Commercial Motors (Wales) Ltd v Howley (Transfer of Undertakings : Consultation and other information)

A transfer under Transfer Undertakings (Protection Employment) Regulations 2006 may occur before contractual completion where the transferee has assumed responsibility for carrying on the business. The decisive question is who is responsible for running it, rather than when ownership or the purchase price passes.

An employer must initiate the process for electing TUPE representatives where none exists. Otherwise, the information and consultation duties would be ineffective. A deliberate and sustained failure to inform or consult can justify a substantial protective award.

In assessing a Polkey reduction, the tribunal must make a practical assessment of the chance that employment would have ended following a fair procedure. The employer bears the evidential burden. An appellate court should be slow to substitute its own assessment.

The claimant was employed by Commercial Motors (Newport) Ltd. Following arrangements for Commercial Motors (Wales) Ltd to acquire and operate Newport's business, Wales took over its running and paid staff wages from 2 February 2009. The claimant was then told that he had no role and was dismissed.

The Employment Tribunal held that there had been a relevant TUPE transfer on 2 February 2009. It found the dismissal automatically unfair, increased the award by 30% for failure to follow statutory dismissal procedures, and awarded 13 weeks' pay for failures to inform and consult under TUPE. It also reduced compensatory loss by 50% under Polkey.

Wales appealed those findings. The central issues were the date of transfer, the statutory uplift and protective award, and whether the 50% Polkey reduction was legally sustainable.

1. Appeal dismissed. The Employment Tribunal was entitled to find that the relevant transfer occurred on 2 February 2009. Completion of the sale on 6 March was not determinative. Wales had entered possession, taken direct responsibility for operating the business in its own right, and assumed responsibility for staff wages. Those facts showed that responsibility for carrying on the business had passed.

2. Wheeler v Patel was fact-specific and did not govern this case. In that case the purchaser had not taken over or run the business before completion and the transferor dismissed the employee. The position here was materially different. The approach was also consistent with the Directive authorities, which focus on the person responsible for carrying on the business.

3. The 30% increase under section 31(3) of the Employment Act 2002 was justified. The claimant received no written statement, no invitation to a meeting, no opportunity to make representations or appeal, and no consideration of alternative employment. The Tribunal's findings adequately explained why a mid-range uplift was appropriate. Employment Tribunal reasons must be read practically and in their context, not subjected to undue legalistic analysis.

4. The award of 13 weeks' pay for breach of TUPE was also upheld. An employer has an implicit obligation to invite affected employees to elect representatives where none exists. A confidentiality agreement did not remove the duty, and the deliberate withholding of information was a serious and sustained breach. Transferor and transferee were jointly and severally liable for compensation.

5. The 50% Polkey reduction disclosed no error of law. The Tribunal permissibly assessed a 50:50 chance that, after a fair procedure, the claimant would have been dismissed rather than retained in a managerial or alternative sales role. The employer bore the burden of adducing relevant evidence. The assessment was one of practical impression and judgment, to which appellate restraint applied.

• Employment Appeal Tribunal: Appeal dismissed. The Employment Tribunal's decision of 25 May 2011 was upheld on the challenged issues.
• Employment Tribunal: Found a relevant TUPE transfer, automatic unfair dismissal, statutory-procedure uplift, breach of TUPE information and consultation duties, and a 50% Polkey reduction.