30th September 2010
The recent case of Nationwide Building Society v Benn has explored the relationship between an employer's obligation to inform and consult with employees under Regulation 13(6) of the Transfer of Undertakings (Protection of Employment) 2006 Regulations ("TUPE") and constructive unfair dismissal claims. This briefing explores the outcome of that decision and what this means for future claims arising out of TUPE.
Regulation 13(6) of TUPE places an obligation on employers to inform and consult with their employees about any "measures" which they intend to take as a result of a TUPE transfer. Claims for breach of Regulation 13(6) must be made by employee representatives or by trade union representatives.
Under TUPE an employee is entitled to resign and claim unfair dismissal if the employer commits a repudiatory breach of contract which amounts to a constructive dismissal (in accordance with the Employment Rights Act 1996 ("ERA")), or if the employee is subjected to a substantial change to the employee's working conditions to their material detriment (Regulation 4(9) TUPE).
A dismissal arising out of a TUPE transfer will be automatically unfair if the dismissal is for a reason "connected with the transfer" unless the employer has an economic, technical or organisational ("ETO") reason. An example of this would be a genuine redundancy situation. This principle applies equally to constrictive dismissal claims arising out of a TUPE transfer.
In the case of Nationwide, employees of the Portman Building Society transferred to the Nationwide Building Society under TUPE. Before the transfer, a job-mapping exercise concluded that some of the roles within Portman would be changed to comparable roles within the Nationwide structure.
The affected employees were not consulted about the changes and the joint consultative group (which included representatives of the staff association of both Portman and Nationwide) was not consulted about the mapping.
Following the transfer, the claimants resigned and brought claims for constructive unfair dismissal on the basis that the changes to their role amounted to a dismissal for a reason connected to the transfer.
At the initial hearing, the Tribunal held that the resignations did not amount to automatic unfair dismissals as the employer had an ETO reason for making the changes. As a result, the Tribunal had to consider the general principles of constructive unfair dismissal under the ERA.
Neither the employees nor the employer made any claim relating to a failure to inform and consult under TUPE. However in spite of this the Tribunal in its judgement held that the resignations were procedurally unfair constructive dismissals on the basis that the employer had not involved the employees in any meaningful consultation and that it had not complied with its obligations under Regulation 13(6).
The employer appealed this decision to the Employment Appeal Tribunal.
The EAT disagreed with the Tribunal for two reasons:
1. No claim had been brought in respect of Regulation 13(6) of TUPE and so the Tribunal could not make a finding in relation to it; and
2. The employees themselves did not have the right to bring a claim for breach of failure to inform and consult under TUPE, as this needed to be done by the employee representatives.
The EAT remitted the question of whether the resignations amounted to constructive unfair dismissals back to the same Employment Tribunal for determination.
What this means
The EAT was clear in its judgment that it was against the principle of fairness to make a decision on a claim in relation to which neither party had been given the opportunity to make any representations.
However, whilst the EAT said that the Tribunal could not make a judgment about whether the lack of consultation was a breach of Regulation 13(6) TUPE; it could make a judgment as to whether the consultation amounted to a breach of the ERA to determine whether the dismissal was fair.
It is therefore important for employers to bear in mind the importance of consultation in a TUPE situation. Employers must be aware that they may be liable for a claim for constructive unfair dismissal under the ERA if they make changes without consultation. Any consultation must be sufficient to comply with the general principles of fairness and to justify the changes proposed.
Also, this case highlights the importance of trade unions, employee representatives and/or employees making sure that all possible causes of action are explored when bringing claims arising out a TUPE transfer.
Laura Shields is a solicitor at Pinsent Masons