M operated an animal hydrotherapy business as a sole trader until 30 September 2019. She decided to retire and on 1 October 2019 M transferred the business to BDHL a company operated by an individual, SA, who was an employee of M. Prior to the transfer, there had been some discussion about the retirement of C and of SA taking over the business but SA had not mentioned to C that BDHL would be intending to make contractual changes following the transfer. When this became known after the transfer C resigned.
The Employment Tribunal Decision
In early 2020, C brought a claim against M, the transferor, under Reg 15 for compensation for a failure to consult as required by Reg 13. She brought claims for wages, unpaid holiday pay and unfair dismissal against BDHL. M’s defence to the failure to consult claim was that BDHL had not informed her of the measures it envisaged and that any liability should be that of BDHL. On 13 July 2020 C settled her claims against BDHL. At the hearing against M, C’s claim under Reg 15 was dismissed. The ET held that M did not know and was not told by BDHL of the measures it proposed as these had been deliberately kept from her. M did not know that there would be a transfer to a limited company and the ET held that she ought to have informed C about this. The ET regarded this as a technical breach because there was a late incorporation of BDHL and C probably knew about it in any event. It therefore made no award against M. The ET further observed that the claim could have been brought against BDHL but as claims against BDHL had been withdrawn it was not appropriate to make an award against it.
C appealed on the following grounds:
- The ET was wrong in stating that the Reg 15 claim could have been brought against BDHL.
- That just because claims against BDHL had been withdrawn did not mean compensation under Reg 15(8)(b) could not be made against it.
- The ET erred because it failed to make proper findings as to whether there had been a failure to inform C of the legal, social and economic implications of the transfer pursuant to Reg 13(2)(b).
- The ET erred in its decision to award no compensation at all in respect of the failure of M to notify C pre-transfer of the identity of the transferee.
The Employment Appeal Tribunal Decision
The EAT (HHJ Auerbach) held:
- That a claim that a transferor failed to consult under Reg 13(1) before the transfer, can only be brought against the transferor. No freestanding claim can be brought against the transferee because of a failure by it to provide information to the transferor as required by Reg 13(2)(d). As C was an employee of M at the relevant time, it was only M who had a duty to comply with Reg 13 in respect of her; and it was Reg 15(8), not Reg 15(7), that provided for C’s potential remedies in respect of that complaint.
- The ET was correct to find that because BDHL had been released from the proceedings by the dismissal of C’s claims against it on withdrawal no award could be made under Reg 15(8)(b).
- C had not advanced specific matters before the ET as to any legal, social, or economic implications of the transfer and could not complain that this had not been addressed by the ET.
- As the identity of the transferor is of fundamental importance to an employee, the ET had erred in making no award.