Important Update: WRC confirms liability for breach of information and consultation obligations under the TUPE Regulations rests with the Transferee.
An Adjudication Officer of the Workplace Relations Commission has confirmed that where a transferor fails to inform and consult with its transferring employees, as required under Regulation 8 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (the “TUPE Regulations”), liability for such failure passes to the transferee and there is no recourse against the transferor.
The case in question, Elizabeth Collins v J Donohue Beverages Limited (ADJ-00007777), was one of three test cases against the transferor, a beverages company in receivership, for failure to comply with the information and consultation requirements under the TUPE Regulations. It was not in dispute in this case that no consultation with the transferring employees took place.
Under the TUPE Regulations, all rights and obligations of the transferor to an employee automatically transfer by operation of law to the transferee as at the date of transfer. It is clear from existing case law on this point that it is not just contractual obligations which transfer; liability for breach of statutory rights and obligations also transfer.
The relevant European Directive (Council Directive 2001/23/EC) provides that Members States may provide for joint and several liability post-transfer of both the transferor and transferee in respect of obligations which arose pre-transfer. However, the Irish TUPE Regulations do not provide for this.
The respondent transferor relied upon the decision of the Court of Justice of the European Union ("CJEU"), Berg v Besselsen [1989] I.R.L.R. 447, which held that unless a member state provides for joint and several liability in its legislation, "the transferor is released from his obligations as an employer solely by reason of the transfer".
The complainant relied upon the decision of the Labour Court in Allpro Services t/a Allpro Security Services Ireland Limited and Henrietta Pitrik (Determination No. TUD176). In that case, the Labour Court found that the transferor engaged in a "minimalistic and token fashion" with the transferring employee (the complainant in that case) in respect of its information and consultation obligations under the TUPE Regulations and the Court overturned the decision of the Adjudication Officer, ordering the transferor to pay the complainant the maximum compensation of four weeks' pay.
In the Collins v J Donohoe Beverages Limited case, however, the Adjudication Officer held that on any plain reading of the TUPE Regulations and the case law submitted, liability could not be imposed on the transferor post-transfer in respect of its failure to comply with the TUPE Regulations pre-transfer. The Adjudication Officer also noted that the jurisprudence of the CJEU "must trump that of the Labour Court”.
This is a useful decision for transferor employers who, for whatever reason, fail to comply with their obligations under the TUPE Regulations, as this decision supports the position that the transferor is effectively released of liability and all liability for such failure to comply with its statutory obligations passes to the transferee employer. More generally speaking, employers should be aware that under the TUPE Regulations employees transfer over to the transferee with all liabilities. The decision also serves as a reminder to transferee employers to have appropriate warranty and indemnity protection against any such failure on the part of the transferor employer to comply with its statutory obligations in any contractual documentation with the transferor employer.
For further advice or assistance on this matter or any aspect of the TUPE Regulations, please contact any member of the Matheson Employment, Pensions and Benefits Group.
This update was authored by Geraldine Carr, Matheson Palo Alto Office, and Edel Flynn, Matheson Dublin Office