Fresh guidance from the EAT on the TUPE regulations has confirmed two important new points of principle. The first is that employers cannot avoid the application of TUPE to staff by using mobility clauses to transfer them away from the part of the business that is transferring. Royal Mail - the respondent in this case - had argued that as it was entitled to move employees to different parts of the organisation, their contracts would not `'otherwise be terminated by the transfer'' under ordinary contractual principles. Therefore, it said, TUPE did not apply to them. Second, the EAT found that because Royal Mail had genuinely believed there was no TUPE transfer, there was no failure to inform and consult with employees under regulation 13 of the regulations. This was despite the fact that the wrong legal information had been given. Naomi Ling considers the implications of Royal Mail Group Ltd v Communication Workers Union
Background
Since 1986, Royal Mail had transferred 203 of its post office branches into private hands to be run as franchises. Its practice was to offer employees voluntary redundancy on favourable terms or to use a mobility clause in their contracts to require them to work elsewhere than their `'original place of employment''.
This was on advice that under regulation 4 of TUPE, the contracts of the employees working in those branches would therefore not transfer. Regulation 4 says:
''A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.''
On this basis, Royal Mail did not `'inform and consult'' on the legally correct basis, although there was a series of meetings with the recognised union described as `'facilitative''.
The majority of employees who had worked in the post offices to be transferred were indeed moved away or accepted redundancy (subject to signing compromise agreements) before the transfers occurred. There were also a number of employees kept on at the post offices dealing with final accounts or property transfers up to and after the franchisees took over the businesses.
Celtec v Astley
The EAT considered the House of Lords authority of Celtec v Astley, in which vocational training was outsourced to a training and enterprise council. Civil servants who had worked in that area before the transfer remained employed by the Civil Service but were seconded to the training and enterprise council, Celtec. They later left the government to work directly for Celtec. After a reference to the European Court of Justice, the House of Lords held that the civil servants had in fact been transferred under TUPE at the time of the outsourcing. This was because a transfer could not take place over time, but could only take place when the transferee took responsibility for the operation of the business. Moreover, the parties could not by agreement alter when this date might be.
Employees working until the point of the transfer
Celtec was clearly different from the present case. In Celtec, the claimants had continued to work for the transferee after the transfer and had subsequently moved to the transferee of their own volition.
But the EAT said that the judgment in Celtec made it clear that where employees remained with the transferor right up until the point of the transfer, the transfer of their employment took place automatically `'unless the employee objects to transfer''. Such an objection would have to be a genuinely free choice, made before the transfer took place.
The EAT found that the Royal Mail employees had not made such a genuinely free choice: they had simply agreed to a contract of employment that contained a mobility clause.
Employees moved away before the transfer
The Communications Workers Union accepted that some of the staff had been removed from the business before the transfer and were therefore not part of the undertaking transferred. However, the EAT observed (obiter) that it was at least arguable that the use of a mobility clause to prevent employees from transferring (where they would otherwise have done so) was against the policy of the directive.
Duty to inform and consult: objective or subjective?
Under Regulation 13(2), employers must give employees' representatives certain information and this must happen long enough before the transfer to enable consultation to take place.
- the fact of the transfer, the date or the proposed date of the transfer and the reasons for it
- the legal, economic and social implications of the transfer for affected employees
- the measures which the employer envisages it will take in connection with the transfer in relation to affected employees
- the measures which the employer envisages the transferor will take in relation to affected employees.
In essence, the EAT had to decide whether an employer would be liable for failing to provide information under the second and third points above if it genuinely believed that the employees in question were not affected by TUPE.
The EAT made a distinction between different types of statutory obligation. It said, obiter, that it suspected that it would not be a defence to a total failure to inform and consult if an employer genuinely believed there had been no transfer.
Equally, the employer could not argue that it had not believed that employees were affected. Hence there should be an objective test to determine the `'scope'' of the duty.
However, the EAT found that there would be a subjective test in relation to the `'nature of the duty''; that is, the duty to provide a particular kind of information under ss.13(2)(b)
and (c).
The purpose of the provisions was to enable the union to understand and take issue with the employer's perception of the situation and the steps it was actually proposing to take. There was no requirement for an employer to `'warrant the legal accuracy'' of the information provided. Therefore, if information was given that turned out subsequently to be legally wrong, the employer would not be in breach of regulation 13.
Conclusion
This finding fires another shot across the bows of employers trying to find legitimate means of avoiding the effects of TUPE. Royal Mail's approach makes sense when the plain words of the regulations are considered: the provisions it put in place did indeed operate to ensure that the transfer did not end the contracts of the employees in question.
As the EAT noted, its conclusion was `'compelled'' by the judgment in Celtec. It paid tribute to the `'powerful'' dissenting judgment of Lord Mance in that case, who argued against `'inflexible rules'' in the application of the regulations, arguing instead for the right of parties to arrive at their own agreements. However, the policy of the directive trumped common law principles in this case as in that one.
In this case, the EAT left open the door for employees to remain with their previous employer, but this will avoid TUPE only when they specifically and freely choose to do so.
Employers may draw some comfort from the decision that there is no liability if incorrect information is given in the genuine belief that it is correct.
As leave to appeal has been given, it remains to be seen whether the Court of Appeal will take the same view.
Naomi Ling, Outer Temple Chambers
Cases referred to:Royal Mail Group Ltd v Communication Workers Union UKEAT/0338/08
Celtec Ltd (North Wales Training and Enterprise Council Ltd) v Astley & ors [2006] UKHL 29