Hagen and Ors. v ICI Chemicals and Polymers Ltd. [2002] IRLR 31
It is very commonly the case that when a business transfers under the TUPE regulations, both employers need the employees to agree to transfer. The transferring business cannot succeed without a skilled workforce. All sorts of promises are made to encourage a smooth transition, but are those promises legally binding?
ICI transferred its Central Engineering Resource Section to Redpath Engineering Services (later known as Kvaerner Engineering Services) in 1994. The employees transferring could have stopped the deal in its tracks by refusing to go.
To persuade them, ICI and Redpath gave assurances that there would be no wholesale compulsory job losses and gave them a five-year guarantee of employment if they agreed to support the transfer. They also assured them that their terms and conditions of employment would be the same, and that their pension rights would be broadly similar: certainly no more than 0.5% inferior. In fact the new pension scheme was very different: 5% worse in some cases. The employees sued.
The Court held that ICI was under a duty to take reasonable care to ensure that any statements regarding the transfer were true. That was a contractual obligation where the transfer will have an economic impact on the employees concerned, the transfer would not proceed without the willing participation of the workforce, and the employer knows that its information and advice will be given great weight. It breached that duty, in relation to the pension scheme: the workforce had been promised pension benefits very closely aligned with the ICI scheme and having created that false impression they could not walk away from it by saying the workforce could have found out by taking further advice.
It is important to note that ICI was not obliged to make any specific assurances at all. There is no general duty on the part of an employer to pass on information about pensions when none is asked for. But if information is provided and negligently so, then the employer will have to compensate.
Importantly, the obligation to compensate rested with ICI and did not transfer to Redpath under the TUPE Regulations. Redpath had its own, similar, obligation to take care what it said, but the Court held that on the facts of the case, this duty had not been breached.
How is compensation calculated in such a case? The proper approach is to see what the individual employees would have done if these assurances had not been given. They couldn't realistically say that they would not have transferred; they could realistically say, however, that collectively they would have made the two companies reconsider. The Court's best estimate is that they would have secured a 'broadly comparable' deal whereby no-one would be more than 2% worse off.
This is not just a pensions issue. In any TUPE situation the employers have a statutory obligation to consult the unions or employee representatives, but this case is concerned with specific assurances given to individual workers. Those assurances could concern any element of the employment package. Neither employer is obliged to say anything, but if they do, and are negligent in providing inaccurate information then they can be held to account.