Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), employers can be required to pay “appropriate compensation” for failing to inform and consult their employees in advance of a transfer. In Shields Automotive Ltd v Langdon and Brolly, the Employment Appeal Tribunal (EAT) confirmed that the point of an award was not to compensate the employee, but to punish the employer.

Basic facts

Shields (a Toyota car dealership) knew as early as March 2010 that Toyota wanted to transfer the dealership to another garage. Although they were aware by July 2011 that matters were progressing, the garage delayed telling employees until 2pm on the afternoon of 2 August about the transfer. It then gave them until close of business at 5pm that day to elect appropriate representatives as required under TUPE. The transfer itself took place on or around 9 August 2011.

Although entitled to vote, Mr Brolly was off work and so could not exercise his right. Mr Langdon, who was present at the meeting deliberately chose not to vote in protest at the short timescale. The election produced a tie for second place and the employer decided (without consulting anyone) that it would make sense not to pick the person who was usually off work on Thursdays when the consultation meetings were due to take place.

The two men applied for compensation because their employer had breached the duty to consult with them.

Tribunal decision

The tribunal held that the election process was unfair as the employer had failed to set an appropriate timescale for the employees to cast their votes; and had decided unilaterally who should be the elected representative without informing the affected employees that there was a tie for second place.

The tribunal awarded two weeks’ pay to Mr Langdon and seven weeks to Mr Brolly. The employer appealed, arguing that the decision was perverse.

EAT decision

Under section 14(1)(a) TUPE, employers have to “make such arrangements as are reasonably practicable to ensure that the election [of representatives] is fair”. Although the EAT accepted that there would inevitably be circumstances when some employees would not get the chance to exercise their right to vote, the onus was on the employer to identify what those were. Although the law only gave employees an entitlement to vote, the EAT said it would be a “hollow vessel” if they never got the chance to exercise it.

The tribunal was therefore entitled to come to the conclusion that the election process as a whole was unfair because it had not made sufficient provision for people like Mr Brolly, who were entitled to vote but were prevented by the short timescale, from doing so.

As for the issue of the tie-breaker, regulation 13(3) states that employee representatives should be appointed or elected by the affected employees. Although the employees had a voice in the election and selection of the reps in this case, the employer had made the ultimate selection, a clear breach of the regulations.

The tribunal had, however, adopted the wrong approach when it came to making the awards of “compensation”, a term that was itself inappropriate as the point was not to compensate the employee, but to punish the employer. “Its purpose is to ensure that employers generally are mindful of their obligations to consult and inform, particularly in circumstances in which there will inevitably be pressures often of time upon the employer to do the opposite”.

The tribunal should therefore have assessed the seriousness of the employer’s default and made the awards on that basis. (These should have been the same for Mr Langdon and Mr Brolly as each was an affected employee). As the employer in this case had tried to comply with the duty, the tribunal should have taken that into account. The EAT reduced the award to Mr Brolly from seven weeks to three on the basis that it was excessive and did not recognise the steps taken by the employer to comply with their obligations, which included full consultation albeit not with elected representatives.