Somerset County Council and Taunton Deane Borough Council decided to transfer the bulk of the work of their resources directorates to a joint venture company, South West One Ltd (SWO), which would be controlled and operated by IBM. The transfer took place in two stages to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applied. The agreement that gave rise to the transfer included a staffing agreement.
There had been lengthy consultation over a period of two years. Under the staffing agreement, the employees working for the relevant parts of the resources directorates, termed as “in scope employees”, were given a choice as to whether they wished to be transferred under TUPE to become employees of SWO or to remain as employees of the relevant council and be seconded to SWO. The councils had set the end of September 2007 as a deadline for finalising the terms of the staffing agreement with IBM. However, some aspects of the staffing agreement remained contentious up to the last moment before transfer, particularly with regard to future recruitment by SWO. On 25 September 2007, the unions were informed about the then envisaged agreement that had been reached about future recruitment. However, at the last minute, the councils and IBM reached a slightly different agreement without further consultation with the unions.
Unison issued a complaint in the employment tribunal alleging that the councils and SWO had failed to comply with their consultation obligations under TUPE in that the last-minute revisions constituted measures taken in relation to the transfer, regarding which there had been no consultation.
The employment tribunal dismissed Unison’s complaint. This was upheld by the Employment Appeal Tribunal (EAT). The EAT looked first at which employees were “affected employees” for the purposes of the TUPE consultation obligations. It found that the final revisions to the staffing agreement did not affect the in-scope employees at all.
It then considered whether other council employees were “affected employees” and therefore should have been consulted about the revisions. It said that “affected employees” are those who will be or may be transferred or whose jobs are in jeopardy by reason of the proposed transfer, or whose job applications within the organisation are pending at the time of transfer. The definition did not extend to the whole of the workforce generally, or on the specific facts of this case to everyone in the workforce who might apply for a vacancy in the part transferred at some point in the future (which the last-minute revisions to the staffing agreement were about). The EAT therefore found the TUPE consultation obligations did not come into play.
The EAT also went on to consider whether, even if the consultation obligations did apply, the councils and SWO could rely on the special circumstances defence – ie, special circumstances that rendered it not reasonably practicable for consultation to take place. It upheld the tribunal’s decision, which was that in light of the fast-moving events and an approaching deadline, the special circumstances defence would have applied in this case.
This case adopted a common-sense approach to determining which employees were “affected employees” for the purposes of TUPE consultation. A wider construction would have had dramatic and arguably unworkable consequences. It is therefore perhaps more noteworthy for its successful special circumstances defence. This defence is normally construed very narrowly and the “fast-moving events” and “approaching deadline” in this case do not appear to differentiate it from any other commercial transaction. However, the EAT appears to have been influenced by the fact it found the consultation that had been carried out was “lengthy and exemplary”. This highlights the importance that the standard of consultation that does take place (in this case almost perfect, it appears) may have when seeking to successfully rely on a special circumstances defence.
Clare Gregory, employment partner, DLA Piper