Appeal No. UKEAT/0338/08/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 13 November 2008
Judgment handed down on 2 December 2008

Before
THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
MR P GAMMON MBE
MR H SINGH

ROYAL MAIL GROUP LTD	APPELLANT

COMMUNICATION WORKERS UNION	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR ADRIAN LYNCH
(One of Her Majesty’s Counsel) and MS JUDY STONE
(of Counsel)
Instructed by:
Messrs CMS Cameron McKenna LLP Solicitors
Mitre House
160 Aldersgate Street
LONDON
EC1A 4DD
	
For the Respondent	MR MOHINDERPAL SETHI 
and MS SARAH WATSON
(of Counsel)
Instructed by:
Messrs Simpson Millar LLP
Solicitors
165 The Broadway
Wimbledon
LONDON
SW19 1NE	

SUMMARY
TRANSFER OF UNDERTAKINGS:  Consultation and other information
Transfer of undertakings.  The Employment Tribunal held that the transferors had failed properly to inform or consult in breach of regulation 13 of the Transfer of Undertakings (Protection of Employment) Regulations 2006.  They held that the transferors had failed to provide relevant information, including information about the legal implications of the transfer.  The employers did not genuinely believe that the implications were as they represented them to be. 

The EAT upheld the appeal and held that this was not a legitimate conclusion in the circumstances. This undermined the whole of the Tribunal’s analysis.  Case remitted to a fresh Tribunal. 
Observations on the proper construction of regulations 4 and 13.

THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1.	In this case the Employment Tribunal concluded that the appellants, Royal Mail Group Ltd (whom I shall hereafter call RMG), had failed to comply with certain obligations imposed by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) in failing to provide information to, or consult with, the respondent trade union contrary to regulation 13.

The background.
2.	The Communication Workers Union (“CWU”) is one of the trade unions recognised by RMG. Post Office Limited (“POL”) is a wholly-owned subsidiary of RMG. It operates the Crown Office network of post offices which, in April 2007, covered 450 branches. The network was losing significant sums of money, which had risen to some £70 million a year. In the period since 1986, 203 post office branches have been converted to franchise status and are being run privately. Some of these branches have been transferred to small operations and some involve larger scale transfers to such bodies as nationwide newsagent chains and supermarkets. 

3.	All these transfers were achieved on the assumption that no staff would be transferred to the franchisee. Staff were either relocated by the employers or they were given the option of voluntary redundancy. The power to transfer employees elsewhere in the operation was specifically conferred on the employers as an express term of the contract of employment which was as follows: 
“Your original place of work will be … The needs of the service require reasonably mobility. You may therefore be required to work elsewhere than at your initial place of employment, at the discretion of Royal Mail Group plc and Post Office Ltd.”

4.	In June 2006 there was a trial transfer of six Crown Office branches to W H Smith (“WHS”).   The objective was to see whether the Post Office and WHS were a good fit. 

5.	Andy Furey, who was a union official representing most of the clerical workers in RMG raised with the managing director of POL his concern that the exercise was being undertaken on the assumption that TUPE did not apply. 

6.	Mr Cook’s reply, dated 27 July, noted that this was not strictly accurate. POL accepted that there was a transfer of an undertaking by the creation of the franchise and the transfer of the business to a third party, but that transfer did not operate to transfer any contracts of the staff to the transferee because of POL’s policy of either redeploying employees or permitting them to accept voluntary redundancy. 

7.	At that stage the union did not mount a challenge to the pilot or the terms on which those transfers would occur. The Tribunal noted that, historically, the unions had not objected to this policy.  Whatever the potentially adverse short term position, the union had taken the view that in the longer run the terms and conditions of their members would deteriorate if the employees were transferred out of the public sector. Accordingly, they happily went along with the policy of re-employment or voluntary redundancy, essentially on the basis that it benefited their members.

8.	However, with the WH Smith transfer, the union began to change its tune. On 16 August Mr Furey requested the consultation period with relation to franchising at the Swansea Kingsway Crown Office to be extended until employees be given “the option of TUPE”. He also noted that CWU would represent any members who were transferred to WHS and that POL should notify WH Smith accordingly.

9.	Mr Furey received a reply from Mr Anderson, a senior director of RMG.  The terms of this reply have figured in the arguments before us, and it is necessary to spell out the details of this letter (dated 23 August 2006, page 121):  
“With respect, it is misleading to talk about employees exercising any form of “option” with regard to whether they should transfer to a transferee pursuant to the provisions of TUPE.
As you are aware, notwithstanding that POL recognises that the provisions of TUPE usually apply on the franchising of an office, its policy is to organise matters so that it does not have the effect of transferring any employee to the transferee. Accordingly, affected employees take part in a preference exercise to determine whether they would like to apply for VR or to be placed elsewhere within the Business.
In the absence of such arrangements the affected employees would transfer into the employment of the transferee. Those employees would have the option of formally objecting to being transferred. The result of that objection, however, would be that their employment would terminate with no compensation.
As you would expect, POL regularly reviews its policy in this regard. I cannot see, however, that it would be practicable to allow employees to opt in or out of transferring to the transferee and accordingly that cannot be available. If you have any alternative you wish POL to consider formally at this stage e.g. all employees automatically transferring into the employment of the transferee upon the conversion of an office (albeit with their statutory right to object being preserved), then that can be considered.”

10.	From September 2006 there were meetings between the union and POL using the offices of a facilitator, David Robertson. The intention was to hold informal discussions concerning the reduction in the Crown network. CWU sought to rely upon TUPE as a way of protecting the terms and conditions of those who had to be franchised out. They were at that stage proposing that they would secure recognition and collective bargaining with the franchisees. The application of TUPE to these transfers would assist that objective.

11.	There was an initial meeting with the facilitator on 5 September, followed by further meetings on 4 and 5 October 2006. There was a recognition that franchising was unavoidable, but CWU wanted to be able to seek greater protection for their members than TUPE itself would achieve. It envisaged tripartite agreements between POL, the union and the franchisee, and that it would be able to negotiate more favourable terms with the franchisee after the transfer. 

12.	At the next facilitated meeting on 16 October 2006 the differences and tensions as to the application of TUPE to these transfers became very apparent. The union continued to assert that the individuals should be given the right to transfer; RMG insisted that the effect of their policy was that no contracts were terminated by the transfer since they were exercising their right to re-deploy staff or offer them voluntary redundancy.  They considered that TUPE would lead to less satisfactory terms and conditions, and that the potential partners would not want CWU in any event. The Tribunal noted that underlying these stances was the recognition that staff might prefer not to be subject to TUPE but to be given the traditional options of transfer or voluntary redundancy.

13.	At about this time Ms Ilesley, head of Industrial Relations at POL, made a presentation on the effects of TUPE.  The Tribunal noted, however, that she admitted in evidence that she had never read it.  She informed the persons present that in 2006, 498 people had been affected by a transfer; 176 were redeployed, and 282 left on voluntary redundancy, the average package being £23K.  If TUPE were to apply, the only options for staff would be either to transfer or resign.

14.	Meetings continued in November and December, but they focused on matters other than TUPE. The differences on that topic were by then clear and apparently irreconcilable. 

15.	There was a final facilitative meeting on 15 January 2007. The principal question identified at that meeting apparently was “How will the positive consultation period carry over into the negotiation phase?” Mr Robertson accepted in evidence, however, that the phrase “consultation” was not apposite because the facilitative phase was not properly consultation.

16.	On 26 January 2007 Mr Cook attended the CWU postal executive meeting. Mr Furey’s evidence was that his impression of Mr Cook’s stance was that he was trying to avoid the TUPE provisions applying on the transfer to franchisees.  POL considered that the application of TUPE terms would discourage potential franchisees from bidding for the contracts.  They would not want to pay the higher terms and conditions which POL had traditionally been paying.  There was a risk that if there was not a franchising of a major part of the Crown Office network, the whole operation would be franchised out.

17.	 There were then what the Tribunal referred to as “make or break” negotiations on 19, 20 and 21 March. They covered a full range of issues regarding the future of the Post offices.

18.	At that stage POL did not identify the intended franchise partner, although they knew it would be WHS.  Moreover, the network of post offices to be preserved was now 370 rather than the 300 or 320 which had been mooted earlier.

19.	Negotiations broke down on 22 March 2007.  The Tribunal’s impression was that this was because of a breakdown over pay negotiations.  By then, the CWU had taken what the Tribunal say was an increasingly aggressive stance on the issue of TUPE. In particular, they wanted to preserve bargaining rights and the effect of collective agreements. POL was taking the view that the transfer to WHS was extremely important and that it would go ahead with it without the union’s agreement. POL did, however, agree to improve voluntary redundancy terms on condition that staff signed away their TUPE rights.

20.	On 29 March 2007 Alan Cook wrote to the work force. He warned that the union’s stance was putting the whole deal in jeopardy. Mr Furey wrote to Mr Cook on 29 March 2007 setting out the union’s position that TUPE applied to the franchises, that the company should negotiate a collective agreement on the measures that would impact on the employees, and that both POL and any franchisees would be under the obligation to adhere to the regulations and in particular, to consult formally with the union. He asked to be informed when formal consultation with the CWU would begin.

21.	Mr Cook’s formal response on 3 April 2007 was that no formal agreement with the franchise partner had been reached, that there had been discussion about the shape and size of the network at earlier discussions in March, and that they were proposing to enter into formal` consultations once the deal was signed and they were in a position to announce plans.

22.	On 18 April 2007 Mr Cook telephoned Mr Furey to tell him that the agreement with WHS had indeed been signed. He told Mr Furey that Mr Furey would receive a briefing which was being sent to employees and that this would be before the employees received it, although that did not in fact happen. 

23.	Mr Furey then received copies of the briefing notes for managers and the hand outs which staff were to use at the briefings on that day. He was told in a covering email that 6 branches would go into consultation immediately, 63 would go into consultation in May and July, and 15 had been told that their future was still uncertain. The remaining 373 branches would remain in the network. The last paragraph of the email said this:
“Please do not hesitate to contact me if you have any queries with any of this material or wish to engage in further discussion around any aspect of these communications either franchising or the proposed pay deal.”
At this stage, there had been no agreement between POL and WHS regarding the franchising arrangements, or at least if there had, the Tribunal was not shown them. The Tribunal had no knowledge of the terms of the franchise agreement regarding employees or any indemnities entered in relation to potential TUPE liabilities. 

24.	POL staff were briefed on the morning of 19 April 2007.  They were told the reason for the transfer, namely the significant annual loss, the number of branches it was proposed to transfer and the fact that WHS had been chosen because it was a well-established and respected  high street retailer, and the pilot franchises had been successful. The key commercial reason for the proposal was to reduce costs. The conversion was to start in August 2007, and the timetable for public consultation was to begin immediately. Staff were told that if their branches were closing they could either remain in the service or receive voluntary redundancy. In relation to the possibility of employment with WHS the briefing said this:
“WHSmith have said that they would like to benefit from the experience Post Office colleagues could bring to their business. They will offer a bonus to those staff who join WHSmith and further details will be provided to those staff who register an interest.
They have a good reputation as an employer and offer competitive terms and conditions to staff ….”

25.	The staff were told that RMG and the union had not reached an agreement about the franchising arrangements, but a deal was still being sought. The possibility of enhanced sums was identified, including the fact that they would be paid but only on the signature of a compromise agreement that would involve them giving up any right to automatic transfer to WHS under TUPE.

26.	The whole attitude to TUPE was summarised in the following question and answer 

(para 4.31 of the decision): 
“Q6 Will Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply?
The franchising of a Crown office will constitute the transfer of an undertaking for the purpose of TUPE. However our usual position is that we either redeploy colleagues to another comparable position at a nearby Crown Office or elsewhere within Royal Mail Group. Alternatively colleagues may accept an offer of VR before the conversion of the branch so that the employees do not transfer into the employment of the franchisee under TUPE. For branches converting to a WHSmith franchise we will pay colleagues who sign up for VR an additional compensation payment of between £500 and £5000 (pro rata in the normal way for part time employees) dependant on the size of the VR payment. This is to compensate those colleagues for waiving their right to transfer to WHSmith under TUPE.”

27.	With regard to a particular question stating: 
“Can I claim a transfer to WHSmith under TUPE …?” 
the answer was this:
“Post Office colleagues whose branches are converting to WHSmith can either opt to take voluntary redundancy or will be redeployed to another role within Royal Mail Group. TUPE would only apply if a colleague’s employment was terminated as a result of the conversion. As all colleagues have the option of being redeployed, they do not have a right to claim TUPE.”

28.	The Tribunal then set out the position as regards the talks with the CWU, as follows (paras 4.35 and 4.36 of the decision):
“The next point to note is that there was no evidence of any talks with the CWU directly about the franchising arrangements immediately after the announcement. There was no evidence of the formal consultation promised in Alan Cook’s letter of 3 April. The prime focus was on briefing and consulting with staff with a view to seeking their preferences regarding their future. The union were told of staff meetings and afforded the opportunity to address those meetings, they were permitted to talk to individual staff about their options and to accompany them to meetings with managers. Some officials used those opportunities to tell staff that they had TUPE rights which were not being honoured by the current proposals. Further there was evidence of managers and local union representatives working together, as they would traditionally do, to solve individual issues, such as the placement at an appropriate local office near to home of a staff member at Forest Hill with acute carer needs in relation to her working arrangements.
The whole feel of the process going forward from 19 April was of a redundancy exercise. Staff were seen on a one to one basis to obtain their preferences as to voluntary redundancy or transfer and to deal with specific questions on their redundancy entitlements. The Tribunal did not find that the CWU were consciously kept out of such contact with their members, at least on the evidence they heard. However the Tribunal did form the impression that the task of communicating the message and obtaining preferences was undertaken at a fast pace, which challenged CWU administrative arrangements and resources. Contact was not always made to advise union representatives of upcoming meetings at branches, there were confusions as to who was the appropriate representative for a particular branch or the union did not have enough people to field to cover all the meetings happening in such close succession.”

29.	On 9 May 2007 a formal notification was sent to Mr Furey of the first 24 intended transfers “following appropriate consultation”. (That means transfers of branches, not individuals.) The notification was stated to be in formal compliance with both TUPE and redundancy consultation obligations. It included details of the fact of transfers, where they were to take place, and the reasons for them, namely in broad terms, costs. The Tribunal thought that the letter was a standard one used by RMG to deal with redundancy consultation, even though it ostensibly claimed to be a requisite consultation document with respect to TUPE also. 

30.	There were no formal meetings in the period April to June. On 19 June 2007 Nick Childs, Policy Adviser to the union, raised with POL the question whether members who wished to transfer employment to WHS would be entitled to the lump sum continuity payment. The answer was as follows:
“Colleagues in 70 branches converting to WHSmith have the option of redeployment or voluntary redundancy. Therefore no-one will transfer under TUPE.”

Mr Childs contended that his members would have the legal right to transfer to WHS under TUPE if they refused redeployment and refused voluntary redundancy.

31.	RMG’s position remained that that was not so. By late June industrial action was threatened and also a boycott of WHS stores. On the eve of the first strike on 29 June 2007 there was a meeting with Jackie Ilesley and Mr Furey dealing with redundancy issues. There was no consultation on TUPE. The CWU were at that time supplied with a copy of the compromise agreement which employees in receipt of voluntary redundancy were expected to sign. The agreement was in the following terms:
“While the Company, Post Office Limited and WHSmith Retail Limited …, which is a party to the agreement, do not consider that [the TUPE Regulations] apply in respect of you in any way, it has been agreed that … you will enter into this agreement including the release of any prior claims against the Company, POL or WHS.”
The agreement also stated that the dismissal was by reason of redundancy. It was specifically provided that if WHS were to offer employment on new terms then the payments made under the compromise agreement would be in full and final settlement of any claims or rights of action that might arise.

32.	On 6 July 2007 certain union officials met POL representatives. The meeting focused on the details of the redeployment processes. Attention was drawn to a letter from the Minister of Employment Relations and Postal Services, Mr Jim Fitzpatrick. No-one knew what the letter stated at that stage, but subsequently a copy was shown to the employers. It said this:
“I understand that there are no compulsory redundancies planned and staff affected will have the choice of another role within Royal Mail or a voluntary redundancy package. They will also be able to apply for roles with the franchisee. TUPE applies automatically as a matter of law unless individual employees choose to be redeployed within the Royal Mail or decide to accept an offer of voluntary redundancy.”

33.	Mr Reeves, one of the union officials, said that he considered that POL had misled employees with regard to the effect of TUPE.  POL’s response was that they had the right to transfer employees, but were in addition giving the option of voluntary redundancy. Either way, the employees had no right or entitlement to compel WHS to accept them on transfer. This was because the contracts were “not otherwise terminated by the transfer” within the meaning of regulation 4(1).

34.	The first two Post Offices closed on 8 August 2007 and the WHS branches opened the next day. 

35.	The Tribunal noted that whereas some individuals had expressed a preference to transfer under TUPE - for example, a severe diabetic with travel difficulties and a single mother with a severely disabled child - nonetheless there was no incidence of anyone actually pursuing a claim to a right to transfer to WHS.  No-one took an unfair dismissal action before a tribunal, for example.  It appears that either there was satisfactory redeployment within the Post Office or the employees accepted the voluntary redundancy terms.

36.	However, not all staff were actually redeployed into new posts by the relevant transfer dates.  Some were kept on at the Post Offices completing final accounts, and dealing with property until after the transfer, although they did not work for WHS.  Others were assigned to other projects pending a placement.  Accordingly there was not necessarily a total cessation of business on the date of closures. 

37.	The Tribunal also noted that there were a number of fixed term and temporary staff who were affected by the transfers.  If they had more than two years’ continuous service then they were given similar options to full time staff.  If not, they were sometimes redeployed, or else their contracts were terminated- sometimes at the point of transfer- depending on the individual circumstances. None of them, however, worked for WHS as a result of being transferred. 

38.	These proceedings were conducted taking four test cases, namely the post offices at Aylesbury, Forest Hill, Gillingham and King’s Lynn respectively.  The Tribunal identified the dates of particular meetings with staff with regard to these four transfers.  In each case the staff were given preference forms and typically a few weeks in which to decide whether to accept voluntary redundancy or not.  In the overwhelming majority of cases staff chose voluntary redundancy, in some cases because they could not accept the alternative job offered because it involved significant travelling which might interfere with child care responsibilities.

Applicable law.
39.	The general principle is that where there is a TUPE transfer, the staff employed in the business do not have their contracts terminated by the transfer but are entitled to go across to the transferee on the same terms as they enjoyed with the transferor (subject to certain exceptions)   The domestic law is found in the TUPE regulations which give effect to the Acquired Rights Directive.  This basic principle is achieved by regulation 4 which is as follows: 
“4(1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee …
(3) Any reference in paragraph (1) to a person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to a relevant transfer, is a reference to a person so employed immediately before the transfer, or who would have been so employed if he had not been dismissed in the circumstances described in regulation 7(1), including, where the transfer is effected by a series of two or more transactions, a person so employed and assigned or who would have been so employed and assigned immediately before any of those transactions … .”

40.	Regulation 4(7) to (9) then deals with the position of an employee who does not wish to transfer and objects to being transferred. He cannot be compelled to do so, but unless the transfer involves a substantial change of working conditions to his material detriment, he is not deemed to have been dismissed by the employer if he chooses to exercise that right.  

41.	Regulation 7 provides that in certain circumstances a dismissal connected with the transfer will be unfair: 
“7(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is –
(a)	the transfer itself; or
(b)	a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce … .”

42.	Regulation 13 of TUPE deals with the obligation to inform and consult which lies at the heart of this case.  It is in the following terms, so far as is material:
(2) Long enough before a relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees, the employer shall inform those representatives of –
(a)	the fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it;
(b)	the legal, economic and social implications of the transfer for any affected employees;
(c)	the measures which he envisages he will, in connection with the transfer, take in relation to any affected employees or, if he envisages that no measures will be so taken, that fact; and
(d)	if the employer is the transferor, the measures, in connection with the transfer, which he envisages the transferee will take in relation to any affected employees who will become employees of the transferee after the transfer by virtue of regulation 4 or, if he envisages that no measures will be so taken, that fact.
…
(4)The transferee shall give the transferor such information at such a time as will enable the transferor to perform the duty imposed on him by virtue of paragraph (2)(d).
…
(6) An employer of an affected employee who envisages that he will take measures in relation to an affected employee, in connection with the relevant transfer, shall consult the appropriate representatives of that employee with a view to seeking their agreement to the intended measures.
(7) In the course of those consultations the employer shall –
(e)	consider any representations made by the appropriate representatives; and
(f)	reply to those representations and, if he rejects any of those representations, state his reasons.”

43.	The definition of “affected employees” is found in regulation 13(1) in the following terms: 
“In this regulation and regulations 14 and 15 references to affected employees, in relation to a relevant transfer, are to any employees of the transferor or the transferee (whether or not assigned to the organised grouping of resources or employees that is the subject of a relevant transfer) who may be affected by the transfer or may be affected by measures taken in connection with it; and references to the employer shall be construed accordingly.”

It is pertinent to note that this definition does not limit the concept of “affected employees” simply to those who will or might be transferred.  That is put beyond doubt by the words in brackets, since only those assigned to the part of the operation transferred will be transferred (see regulation 4).  So it is envisaged that others may be affected by the transfer and measures may need to be taken with respect to them.  If that is so, then the regulation is triggered.

44.	Regulation 15 sets out the consequences of failure to inform and consult. In substance the tribunal may make a declaration of breach and award compensation to the affected employees which, by regulation 16, may be up to 13 weeks’ pay for each employee.

The parties’ submissions before the Employment Tribunal.
45.	The case before the Tribunal was that there had been no proper provision of information or consultation in accordance with regulation 13.   

46.	The claimants contended that there was a relevant transfer with respect to each franchise and that the employees had a right to transfer across. Each and every employee at the Crown Office branch had the right to be transferred and was affected by the transfer. Once TUPE was engaged all employees had an automatic right to transfer and the parties could not by agreement remove that right. The relevant staff should have been informed of this as part of the legal implications of the transfer, and had they been, that would have necessarily involved the employers notifying them of the social and economic implications which would result from transferring to WHS, as well as the measures which the transferee intended to take with respect to them.

47.	Furthermore, consultation could only start after the transferee had been identified in April.  In fact there was no proper consultation.  The meetings at the end of June and early July were only about the proposed alternatives of redeployment and redundancy and in any event they were after extensive discussions with individuals.  Collective consultation ought to have taken place before individual consultations. There was in reality no TUPE consultation at all.  Moreover, there were no consultations at all about fixed term staff whose contracts had ceased or not been renewed on transfer.   This was a serious default justifying the maximum award.

48.	The claimants accepted that a permanent assignment of staff away from the transferring business well before the transfer might avoid TUPE but there was no such clear prior assignment here.  Indeed, some of the staff had remained in the business transferred until after the date of transfer.  The employers had never identified that there would, or even that there could, be transfers under regulation 4 with respect to any of the staff. 

49.	The employers submitted that the duty to provide information as to the “legal, economic and social implications” of the transfer for any affected employee; and the measures which the employer envisages taking in relation to any affected employees, must relate to the employer’s beliefs as to what these consequences and measures were. The information had to be with respect to how they understood the position.  Accordingly, if the transferor does not believe that employees will transfer to the transferee, then the regulations will not apply with respect to transferred employees. In particular, if the transferor genuinely does not believe that the transferee will engage any staff as a result of the transfer, then regulation 13(4) cannot apply.

50.	As far as the provision of information is concerned, it need only be provided in time to enable consultations to take place before the actual date of the proposed transfer. There must be a proper opportunity to consult before that date.  Here that obligation was complied with.

51.	On the facts here, RMG genuinely believe that in practice the policy they had adopted meant that none of the employees would transfer under TUPE either because they were not employed at the relevant time in the business or at least the part transferred, or they were not “persons whose contracts would otherwise have been terminated by the transfer” within the meaning of regulation 4.  RMG had made clear that TUPE applied to franchising arrangements, but had also made it plain to the employees that they would not be transferred. 

52.	The issue for the Tribunal was not whether the company’s position on TUPE was right but rather whether it was a genuine understanding of how the law would operate.  There had been numerous meetings between union, employees and employers. Discussions about potential franchises had commenced in August 2006.  Thereafter information was provided to the union, as the law requires, once the announcement of the WHS deal was made on 19 April 2007.   

53.	There were then a whole host of meetings with staff, but which union officials could attend, setting out the options.  Further meetings with the unions took place on the 6 and 10 July involving a discussion of placements and the terms of the compromise agreement.  Furthermore, all this must be seen against the background of extensive discussions for over a year.

54.	The Tribunal should not adopt a nit-picking approach.  In substance there had been full compliance here even if the focus was only on the period after the formal notification of transfer in April 2007.  Alternatively, any breach was highly technical and should be reflected in minimal or nominal compensation. 

The Tribunal’s conclusions.
55.	The Tribunal recognised that until the bulk transfer to WHS it had suited all parties to, as they put it, “ignore TUPE” on the basis that the terms and conditions available within POL were significantly better than those which were likely to be maintained over time by any transferee. The position was otherwise with respect to WHS and the union wished to obtain recognition and be able to negotiate better terms for staff. Hence they withdrew their acquiescence to the previous policy. 

56.	The Tribunal considered that RMG had taken the view that the commercial reality was that no franchise partner would take POL staff on current POL conditions. The franchises were crucial commercially to the organisation; RMG considered that if they had to apply TUPE to the staff, they would not get the deal they needed. 

57.	The position of the two parties about TUPE had become irreconcilable by April 2007.  Thereafter RMG had gone over the heads of the union and approached the employees directly. Although there had been detailed information provided about the scope of the proposal and the reasons for it in negotiations leading up to March 2007, thereafter the provision of information on the franchise proposals ceased. There never was any formal consultation, as promised by Mr Cook in his letter of 3 April.  The meetings, when they eventually occurred, were meetings about redundancy and not about TUPE. 

58.	The Tribunal observed that the meaning of the phrase in regulation 4 “which would otherwise have been terminated by the transfer” was a difficult one. However, it did not consider that regulation 4 was, in fact, critical in this case. The issue was whether regulation 13 applied and the Tribunal took the view that the authorities relating to regulation 4 were of limited value.  

59.	Having stated that, we have to say that thereafter the Tribunal appears to have taken the view that it must have been plain to RMG that some of the staff at least would be subject to the automatic transfer principle. They were not permanently assigned away from the entity prior to the transfers; many were retained at branches until after the transfer date or held in limbo until a job was found for them. Temporary staff had their contracts terminated at or close to the point of transfer. The Tribunal stated that on any conventional reading of TUPE, and avoiding deciding the issues around the legal effect of the mobility clause, the automatic transfer principle would apply.

60.	The Tribunal then reached its conclusion that RMG did not genuinely believe that the automatic transfer principle was excluded.  It did so in the following terms without ever addressing the company’s contention that the effect of using the mobility clause was that they were acting lawfully. 
“…By reference to the Tribunal’s findings of fact their view is that this is not a case where Royal Mail genuinely believed the Regulations did not apply to give staff a right of transfer to WHS. That is not the line they took on the 2006 pilot. That position is not consistent with the terms of the compromise agreement, including WHS as a party. Royal Mail themselves in communications to staff referred to compensating staff for “waiving their right to transfer to WHSmith under TUPE”. That is not reconcilable with assertions that colleagues “do not have a right to claim TUPE”. So, on the facts the Respondent cannot make out their submission that they acted by reference to their genuine belief.”
The reference to the line taken in August 2006 is a reference to the letter sent by Mr Anderson, which we have set out in full above (paragraph 9).

61.	Having reached the view that the decision was not genuine, the Tribunal inevitably concluded that there had been a failure to provide the necessary information.  They accepted that there was broad compliance with regulation 13(2)(a), but not with regulation 13(2)(b) particularly with respect to the failure to provide information about the legal implications of the transfer.  RMG had totally ignored the possibility of an automatic right to transfer. They expressed their conclusions as follows (para 6.45): 
“… On the Tribunal’s findings of fact Royal Mail engaged in a formal stand off with CWU, both sides acting on legal advice, as to the effect of a transfer and in that context refused to admit to them the possibility of an automatic right to transfer. The Tribunal have found that the position adopted by Royal Mail in that stand off was not one genuinely held. They did not admit to staff either the right to transfer, except in the context of seeking a waiver of their rights. Giving purposive content to Regulation 13(2), Regulation 2(b) in relation to provision of information on the legal implications of the transfer was not on the facts complied with.”

62.	This failure in the Tribunal’s view thereafter tainted the information that should have been made available under regulation 13(2)(c). Their reasons were as follows: 
“… Again, by reference to the Tribunal’s findings of fact the Tribunal finds non-compliance. Royal Mail felt obliged to push through the conversion programme on the basis that no staff would be given the automatic right to transfer to the transferee. Their reasons for adopting that position were commercial; the need to achieve a large scale saving of costs. On the Tribunal’s findings of fact Royal Mail knew, as they recited in August 2006, that offering redeployment and voluntary redundancy did not remove the right to automatic transfer but they never articulated to the CWU in the 2007 exercise that possibility. On the facts the transfer away of staff was knowingly not a “blue water” exercise, temporary staff were ceased at the point of transfer, staff were kept on past the point of transfer or held as surplus, without a job to go to. Giving a “genuine belief” meaning to Regulation 13(2)(c), never mind giving it a purposive meaning, there was not a frank and full provision of information about the measures Royal Mail envisaged in connection with the transfer. Rather there was a provision edited for a commercial and political purpose. It is not possible to find incomplete information about legal implications but satisfactory information about measures because the two are inextricably factually linked.”

63.	No information had been provided as to what WHS envisaged and indeed there was nothing provided to the Tribunal to show what the relationship was between WHS and RMG.

64.	Thereafter, the Tribunal inevitably found breaches of the obligation to consult under regulation 13(6) and 13(7). They accepted that it was necessary to look at matters broadly and not adopt a nit picking approach to the question of information supplied. They specifically rejected the claimants’ contention that the rules are rigid and prescriptive as to the sequence in which various steps relating to consultation must be taken. Notwithstanding this, they concluded that the failure by the employers to consult as promised by Mr Cook in his April letter, and the fact that arrangements were made and staff preferences processed prior to union meetings, together with the three-month gap between the announcement of the WHS deal and the first meeting with the union, meant that there could be no meaningful change made to the proposed steps before closure took place.

65.	This may have been intended to indicate that even if RMG had acted genuinely in their analysis of the automatic transfer principle, there was still a breach of regulation 13.  However, the Tribunal’s conclusion with respect to consultation indicates that this is not a safe reading of the decision.  The Tribunal said this (para 6.48):
“In the Tribunal’s view without consultation about TUPE after the WHS deal was announced there could not be adequate consultation satisfying TUPE. Without disclosure of required information about legal implications of the transfer and measures proposed by the transferor in connection with the transfer there could not either be adequate consultation under Regulation 13; all were inextricably linked.”

66.	In short, the disingenuous position adopted with respect to the automatic transfer principle led ineluctably to the finding that there was a failure to provide information as to the relevant measures, which in turn meant that no proper consultation took place. There were no special circumstances which relieved the company of its regulation 13 duty.

67.	 The Tribunal made a declaration of non-compliance in relation to regulation 13 but left open the question of remedies until the issue of who were “affected employees” had been determined.

The grounds of appeal.
68.	RMG’s submission in a nutshell is this.  The Tribunal erred in law in concluding that there was never any genuine belief that staff would not transfer.  The finding was based on a number of false premises and was unsustainable. In addition, it was reached in breach of natural justice because RMG had no notice that this was an issue in dispute.

69.	 If the Tribunal’s conclusion on this point was incorrect, it followed that the Tribunal’s conclusion that regulation 13 was infringed was unsupportable.  The obligation under regulation 13 is to inform the union about the employer’s genuine belief about the implications of the transfers and the measures it was proposing to take.  Here RMG did not believe that any of the affected staff would transfer as a matter of law.  The previous exercises in contracting out had not involved the transfer of staff, and there was no intention or belief that it would happen on this occasion.  

70.	It was RMG’s belief, on legal advice, that as a matter of law, the policy it adopted precluded any automatic transfers taking effect.  In those circumstances it would have been false and misleading to have provided information about something that RMG did not believe would happen.  If and insofar as the Tribunal was finding that the transferor must, when giving the legal implications of the transfer, accurately state their effects as a matter of law, that was wrong.  The transferor does not warrant the accuracy of the information he provides and is not liable merely because it is wrong.

71.	In any event, the information was not wrong.  The better view was the policy adopted by RMG involving the use of the relocation clause did indeed have precisely the consequences stated by them, namely that no staff did automatically transfer pursuant to TUPE.  Regulation 4 only effects an automatic transfer of those staff whose contracts would otherwise have been terminated by the transfer; here the staff were retained - or at least had the right to remain with RMG if they so wished - notwithstanding the transfer.
 
72.	In short, RMG says that the information provided as to who would transfer was correct; it was believed by RMG to be correct and the Tribunal could not properly have found otherwise on the evidence before it; and even if not correct, it was RMG’s genuine belief as to the legal implications of the transfer and therefore gave rise to no breach of regulation 13.  There had been a proper provision of information and consultation thereafter.
 
73.	The union submits that there was no error in the Tribunal’s analysis.  On the contrary, they were wholly entitled to form the view that the employees - and certainly those still employed in the business at the time of transfer - were entitled to transfer pursuant to regulation 4.  That is supported by the authorities and is in accordance with the policy underlying the Directive.  The fact that some staff at least would automatically transfer ought to have been clear to RMG since they always appreciated that they would be using staff to work in the businesses transferred right up until, and even beyond, the point of transfer.  The information provided, and the consultation thereafter, ought to have reflected that fact.  RMG was wrong to say that it was only obliged to state its own understanding of the legal position; it had objectively to state what the legal implications were as a matter of law.

74.	In any event, even if RMG were correct and the transferor’s genuine belief was enough, the Tribunal had found as a fact that RMG did not genuinely believe the position they were purporting to adopt.  That finding otherwise was plainly sustainable and could not properly be challenged since it was not conceivably perverse.  There was no unfairness in reaching that conclusion.  On the contrary, RMG itself was asserting that a genuine belief was enough to comply with regulation 13, and it was therefore incumbent on the Tribunal to address that issue.  

75.	It is trite law that the Tribunal is master of the facts; it is not for the EAT to assess the weight of evidence; and that a decision which has some evidential support can be challenged only if it is perverse.  That is an exceptionally high hurdle as the well known passage in the judgment of Mummery LJ in Yeboah v Crofton makes clear.  It was nowhere near being met here.

76.	Finally, even if RMG were right about all these things, they had not consulted properly with respect to the staff who remained with them.  The information was provided late, was incomplete, and the consultations were all after the individuals had been consulted and were in reality, as the Tribunal found, only about redundancies.

Conclusions.
77.	This case raises a number of issues.  It seems to us that that the contending positions can be analysed under four heads:
(1) Did RMG in fact misconstrue the proper effect of regulation 4?  

(2) If the Tribunal was not entitled to reach that view, was RMG in any event in breach of its duty to inform and consult for getting the legal position wrong (assuming that it was wrong) and thereafter informing and consulting on a false premise?

(3) Assuming they did get it wrong and the staff - or at least some of them -ought to have transferred automatically to WHS pursuant to TUPE, was the Tribunal entitled to conclude that RMG did not genuinely believe that staff would not automatically transfer to WHS?  

(4) Assuming that RMG was entitled to take the view that it should inform and consult on the assumption that no staff would transfer to WHS (either because RMG properly construed regulation 4 or because it was enough that they stated their genuine understanding of its effects) did RMG nonetheless fail to comply with the duty to inform and consult about the effects of the transfer on the staff affected by it?

78.	We accept that it is far from clear that the Tribunal did reach any unambiguous answers with respect to either of the first two questions.  However, they are potentially decisive of this appeal, for reasons we give below, and the material findings of fact have been determined.  Accordingly, in our view we need to determine these issues in order properly to dispose of this appeal.  

79.	It is important to understand the implications of the answers to these various questions. We start by observing that both parties accept that the Tribunal never did fully engage with  question (4).  The Tribunal did not consider whether, even if RMG were right that no staff were automatically transferred, or if they genuinely believed that to be the case and their genuine belief satisfied the requirements of regulation 13, there was in the particular circumstances proper compliance with regulation 13.  There are certainly strong indications that they felt that the process had been unsatisfactory in any event, but as we have seen, the Tribunal did finally pin the breach of regulation 13 firmly to RMG’s lack of genuine belief in the stance they adopted to the automatic transfer issue.   

80.	Similarly there was no specific finding as to whether there had been proper information and consultation with respect to temporary and fixed term staff.  There is no doubt that some of these staff had their contracts terminated at the time of the transfer, but there was a dispute, not resolved by the Tribunal, whether this was as a consequence of the transfer.

81.	We would also point out that even if we felt that we could properly conclude that the Tribunal had found breaches of regulation 13 even if RMG’s belief was genuine, the failure to identify the nature and extent of those breaches could have seriously prejudiced the affected employees when it came to giving remedies.

82.	In these circumstances the parties realistically agreed that even if we uphold the appeal and find that the Tribunal was not entitled to reach the decision it did, it will nevertheless be necessary to remit the matter to an employment tribunal to consider whether there has been a breach or breaches of regulation 13 for reasons other than those specifically identified by the Tribunal.

83.	The answer to the first question is potentially decisive of the whole appeal.  This is because if RMG did properly construe regulation 4 then it is not possible to say that they gave inaccurate or false information about the legal implications of the transfer. Even if regulation 13 effectively imposes a warranty upon them to get the right answer, as the union submits, they did so.  

84.	Furthermore, the conclusion that they had properly construed the effect of regulation 4 would wholly undermine the Tribunal’s finding that RMG’s belief was not genuine.  That finding is premised in large part on the assumption that RMG were wrong in stating that no staff would automatically transfer, and that they maintained that position in discussions with the union even though they knew that they were wrong.  However, if they were right all along, this key finding of the Tribunal must be unsustainable.

85.	If RMG are wrong about their interpretation of regulation 4, then question (2) is potentially decisive.  This is because if RMG failed objectively to state what the legal implications of the transfer in fact were, and regulation 13 requires them to get the answer right, then the Tribunal’s conclusion would be sustainable in any event. If, however, they satisfy regulation 13 by stating their genuine belief as to what are the legal implications for affected employees, then question (3) becomes decisive.
  
86.	If the Tribunal was entitled to find that the belief was not genuine, then there is no basis on which the decision of the Tribunal can sensibly be challenged whatever the answers to the other two questions. (In fairness to the Tribunal that is no doubt the reason why it was not necessary for them to determine those questions.)  If RMG deliberately gave false or misleading information about the legal implications of the transfer, then as Mr Lynch realistically accepts, the Tribunal was undoubtedly correct to say that this involved a breach of regulation 13.  Not only would RMG have been in breach of the obligation to state the legal implications of the transfer, but as the Tribunal found this in turn would mean that it had failed to give further crucial information, such as the measures which WHS intended to take with respect to these staff, and was not consulting as the regulations envisaged.

87.	Finally, we note that there are certain peripheral complaints about the approach of the Tribunal which we do not think it profitable to deal with in what is already a very lengthy judgment.  The reason is this: if the Tribunal was entitled to find that RMG did not genuinely believe the stance they adopted with respect to the automatic transfer principle, then the appeal is bound to fail whatever minor blemishes there might have been in the Tribunal’s reasoning. Conversely, if RMG succeed in the appeal, so that the case has to be remitted, then the case will have to be heard again and it will be unnecessary to deal with these alleged additional errors by the Tribunal. In short, the appeal can be disposed of by concentrating on the big picture.

88.	We turn to consider the three central questions in this appeal, taking them in order.

Regulation 4.
89.	This case is, of course, about regulation13 and not regulation 4.  However, as we have said the proper construction of regulation 4 is potentially decisive of this case.  If RMG construed it properly, the appeal must succeed.  If on the other hand they did not, then the appeal will fail if the claimants are right that the legal information provided to the union must be correct and not merely genuinely held 

90.	The division between the parties on this question is this.  Mr Lynch says that under regulation 4 the only persons who are caught by the automatic transfer principle are those whose contracts would otherwise have been terminated by the transfer.  If the employee does not have his contract terminated notwithstanding the transfer, the automatic transfer provisions do not bite.  Here the employers exercised their contractual right to transfer these employees elsewhere; they were willing to retain them in employment if they wished to stay, and to give them very generous severance terms if they wished to go.  The power to transfer them was not simply adopted in the context of transfers of a business; it was a long standing contractual term which had been exercised in a variety of circumstances.  

91.	Furthermore, this approach was not inconsistent with the policy behind the Directive and the Regulations. The purpose was to secure the jobs of staff caught up in a transfer situation, but that was secured by this arrangement.

92.	Mr Sethi submits that this is a fundamental misunderstanding of the authorities and the policy underlying TUPE.  He accepts that in principle an employer with a suitably drafted mobility clause can transfer employees away from the area of work which is to be transferred and thereby escape the effects of TUPE.  He agrees with Mr Lynch that in those circumstances they would not be persons who at the relevant time were, to use the language of regulation 4, “assigned to the grouping of resources or employees”. Accordingly, they would not be subject to the automatic transfer principle.

93.	However, the position is otherwise if there are persons who are working in the business transferred at or immediately before the time of transfer.  The automatic transfer principle then kicks in independently of the wishes of the transferor, the transferee or the affected employees.  They cannot even by agreement alter the legal effects.  

94.	Accordingly, he accepts that whilst some of RMG’s employees may have been transferred out of the business long enough before the transfer not to be caught by regulation 4 (a concession which may not have been made before the Employment Tribunal since the Tribunal appears to have assumed that all were in the same boat), others certainly were caught because they continued to work right up until, and in some cases even beyond, the transfer.  Moreover, this was not the result of arrangements made at the last minute.  It was always appreciated by RMG that some of the staff would be retained in the transferred businesses to wind down the operations even after the transfer had occurred.  The automatic transfer principle inevitably applied to them and RMG should have informed and consulted on that basis.

95.	Mr Sethi relies upon a number of authorities in support of his proposition. First, and at the forefront of his submission is the decision of the House of Lords in Celtec Ltd v Astley [2006] IRLR 635.  The facts were that three civil servants were apparently seconded in September 1990 to a newly-formed North East Wales Training & Enterprise Council. In 1993 these employees opted to take up employment with the Council and resigned from the Civil Service. The issue arose subsequently, when they were made redundant, how long was their period of continuous service. They contended that their employment between the Civil Service and Celtec was continuous because there had been a transfer of an undertaking. The Employment Tribunal agreed that there had been. They held that the transfer had taken place over a period of years by a series of transactions which included the transfer of staff. Accordingly, these employees were employed at the time of transfer and their rights passed over to Celtec. 

96.	The EAT upheld an appeal on the grounds that the test for determining when a transfer took place was when occupation and control of the old business transferred to the new employer. On that basis they considered that completion was around September 1990, as indeed the parties had agreed, but since the employees were still employed by the Civil Service on that date, they were not transferred pursuant to TUPE. 

97.	The Court of Appeal restored the decision of the Employment Tribunal and the House of Lords in turn upheld the appeal from that court. It did so after having made a reference to the European Court of Justice as to whether a transfer could be continuing over a period of time, or must be deemed to have taken place at a particular time. The ECJ held ([2005] IRLR 647) that the latter was correct; the date of transfer was the date when the transferee took over responsibility for the operation of the business.  However, they also commented on the effect of the automatic transfer principle in the following terms (paras 37-38): 
“As the court has already held, implementation of the rights conferred on employees by Article 3(1) of Directive 77/187 may not be made subject to the consent of either the transferor or the transferee nor to the consent of the employees’ representatives or the employees themselves, with the sole reservation, as regards the workers themselves, that, following a decision freely taken by them, they are at liberty, after the transfer, not to continue the employment relationship with the new employer (see case 105/84 Danmols Inventar [1985] ECR 2639, paragraph 16 and d’Urso, cited above, paragraph 11).
It follows that, with that sole reservation, contracts of employment or employment relationships existing on the date of the transfer referred to in Article 3(1) of Directive 77/187 between the transferor and workers assigned to the undertaking transferred are automatically transferred from the transferor to the transferee by the mere fact of the transfer of the undertaking (see d’Urso, cited above, paragraph 20, and case C-305/94 Rotsart de Hertaing [1997] IRLR 127, paragraph 18).”

98.	A majority of the court (Lord Bingham of Cornhill, Lord Hope of Craighead and Lord Carswell) concluded that applying that principle to the facts, the transfer took effect in 1990.  Lord Roger of Earlsferry considered that the transfer took place in 1993. The issue then arose whether the employees were employed by the Civil Service from 1990 to 1993. On the face of it they were simply at that stage seconded to the council. That was certainly how the parties understood the position. Had that been correct, then on the analysis advanced by the appellant in this case, they could not be deemed to have been automatically transferred to the transferee because they were not “persons whose contract would otherwise have been terminated by the transfer” in regulation 4.  On the contrary, they were persons whose contracts had not been terminated notwithstanding the transfer. 

99.	It was specifically argued by the employers that the employees had made a free choice to remain in the employment of the Civil Service and to be seconded to Celtec. It was suggested that there was nothing in the Acquired Rights Directive which should preclude them from exercising that right.  However, the House of Lords held that the effect of the Directive was that these employees were, in fact, transferred in 1990 notwithstanding that this had not been appreciated by anybody at the time, and even if it were against their own wishes. 

100.	Lord Hope, with whose judgment, Lord Bingham and Lord Carswell concurred, considered a number of decisions from the European Court of Justice in addition to the decision in the Celtec case itself, including Mikkelsen v Danmols Inventaar A/S 105/84 [1985] ECR 2639 ECJ, D’Urso v Ercole Marelli Elettromeccanica Generale SpA, C-362/89 [1992] IRLR 136 ECJ, Foreningen af Arbejdsledere I Danmark v Daddy’s Dance Hall A/S 324/86 [1988] IRLR 315 ECJ and Katsikas v Konstantinidis, C-132/91 [1993] IRLR 179 ECJ and drew the following conclusions (paras 54 and 55):
…The starting point is to be found in the general rule that the contracts of employment of workers assigned to the undertaking transferred are automatically transferred from the transferor to the transferee on the date of the transfer. Then there is the fact that it is not possible for this rule to be derogated from in a manner unfavourable to the employees. The rights conferred on them by the Directive may not be made subject to the consent either of the transferor or the transferee nor the consent of the employees’ representatives or the employees themselves: Daddy’s Dance Hall, paragraph 14; d’Urso, paragraph 11. The gulf between what the parties themselves may have contemplated and what the rule requires may be quite large, as it is in this case. My noble and learned friend Lord Rodger of Earlsferry says that this puts in place a fictional version of events in place of what actually happened. But, as I read paragraphs 37 and 38 of the court’s judgment, it is the rule that must prevail. So I cannot agree with him that, to accommodate the arrangements that the parties thought they were entering into, the date of transfer must be taken to be 1 July 1993. The transfer took place in September 1990 when responsibility as employer for carrying on the business of the unit transferred moved to the TECs from the DoE.
On the other hand it is a fundamental right of the employee to be free to choose his employer. So he cannot be obliged to work for an employer whom he has not freely chosen: Katsikas, paragraph 32. From this it follows that it is open to an employee whose contract of employment would otherwise be transferred automatically from the transferor to the transferee on the date of the transfer of his own free will to withdraw from this arrangement by declining to enter the employment of the transferee: Mikkelsen, paragraph 16, Berg, paragraph 12; Katsikas, paragraph 32. That, then, is the extent of the sole reservation referred to in paragraph 37. It does not, as my noble and learned friend Lord Mance suggests, work the other way round. It does not enable effect to be given to an employee’s wish to continue to be employed by the transferor while continuing to be employed in the unit to which he has been assigned after its transfer to the transferee. But the application of the rule that he can withdraw from the arrangement depends on two things: first, that the employee is in a position to choose whether or not to enter the employment of the transferee after the date of the transfer; and second, that he in fact exercises that choice by deciding of his own free will not to do so.”

101.	The effect, therefore, was that the agreement to second was not as a matter of law an effective agreement. Whatever the wishes of the parties, the effect was that the claimants had been transferred in 1990 because they had chosen after the transfer to work for the transferee.

102.	Lord Mance gave a powerful dissenting judgment.  He noted that there may have been a number of good reasons why the employees might have wished to remain with the Civil Service, and that there was no sensible reason why an inflexible rule should be adopted which would deny employees the right to remain with the transferor, even on terms that they would be seconded to the transferee.  

103.	Celtec was followed by the EAT in Scotland (Lady Smith presiding) in the recent case of Capita Health Solutions Ltd v McLean [2008] IRLR 595. In this case Mrs McLean did not wish to transfer in circumstances where the business in which she was employed was subject to a TUPE transfer. She was employed as an occupational nurse by the BBC and elements of the Human Resources Department, where she worked, were transferred out to Capita. She objected to the transfer and decided to take early retirement. The BBC proposed that she should work six weeks of her notice period on secondment to Capita assisting with the transition of the service. She agreed to that. Her pay and pensions were paid by the BBC during the period of secondment. Subsequently she brought unfair dismissal claims against both the BBC and Capita. 

104.	The issue was whether her employment had transferred to Capita. Capita submitted that her employment had not because she had objected to the transfer and her presence in Capita was explained wholly by the secondment.  The only sensible analysis was that she was employed throughout by the BBC.  

105.	The Employment Tribunal concluded that the effect of the relevant regulations (TUPE 1981) was that her employment had transferred to Capita. 

106.	The EAT held that the Employment Tribunal had reached the right conclusion, albeit for the wrong reasons. Lady Smith recognised that all parties had agreed to this arrangement and were willing at the time for the contract to be with the BBC rather than Capita, but concluded that this was not possible.  She said this (paras 42 and 43):
“Can the employee’s contract of employment with the transferor be continued beyond the date of transfer without interruption if all parties concerned agree that that is what should happen? I do not see that it can. The import and effect of reg. 5(4B) is clear and cannot be avoided by agreement, just as an agreement that employees’ contractual terms will be subject to an unfavourable variation on transfer is ineffective (Foreningen Af Arbejdsldere I Danmark v Daddy’s Dance Hall A/S [1988] IRLR 315). Thus, at best for the second respondents, if they are right in their contention that the claimant objected to the transfer, the claimant worked under a new contract of employment that ran from the date of transfer for a period of six weeks and the issue would then be: who was her employer under that contract?
Having given careful consideration to the whole circumstances, I am, however, satisfied that that issue does not arise. That is because it seems to me clear that the claimant’s employment did transfer to the second respondents on 1 April 2006, the date that the undertaking transferred. That is because when what was said and done is looked at as a whole, the only proper interpretation that can be put on it is that the claimant did not object to being employed by the second respondents. She was, clearly, only prepared to work for them for a limited period of six weeks but that being so, she cannot, at the same time, insist that she objected. What her approach shows is that she was in fact agreeable to working for the second respondents albeit only for a short period. That her preparedness was time limited does not mean that she objected to a transfer. Regulation 5(4A) does not allow for post transfer objection except perhaps in exceptional circumstances such as where employees are not made aware of the transfer in advance of it occurring, as happened in the New ISG Ltd case. There are no exceptional circumstances here and, in any event, the second respondents founded on pre not post transfer objection.”

107.	Mr Sethi also relied upon three decisions of the EAT.  In Securicor Guarding Ltd v Fraser Security Services Ltd [1996] IRLR 552 (His Honour Judge Clark presiding). One of the issues was whether it could be said that employees were assigned to the part of the business transferred in circumstances where they could be required to work elsewhere by the transferor pursuant to a mobility clause.  In fact the clause had not been activated by the employers in that case prior to the transfer.  The EAT found that the mere existence of this clause made no difference to the operation of TUPE. They were employed in the part transferred at the time of transfer. 

108.	Reference was also made to the decision in Jones v Darlow Estate Agency [1997] UKEAT/1038l, an unreported decision in which the EAT (His Honour Judge Pugsley presiding) expressly rejected an argument which is in identical terms to that advanced by the employer in this case.  That was a case where employees had been transferred out of the part of the business transferred prior to the transfer and it was argued that they were not assigned to the transferred business at the relevant time, and that their contracts had not been terminated by the transfer. 

109.	The EAT disagreed and concluded that transferring employees out in this way would enable employers to defeat the protection which the legislation was designed to achieve.  

110.	Finally in Sunley Turriff Holdings v Thomson [1996] IRLR 184 the Scottish EAT (Lord Coulsfield presiding) held that a tribunal was entitled to find that an employee who remained with the receivers of a company after the transfer had nonetheless been transferred to the transferee because he was assigned to the business transferred at the time of transfer. The fact that the parties may not have appreciated that the employee was transferred was irrelevant.  The EAT accepted that there may be some new agreement which took the employee outside the scope of the business transferred, but in the absence of that, the transfer principle would apply automatically.

111.	Mr Lynch contends that none of these cases is decisive of this point.  Sunley Turriff involved an arrangement made specifically in the context of the transfer and in circumstances where the original contract would inevitably have terminated by reason of the transfer.  Securicor was plainly right but of no relevance where the mobility clause had been invoked and exercised before the transfers. 

112.	Indeed, the EAT recognised that had it been activated the result might have been different.  Jones was obiter and in any event there was no evidence in that case that the staff were transferred in accordance with a mobility clause or otherwise with their agreement.  

113.	Celtec and Capita were both concerned with cases where after the transfer the relevant employees were actually working for the transferee; they had chosen to do so.  That was a crucial feature of those cases which distinguished them from this case. Here none of the relevant staff ever did work for WHS.  It is true that they did remain finishing off work in their old offices, but that was not carrying on the business of WHS in any way.  Rather it was doing work for RMG tidying up aspects of the business that remained with them. At no stage did they attend WHS’s premises and work for them, whether as seconded staff or otherwise.

114.	On policy terms there was no reason why these employees should be deemed to have transferred.  The purpose of TUPE was to protect jobs on a takeover, and that is what this policy achieved.  The affected employees were guaranteed a job if they wished to undertake one, and if not they received generous redundancy terms.

115.	Furthermore, whilst it is  true that the policy may have been adopted to achieve a particular commercial objective, there was no reason why the employers should not so structure matters to seek to secure certain legal outcomes.  It is not wrong, for example, for an employer to effect a share sale rather than a transfer of a business specifically in order to escape the consequences of TUPE.  Likewise here, they were entitled to take the employees out of the category who would be transferred by the exercise of the mobility clause, particularly where it could be said that the clause had been invoked in all sorts of circumstances and not merely in the TUPE context. 

116.	In our view, Mr Sethi is right to say that in the current state of the law if the employee is employed at the time of transfer in the business transferred then he will automatically transfer to the transferee.  That is so even where the employer has the power to transfer the employee away from the business transferred so that he is not assigned to it at the point of transfer.  If that is not in fact done, then the transfer takes effect.  

117.	We think that the Celtec case compels that conclusion, and the other cases, such as Capita, are consistent with it.  Even if the employee chooses to remain with the transferor, he cannot do so if thereafter he works for the transferee.  We see considerable force in Lord Mance’s dissenting judgment in Celtec.  We find it difficult to understand why a law designed to favour employees should have the effect of preventing them from remaining with the transferor and being seconded to the transferee, but that is how the House has construed the European jurisprudence and we are obliged to follow it.

118.	Of course, we appreciate that here none of the staff ever did actually work for the transferee, WHS.  However, they did remain in the business being transferred right up until the very point when the transfer took effect.  The judgment of Lord Hope makes it clear in our view that in those circumstances the transfer takes effect automatically unless the employee objects to transfer.  But that must be a genuine free choice exercised prior to the transfer.  

119.	We do not accept that it could conceivably be said that by agreeing to employment with a mobility clause, this free choice was achieved by the employer exercising the power conferred by that clause.  It may of course be that many, perhaps most, of the employees would have preferred either of the two options they were given rather than transferring to WHS, but in our judgment they could not be denied that right.  

120.	We would add this. Mr Sethi has not disputed the fact that staff may be transferred prior to the transfer and will then be removed from those persons assigned to the business to be transferred.  He accepts that this may have been the case with some of the staff here.  We would only observe that in our view it is at least arguable that the approach of the EAT in Jones is correct, so that where a mobility clause is used for the very purpose of ensuring that employees who would otherwise transfer are precluded from doing so, this is inconsistent with the policy underlying the Directive. 

121.	Of course, the employees may object to going and the transferor may be happy to keep them, but that is a different thing.  In this context it is not obvious why any distinction should be drawn between an employer who sometimes uses the power in non-TUPE situations and one who only uses it in such situations.  The question is simply whether the power is exercised in a way which frustrates the right to transfer. However, we have not heard argument on that and reach no concluded view about it.

122.	It follows that we find that in our judgment RMG did not properly construe the effect of regulation 4.  They ought to have found that the automatic transfer principle applied at least with respect to some of the staff.  

123.	We do accept, however, that even after the decision in Celtec the legal position of the staff in this case was far from clear. The employees in Celtec actually carried out work for the transferee, which was not the position here, and the other cases relied upon by the claimants were potentially distinguishable in the way suggested by Mr Lynch.  Indeed, the Employment Tribunal recognised that the meaning of the phrase “whose contracts would otherwise have terminated by reason of the transfer” was far from clear.  We do not, therefore, accept that the legal position was such as to warrant the inference, or even support the inference, that RMG’s stance could not be a genuine one. 

The objective test.
124.	Mr Sethi submits that even if the Tribunal did wrongly make a finding that the position of the claimant was not genuine, it was immaterial because objectively viewed, RMG gave wrong information about the legal implications of the transfer, at least with respect to those who were caught by the automatic transfer principle.  They ought to have been told that they would transfer unless they exercised their statutory right to object, and informed about what form any such objection should take. 

125.	Mr Sethi accepts that regulation 13(2)(c) envisages that a subjective test will be applied when determining whether an employer has satisfied that provision. He accepts that in that context the question is what measures the employer actually envisages he will take in connection with the transfer. The issue is not what measures he ought to envisage, but what measures he does in fact envisage. However, he submits that is not the position with regard to the information in paragraph (b). That does not state that the employer need only provide information as to his understanding of the legal, economic and social implications of the transfer. It is an obligation to inform about those implications, with the plain inference that the employer must inform the union as to what they actually are and not what he believes them to be. Applying the genuine belief test to this regulation would not only be contrary to the express wording, but it would also render the purpose which the process is designed to serve meaningless.

126.	Mr Lynch submits that this is a misunderstanding of the nature and purpose of the consultation provision. There is no reason to read different parts of the information obligation under regulation 13 differently. It is plain that with respect to the information about measures that are envisaged, the question is what the employer genuinely envisages he will do.  That is what he must communicate.  It may be that he will change his mind or that his plans are not fully developed, but he must then state what his current intentions are. It would be strange if paragraph (b) were to be read differently. 

127.	Moreover, the whole purpose of these regulations is to ensure that the unions have a proper opportunity to understand the employer’s position with respect to the transfer and the steps that he intends to take pursuant to it. That exercise pre-supposes that the employer states what he intends to do with respect to the affected employees, and that in turn will necessarily depend upon what he understands their legal rights to be. 

128.	The union may dispute his understanding of the position and if he gets it wrong there may be certain consequences, such as potential claims for unfair dismissal, but the purpose of the regulation will have been satisfied by the employer putting his cards on the table with respect to the matters identified in regulation 13.

129.	Mr Lynch submits that he is supported in this analysis by the decision of Millett J in Professional Civil Servants and Others v Secretary of State for Defence [1987] IRLR 373.  We will not consider that case in any detail.  Suffice it to say that we accept that it supports the proposition that the transferor need only inform of those measures which he actually envisages will be implemented, but it does not directly bear on the construction of paragraph (2)(b).

130.	Mr Sethi’s submission has some force.  In particular, we strongly suspect - although the issue was not argued before us - that it would not be a defence for an employer to say that he did not inform or consult because he did not realise that there was a transfer at all, or because he genuinely believed that there was not.  We also think that he would be liable for failing to inform and consult with respect to persons who are affected by the transfer even although he had genuinely not thought that they were.  In these contexts, therefore, an objective interpretation of the law probably is required.  

131.	However, those issues are determining the scope of the duty, in the sense of determining when and with respect to which employees it arises.  In our judgment, that is different from the question what is the nature of the duty itself? Whilst the scope of the duty may have to be objectively determined, in our view, it by no means follows that an objective test would be adopted with respect to the actual information that should be provided.

132.	In our judgment, RMG’s construction is to be preferred.  It seems to us that the purpose of these provisions is to enable the union to understand, and if necessary take issue with, the employer’s perception of the situation and the steps which he is proposing to take with respect to the transfer.  This must be what he is in fact proposing to do, not what he ought to be proposing to do.  

133.	The union’s construction means that if the employer misunderstands the law with respect to the legal implications of the transfer, he is thereafter also in breach of the consequential duties for failing to state what measures he would have taken had he properly understood the position, and indeed, what measures the transferee was proposing to take.  He then becomes liable for failing to say what measures he ought to have taken or would have taken had he properly understood the law, even though he has fully disclosed what measures he is in fact proposing to take.  

134.	In our judgment, if the intention had been that the transferor had to warrant the legal accuracy of the information he was providing, the Regulations would have said so in terms.  The sanctions for non-compliance are significant and penal, and we do not think that we should readily assume that the draftsman intended to impose a principle of strict liability in this sensitive field of labour relations. 

135.	It follows that in our view RMG was not acting in breach of regulation by misstating the effect of regulation 4 and by identifying the measures it proposed to take on the premise that its analysis of the regulation was correct.

Was the Tribunal entitled to find that RMG did not genuinely believe the stance it adopted?
136.	We have set out at paragraph 60 above the Tribunal’s conclusions with regard to this issue.  It identified four matters in particular in order to justify its conclusion.  These were the misconstruction of regulation 4; the fact that RMG had adopted a different position in August 2006 (that raises the issue of the Anderson letter); that it entered into a compromise agreement to which WHS was a party; and that it frequently referred to the claimants’ need to waive their rights to employment with WHS, thereby accepting that they had such rights.  In considering this question we bear in mind the submissions that we cannot interfere with matters of fact which are evidence based, and that any perversity challenge is likely to be upheld only in the most exceptional circumstances.  

137.	Mr Lynch does not flinch from asserting that in the circumstances of this case the finding is based on a misunderstanding of certain evidence; the Tribunal failed to focus on certain crucial evidence which strongly supported the genuineness of RMG’s position; and that the conclusion was unfairly made because the employers had no proper opportunity to deal with it. 

138.	Mr Sethi submits that the decision was sustainable and moreover he points out that at various points the Tribunal pointed out that the whole operation was driven by commercial imperatives.   The inference could fairly be drawn that the company allowed these commercial objectives to cause them to adopt a convenient view of the legal implications.

139.	As to the particular matters relied upon by the Tribunal, we do not accept that the Tribunal did in substance misconstrue the effect of regulation 4.  Equally, however, as we have said, nor do we think that the fact that RMG misconstrued it can be relied upon as evidence that they did not genuinely believe the position they adopted. 

140.	As to the second factor concerning the alleged change of position, Mr Lynch says that if one reads Mr Anderson’s letter fairly, it does not disclose any such thing.  Mr Anderson accepts that the automatic transfer principle would apply if RMG did not adopt the policy it was determined to follow, but the letter makes it clear that if that policy is adopted then none of the staff will transfer.  We agree with that reading of the letter. We accept that it cannot fairly be read so as to infer that RMG later altered its position. 

141.	We also consider that no adverse finding on genuineness can properly be made simply from the fact that RMG entered into compromise agreements with the staff, and made WHS parties to these agreements.  We entirely accept that the very fact that they entered into compromise agreements demonstrated a degree of uncertainty as to the precise legal position, but Mr Lynch is surely right when he says that the entry into compromise agreements of this kind does not begin to demonstrate that RMG’s position was not a genuine one. It is perfectly consistent to recognise that the legal advice and the position adopted in the light of it may be wrong and therefore needs to be covered in the context of the compromise agreement, whilst actually believing that the better view at least is that it is right.

142.	As to the fourth factor, we do recognise that some of the language in the documentation sent to employees does indeed suggest that the company envisaged the employees waiving their rights. Particular passages in the documents suggest not that they are being asked to waive such rights as they may have, (with RMG making it plain that they did not believe they had any); rather the documents are expressed in terms of waiving a right to join WHS as though the right exists.  However, that is picking out these passages in isolation. There are many other passages in the same set of documents where the position of RMG, namely that they did not believe that employees had a right to transfer, is made crystal clear.  In any event we do not think that this factor alone is remotely sufficient to cast doubt upon the genuineness of RMG’s stance. 

143.	Nor do we think that any significant adverse inference against RMG can be drawn from the fact that they were keen to effect the transfer and thought that the operation of the automatic transfer principle would scupper it. It certainly shows that RMG wanted to believe that advice and would have been delighted that there was a valid legal way of reaching their commercial objectives.  But it lends little, if any, support to the view that they were seeking to achieve those objectives by using means which they did not believe to be legitimate.

144.	Mr Lynch further submits that when assessing the issue of genuineness the Tribunal was obliged to have regard to the fact that the company alleged that they were acting on legal advice, and moreover they were doing precisely what they had done in many previous franchise arrangements.  

145.	We agree that the fact that the company was acting on legal advice is a factor of very great significance which the Tribunal had to address in this context. It is true that RMG did not waive privilege, but nor were they invited to do so, and nobody was apparently doubting that there was legal advice which the employers were following. Whether that advice was right or wrong is not to the point. 

146.	As far as the genuineness of the employers’ position is concerned, if the employers’ advice was that what they were proposing to do was lawful and could properly be adopted, then the position they have adopted cannot be said to be a false one. It was not apparently put to any witness that he or she had misrepresented that advice or was acting inconsistently with it, or indeed that RMG itself had deliberately departed from it. Moreover, whilst the fact that RMG had always adopted the same stance did not of itself demonstrate that the position was genuinely held, it was some evidence to support RMG’s position since otherwise there would have been a longstanding deception.

147.	Finally, it does not in any event seem as if anyone had ever suggested that RMG’s position was anything other than genuine.  Both parties accept that the issue arose only because of the argument about whether regulation 13 (2) should be objectively construed or not.  Mr Lynch submitted in closing submissions that it should not and that it was enough for a transferor to state his genuine beliefs as to the legal implications of the transfer.  He was not thereby intending to put that question in issue in the proceedings, and it had never been in issue up to that point.  Again, given that the issue arose in this way, with due respect to the Tribunal we do not think that they were entitled to make a finding on this matter when it had never been flagged up as an issue in dispute.

148.	It follows that we agree with Mr Lynch’s submissions on this point.  We do not think that the Tribunal was entitled to reach a finding on this important issue at all.  Even if they were, we are satisfied that it was not a sustainable conclusion. 

149.	We have looked at this matter very carefully, being acutely conscious of our limited role in reviewing findings of fact. We do not, however, consider that it is the standard case where there is a straightforward finding and the only question is whether there is a proper evidential basis for it. It is trite law that the degree of evidence necessary to sustain a particular finding will depend upon the nature of the question in issue. 

150.	It is a serious matter to say that a company is deliberately acting falsely or (which may be implied in this case) deliberately misrepresenting the legal advice it has been given. There must be cogent evidence to justify a conclusion of that kind and we do not think that there was such evidence in this case.  It is not a question of perversity. In our judgment the Tribunal misunderstood the Anderson letter and failed to have regard to certain highly relevant factors in reaching its conclusion.  

151.	In the circumstances, in our judgment, the Tribunal was not entitled to conclude that RMG did not genuinely believe that no staff would transfer. 

Disposal.	
152.	This appeal must succeed. The Tribunal was not entitled to reach the conclusion that RMG’s stance with respect to the effect of the automatic transfer principle was not genuine.  Furthermore, we think that in disclosing the legal implications as required by regulation 13(2)(b), RMG was obliged merely to state what it genuinely thought those implications were; it was not warranting that its analysis was correct.  

153.	The matter must now be remitted to a fresh Tribunal to consider the question of information and consultation again in the light of this decision.  Save to the extent that any evidence can be agreed in the light of the earlier hearing, it will have to conduct a complete rehearing.  We appreciate that that is not entirely satisfactory, but we see no realistic alternative.