Employers’ duties – Honest belief – Strict liability – Transfer of undertakings

Royal Mail Group Ltd v Communication Workers Union: CA (Civ Div) (Lords Justice Waller, Hughes, Rimer): 14 October 2009

The appellant trade union (C) appealed against a decision of the Employment Appeal Tribunal (EAT) that the respondent employer (R) had fulfilled its duty under regulation 13(2)(b) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 by informing C of its genuine but mistaken belief as to the legal implications of a proposed relevant transfer.

R had announced that several of its branches would be converted to franchise status and transferred to a commercial partner to be run privately. The franchising was a transfer of an undertaking so that the contracts of the affected employees would transfer automatically to the commercial partner under regulation 4. However, R was of the opinion that no automatic transfer would take place because it had a policy of giving employees in the converting branches the choice of redeployment elsewhere or voluntary redundancy. It followed that R failed to inform C, which was the appropriate representative of the affected employees, that automatic transfers would take place. C claimed that the automatic transfer principle under regulation 4 applied in respect of some of the employees assigned to the transferring branches. It stated that R had failed to inform and consult it on the legal implication that affected those employees, which amounted to a breach of its duty under regulation 13(2)(b) to inform it of the legal, economic and social implications of the transfer. An employment tribunal held that the principle of automatic transfer under regulation 4 applied in at least some of the cases, and that R had failed to properly inform and consult C in breach of regulation 13. On appeal, the EAT held that R had been mistaken in its belief that regulation 4 did not apply, but that a genuine, albeit mistaken, belief as to the legal implications of the transfer was sufficient for compliance with regulation 13(2)(b). C submitted that the correct interpretation of the obligation under regulation 13(2)(b) was that R had to provide accurate information and that the scope of the obligation was not defined by the subjective state of R’s mind. R submitted that the obligation on an employer to provide information under regulation 13(2) was to enable an effective consultation to take place, which was dependent on the employer actually providing the information. It also argued that C’s construction would require employers to warrant the legal accuracy of the information provided, yet the legal implications of a transfer were not readily predictable.

Held: There was a strong argument that employees needed to know where they stood, and that an employer should know what the legal implications of a transfer were so that the employees could be informed. However, it did not follow that the employer had, in effect, to warrant the accuracy of the law. The EAT was correct to hold that regulation 13(2)(b) obliged the employer to describe what it genuinely believed to be the legal, social and economic implications of a transfer. The language of regulation 13(2) was not the language of strict liability or warranty. Regulation 13(2)(a) required the employer to inform the representatives of the existence and date of a future transfer, but if no transfer took place or the date was changed, no liability would arise. It was clear that the warranty of the accuracy of such subjects could not have been contemplated. Under regulation 13(2)(b), leaving aside legal implications, both economic and social implications were highly unsuitable aspects to be the subject of some warranty as to accuracy, as opposed to matters on which the employer should express a genuine view. In addition, it was common ground that regulations 13(2)(c) and 13(2)(d), which required the employer to inform of the measures that it envisaged taking in connection with the transfer, were matters for the genuine belief of the employer. It would be an unlikely construction that only one aspect of one sub-paragraph should be the subject of a warranty. Further, the sub-paragraphs were so interrelated. Economic and social implications would depend on the legal implications, and the measures that the employer envisaged would depend on all three. All were to be the subject of interrelated consultation. Legal implications could in any event be difficult to be certain about. A lawyer would not warrant the accuracy of his advice in any area of uncertainty, if at all, and it would take clear language to impose such a warranty on a non-lawyer. In addition, where consultation and debate were important, it was likely that the legislation would be encouraging openness and allowing for an employer to be able to say that the legal implications were not clear, where they were unclear, so that there could be a proper debate about it. An obligation to warrant the accuracy would probably make it impossible for an employer to say that the answer was not clear.

Appeal dismissed.

David Reade QC, Mohinderpal Sethi, Sarah Watson (instructed by Simpson Millar) for the appellant; Adrian Lynch QC, Judy Stone (instructed by CMS Cameron McKenna) for the respondent.