Pre-transfer consultation on collective redundancies

One of the most damaging and controversial changes to TUPE under the 2014 Regulations is to allow pre-transfer consultation on collective redundancy dismissals. The new rules, which affect all transfers on or after 31 January 2014, allow a prospective transferee to start consulting with the transferor’s workforce on “proposed redundancies” before the transfer date, in other words before becoming their employer, and for this pre-transfer consultation to count towards the minimum statutory period of 30/45 days’ collective redundancy consultation. Commentators, including the TUC, have pointed out that this change to the law breaches the Collective Redundancies Directive (1998/59/EC). The terms of that Directive are clear that collective redundancy consultation must be with the employer of the employees who are to be made redundant.

European case law is also clear. For example, in Akavan Erityisalojen Keskusliitto AEK ry v Fujitsu Siemens Computers Oy C-44/08 [2009] IRLR 944, the ECJ comments:

“It is clear that under Article 2(1)(3) and Article 3(1) and (2) of Directive 98/59, the only party on whom the obligations to inform and consult and notify are imposed is the employer, in other words, a natural or legal person who stands in the employment relationship with the workers who may be redundant.”

To bring this change into law, new sections 198(A) and (B) have been added to TULRCA. The new rules allow collective redundancy consultation to be carried out by a prospective employer before the transfer date provided:

• there is, or is likely to be, a relevant transfer;

• the transferee proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less; and

• at least one of the transferring employees “may be affected by the proposed dismissals or by measures taken in connection with the proposed dismissals”.

Under new sections 198(A) (B) of TULRCA:

• the transferee can elect whether to consult with representatives of employees of the transferor at risk of redundancy before the transfer date;

• the election must be by written notice to the transferor;

• any consultation can only take place with the transferor’s agreement;

• the transferor is entitled, but not obliged, “to provide information or other assistance” to the transferee to help it carry out pre-transfer consultation;

• any failure by the transferor to provide information or assistance will not amount to special circumstances justifying a failure to comply with the information and consultation obligations;

• a transferee can cancel its decision to carry out pre-transfer consultation at any time by written notice to the transferor;

• if a transferee cancels its decision to carry out pre-transfer consultation, the slate will be wiped clean and the pre-transfer consultation has no effect.

Employees and reps get no say as to whether or not pre-transfer consultation with the transferee takes place. However, any consultation must be meaningful or else risk a protective award.

Even though the transferee can carry out pre-transfer consultation on proposed redundancies, it cannot carry out any dismissals until it becomes the employer, i.e. after the transfer. Any dismissals by a transferor because of a transferee’s need to make redundancies are automatically unfair (see Chapter 6).

Although the new regulations retain an “establishment” test, any consultation will be subject to the ruling in USDAW v Ethel Austin Limited [2013] UKEAT/0547/12/KN. In this case, the EAT ruled that the “establishment” test infringes the Collective Redundancies Directive. The issue is under appeal, and has been referred by the Court of Appeal to the ECJ.