Alamo Group (Europe) Limited v Tucker (EAT 24/02/02): Liability for failure to consult employees under TUPE passes to purchaser

The EAT has ruled recently that liability for failing to consult employees on a TUPE transfer will pass to the Purchaser.

Regulation 10 of TUPE states that the Vendor of a business is obliged to inform and consult employees who are affected by the sale or transfer of that business, through employee representatives. Employees who are not properly informed and consulted may receive compensation of up to 13 weeks' actual pay (Regulation 11). Although it is the Vendor who has the primary obligation to consult employees, it has been unclear whether liability to pay compensation for failure to consult remains with the Vendor or transfers to the Purchaser when a business is sold.

In 2000, the English EAT held in Kerry Foods –v- Creber that liability for failure to consult employees does transfer to the Purchaser on the sale of a business. However, in 2001 the Scottish EAT held in TGWU –v- McKinnon that liability does not transfer.

Now, in Alamo Group –v- Tucker, the English EAT has decided that the liability to pay compensation for failure to consult does transfer to the Purchaser. This is mainly on the basis that it is a liability in connection with an individual's contract of employment, and therefore transfers with other employee rights and obligations in the usual way under TUPE (Regulation 5).

This latest judgment highlights the fact that the rights which transfer under TUPE can be derived from statute or regulations as well as from the contract of employment. The EAT appears to have been swayed by the fact that there is nothing in the TUPE Regulations expressly excluding the transfer of liability for failure to consult (unlike the occupational pensions exclusion). They also expressed the view that employees will be better protected if Purchasers have the primary responsibility to pay compensation (particularly, for example, in an insolvency situation).

The lesson for Purchasers is to make sure that they have sufficient warranties and indemnities to protect themselves against any failure by the Vendor to consult transferring employees.

If you require any further information about this please contact Simon Jeffreys at [email protected] or on +44 (0)20 7367 3487 or Anthony Fincham at [email protected] or on +44 (0)20 7367 2783 or Alex Green at [email protected] or on +44 1224 622022