TUPE Failure to Consult - The Penalties

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 (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.

Under the revised TUPE legislation, which came into force on 6 April 2006, a relevant transfer can include what are termed ‘service provision changes’, which cover situations where services are contracted out, contracted in or where a contract is assigned to a new contractor on subsequent re-tendering where the transfer is of an ‘economic entity which retains its identity’.

If there is a failure to comply with the requirement to inform and consult as set out in the legislation, a complaint may be presented to the Employment Tribunal (ET) by the affected employees. The maximum compensation payable to each employee is such a sum (not exceeding 13 weeks’ pay) as the Tribunal considers is just and equitable with regard to the seriousness of the breach of the duty. The legislation provides that the transferee shall be jointly and severally liable with the transferor for any appropriate compensation payable.

The Employment Appeal Tribunal recently ruled (Sweetin v Coral Racing) that when assessing compensation for failure to consult under the TUPE Regulations, the ET should adopt the same approach as that taken when an employer fails to consult under the Trade Union and Labour Relations (Consolidation) Act 1992 when collective redundancy occurs. In Susie Radin Ltd. v GMB, the Court of Appeal found that the purpose of the protective award when there is a failure to consult on proposed redundancies is to provide a sanction for an employer’s breach of his or her obligations and what is relevant is the seriousness of the breach. Likewise, in TUPE situations the purpose of the award is to provide a punitive, deterrent sanction for the breach by the employer and the ET should award the maximum compensation when there is a failure to consult prior to a business transfer, unless there are mitigating circumstances which justify a reduction in the maximum award.