+Scott Watson

Sunday, 24 April 2011

Effect of Failure To Consult under TUPE and whether employee 'assigned' to undertaking transferred

Marcroft v Heartland (Midlands) Ltd
Although a failure to consult under TUPE gives rise to a claim for compensation, it cannot make the entire transfer ineffective. And a person who gave his notice shortly before the transfer continued to be ‘assigned’ to the undertaking transferred despite not attending his office and only doing a small amount of work from home.

Mr Marcroft worked for PMI Health Group (PMI), responsible for sales in the commercial insurance department. His contract contained a restrictive covenant which he is alleged to have breached by approaching clients of PMI whose accounts he had managed or about whom he had acquired knowledge while with PMI with a view to their transferring business to a rival company. In August 2009, PMI started negotiations with a view to disposing of the commercial insurance part of their business to Heartland. On 15 September Mr Marcroft gave notice of his resignation and it was agreed that his notice would expire on 26 October. On 25 September Mr Marcroft was officially informed by the directors of the proposed sale to Heartland. It was agreed that he need not attend the office to work, as there was very little work to be done in the commercial side of the business, but that he would be ‘on call’ at home, if it became necessary. There was no consultation with him about any actual or prospective transfer to Heartland or to anyone else, nor did he receive any documentation about the transfer. Between 25 September and 2 October (when PMI formally agreed to sell to Heartland), Mr Marcroft did little work other than fielding some calls and finalising some account details. At issue here was who - Heartland or PMI – benefitted from the restrictive covenant in Mr Marcroft’s contract. Heartland claimed that Mr Marcroft’s contract transferred to it by virtue of TUPE which entitled it to sue him for breach of the covenant. Mr Marcroft initially sought to rely on the TUPE transfer to Heartland but then changed his tune. He argued that TUPE did not apply, that there was no relevant transfer, that he was not employed by PMI, that he was not assigned to that part of the undertaking transferred, that he had ceased to be assigned before the date of the transfer and that PMI had deliberately breached its duty to provide him with information about the transfer, thereby by depriving him of the opportunity to object to it and rendering the transfer of his contract of employment ineffective.

The judge held that there was a relevant transfer by PMI to Heartland under TUPE, reg. 3; that Mr Marcroft was employed by the transferor PMI; that he was assigned to the business of the commercial insurance department at PMI which was transferred to Heartland; and that he had adequate opportunity to object to the transfer.

The Court of Appeal had to decide whether, at the date of the transfer, Mr Marcroft was assigned to PMI's commercial insurance undertaking ‘on a temporary basis’, in which case he would not have transferred under TUPE, or whether he was fully assigned at the date of the transfer, in which case he would be TUPE-transferred. It had no doubt that the original judge correctly decided that he was assigned and could not bring himself within the temporary assignment exclusion. The court understood why it could have been said that ‘in the fag end of his contract’, there was a temporary quality in the timescale of Mr Marcroft’s work with PMI. However, the mere fact of his handing in his notice (and the subsequently much reduced workload) did not change the nature of the work he was performing: it ‘cannot be right, in principle, that an employee is automatically assigned on a temporary basis, thereby losing the protection of TUPE, simply as a result of handing in his notice’.

On Mr Marcroft’s claim regarding the failure to inform and the denial of his right to object, the Court of Appeal said that he faced a number of insuperable problems:

* There was no conspiracy by PMI and Heartland to evade TUPE which would disentitle Heartland from saying that there was a TUPE transfer. Mr Marcroft was informed of the proposed transfer by PMI on 25 September. He did not object to the transfer either before or after 2 October 2009. On the contrary, he asserted through his solicitors in a letter of 26 November, by which time he was fully aware of the circumstances, that TUPE applied to transfer him from PMI and that Heartland had the benefit of any restrictive covenant that he was alleged to have breached.

* There is no legal basis for saying that the transfer of his contract was ineffective. There is a duty (under TUPE, reg. 13) to provide the representatives of the affected workers with certain information (which does not, however, include the right to object). It is not an obligation to provide the information to Mr Marcroft personally. But even if such a duty could somehow be spelled out of that regulation, the duty rested with the PMI, not Heartland since they were not his employer. The remedy for breach of the reg. 13 duty is a claim in the tribunal by union or employee representatives, not an avoidance of the transfer that has taken place.

* Compliance with reg. 13 is not a precondition to an effective transfer of a contract of employment. If it were, there would be no point in TUPE conferring the right to object, since the transferor employer in the position of PMI could always prevent a transfer by the simple device of not providing the employee’s representative with information in compliance with reg. 13. Such a construction would undermine the protective purpose of TUPE.

* There is no basis in fact or law for the suggested implied term in the contract of employment that would render the transfer of it ineffective unless the employee has been provided with information by the employer about the transfer.

Published with kind permission of Craig Gordon, HR Bullets.

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