it stated that taking the maximum award as the starting point and discounting, if appropriate, for mitigating circumstances should not be applied mechanically in a case where there has been some information given and/or some consultation, even if the consultation did not comply with the strict legal obligations.
Ms Todd sold her care home business to Care Concern giving rise to a TUPE transfer. However the requirements for providing information and consultation were not properly met. There was no arrangement for the election by employees of appropriate representatives and no information was given to representatives. However some information about the transfer was given to some of the employees directly in a meeting. Those who could not attend learnt the information second hand.
Although the employment tribunal at first instance ordered Ms Todd to pay an award of thirteen weeks' pay per affected employee and made no award against Care Concern, on appeal the EAT reduced the award to seven weeks' pay and declared that Care Concern (as transferee) was jointly and severally liable for the award. The EAT confirmed that the 13 week award should only be the starting point if there has been a total failure to fulfil the information and consultation obligations under TUPE.
This case reemphasises the importance for employers of doing whatever they can to comply with the information and consultation requirements under TUPE. Ideally employers should seek legal advice early to ensure that they fully comply with their obligations, but even where full compliance is not possible employers should ensure that they take whatever steps are possible to reduce the potential level of compensation awarded in the event of claims.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 15/10/2010.
