13 November 2012

Ensure all parties are part of settlement agreement under TUPE

The nature of TUPE transfers means there are always more than one employer in the framework. As the liability of providing transferring employees with information and consultation is joint and severable, where one employer enters into a compromise/settlement agreement with an employee, does this automatically bar off claims against other actual or potential employers?

The Employment Appeal Tribunal (EAT) recently dealt with this question in Tamang v ACT Security Limited.

Background

The case concerned two employees who were employed by Reliance (now Securitas) at a site in Wembley, as security guards working at the gatehouse. On 1 April 2010 the whole of the site was leased to Euro Storage UK Ltd (Euro). On 1 June 2010 to the surprise of the Claimants they were informed that they would no longer be working for Reliance as the site had been taken over by ACT Security Ltd (ACT).

Reliance, the original employer, entered into a settlement agreement with the Claimants by way of an ACAS agreement. This agreement did not make any direct provisions in respect to the positions of Euro or ACT.

The Claimant's pursued Euro and ACT for claims of unfair dismissal, wrongful dismissal and for their failure to provide information and consultation under the TUPE regulations.  

The Employment Tribunal (ET) decision

The ET decision was made by a judge sitting alone and in the absence of representations from the companies. The judge examined the ACAS settlement agreement together with the relevant authorities and held that the Claimants could not sue Euro or ACT. It was held that the agreement with Reliance released all three companies, and in essence there had been a compromise of all the claims the Claimants wished to make against all three companies.

The EAT decision

The EAT reversed the ET's decision. On the EAT's examination of the settlement agreement and associated letters by the legal representatives, it was held that the true construction was a covenant not to sue Reliance.:

1. The only parties to the agreement were Reliance and the Claimants;
2. The express wording of the covenants was to withdraw Reliance from the proceedings and no other party.

Therefore its scope only related to Reliance and not by implication to others.

In reaching the judgement the EAT looked at the TUPE regulations and factored in that liability could only be joint and severable in respect of the parties failure to provide information and consultation, since there was no joint and severable liability in respect of the unfair dismissal and wrongful dismissal claims.

Conclusion

This decision highlights the importance of all potential parties in a TUPE transfer to be expressly included in a settlement agreement, if finality is to be achieved, particularly where there are claims of unfair dismissal where liability is not joint and severable and compensation is likely to be higher.