Employer Falls Foul of TUPE Regulations in WRC. Tony Breslin v Trinity Motors Wicklow Limited...

Tony Breslin v Trinity Motors Wicklow Limited ADJ-00033852 concerned several complaints to the Workplace Relations Commission (“WRC”) under the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (“TUPE Regulations”). In short, the TUPE Regulations exist to safeguard the rights of employees where there is a change in the legal owner of the business or part of the business in which they are employed. The TUPE Regulations implement Directive 2001/23/EC, 12th March 2021 (Acquired Rights Directive) and provide that employees are entitled to the same terms and conditions of employment that they enjoyed before the change in ownership subject to limited exceptions.

Facts: The Complainant was employed as a Brand Manager and Head of Sales in Sinnott’s Auto Ltd (“the Transferor”), at the time of the transfer. He had worked for the Transferor continuously since June 1996. On 14th December 2020 the Complainant received the following notification:

“We are delighted to announce the sale of our VW and Skoda Dealerships to the Murphy Family of Trinity Motors Group, who like Sinnott Autos, are a 2nd generation family business. The transition, effective from 4 January 2021, will be seamless and will not affect your position.

Under the Transfer of Undertakings Directive of 1977, (which safeguards employees’ rights) your employment will transfer to the Trinity Motor Group and your current employment terms and conditions with Sinnott Autos ltd will carry forward, including your length of service, effectively meaning that there will be no changes in your employment terms.”

It was submitted on behalf of the Complainant that his new employer, Trinity Motors Wicklow Limited (“the Transferee”) did not observe the terms and conditions transferred from his previous employer. Counsel for the Complainant argued that the Complainant had been exposed to a radical change in his working role and function following the takeover of the business. In March 2021 an upward alignment in working hours to ensure all dealerships operated the same was accepted by the Complainant, who gave evidence in the WRC that he accepted it as he wanted to fit in. He denied that this change was favourable to him. The Complainant was exposed to a probation clause and was approached to be paid by commission only, which he refused. The Complainant described a decline in his seniority and a diminution of his role, as a new business manager (Ms. Y) and Head of Sales (Mr. Z) were appointed. Previously the Complainant had reported directly to the owners of the Transferor’s business, two brothers. He did not have sight of a revised organisational chart post transfer. The Complainant submitted that work became busier, and he had been reduced to the same level as Mr. A, a sales representative at the business. Mr. A gave evidence on behalf of the Complainant and described in detail the changed work environment in the weeks following the transfer. Mr. A also confirmed to the WRC that his role in the business was to be distinguished from the Complainant’s role, who had been Head of Sales.

The Complainant discussed the difficulties he was experiencing with Mr. C, Dealer Principal and Chief Operations Officer for the Respondent, on 21st April 2021, but this did not resolve matters. The Complainant commenced sick leave on 29th April 2021 and submitted a grievance. The Respondent stated that the issues would be dealt with when the Complainant returned to work. The Complainant submitted a medical certificate confirming that he could participate in the grievance process, and the Respondent requested he attend Occupational Health to ascertain his fitness to engage in a grievance process while on sick leave. The Complainant refrained from attending Occupational Health and when questioned on this he stated that he had lost trust in the process. He resigned on 24th May 2021.

The Respondent submitted that it had not been aware of any issues experienced by the Complainant before the meeting with Mr. C on 21st April 2021. Their position was that the Complainant had desired an exit through redundancy and felt entitled to one. The Complainant denied that he had sought redundancy.

Decision: The Adjudicator, Patsy Doyle, noted that in this case a considerable period of time was expended by the Respondent placing the Complainant on proof that an activity governed by the TUPE Regulations had actually occurred, which caused some disappointment to the Complainant’s representatives. A transfer of undertakings is defined as:

“A transfer of an economic entity which retains its identity, meaning an organized grouping of resources which has the objective of pursuing an economic activity whether or not that activity is central or ancillary.”

The Adjudicator referred to the seminal European Court of Justice Spijker case (C-24/85) which laid out the criteria to have regard to when considering the application of the TUPE Regulations. These key criteria include the type of business, transfer of tangible assets, takeover of majority of staff, transfer of customers and degree of similarity between activities carried out before and after the transfer. In this case, the Adjudicator considered the Spijker criteria and other case law in this area and found that a transfer of undertakings within the meaning of the TUPE Regulations had occurred on 4th January 2021. While the franchises held by the Transferor, Volkswagen and Skoda, did not automatically transfer over (they were won by tender) the buildings, the majority of the employees and the customer database were taken over by the Transferee. The business also continued in the footsteps of the Transferor by selling new and secondhand cars.

The Adjudicator expressed a “pronounced difficulty” with the Respondent’s contention that the issue in the case was in fact that the Complainant was disappointed that he was not made redundant. The Adjudicator noted that the Complainant had demonstrated an attempt to try to make the transition work. Regulation 4 of the TUPE Regulations was considered by the Adjudicator, in particular the following:

The Adjudicator accepted the observation of Mr. A that the Complainant had been reduced to his seniority level. The Adjudicator also noted that the Complainant, above all else, expressed a lack of belonging and found it regrettable that the Respondent did not take time to provide one-to-one support to the Complainant after the transfer. The Adjudicator submitted there had been a shortfall in the duty of care owed by the Respondent in providing a safe work environment. The Complainant’s work hours were unfavourably altered and his historical agreement on time in lieu and annual leave was disturbed. The Adjudicator found that the Complainant’s early agreement to same was void. Separately, the Adjudicator noted that she would have liked to have seen more engagement from both parties to resolve the issues using the grievance procedure.

Ultimately, the Adjudicator found that there had been a serious breach of Regulation 4 of the TUPE Regulations by the Transferee as there were considerable variations made to the Complainant’s terms and conditions of employment, amounting to a clear detriment to the Complainant. It was observed that the “Complainant’s position was not visibly remotely the same as the role he held at the moment of transfer”. She considered it just and equitable to order the Respondent to pay €35,840 as redress, representing 28 weeks of the Complainant’s salary. The Adjudicator considered that the award should have a deterrent effect as there had been a contravention of an EU Directive. The Adjudicator also found that the Respondent did not meet its obligations under Regulation 8 of the TUPE Regulations, providing for information to be given to employee representatives not later than 30 days before the transfer is carried out (a meet and greet organised by the Respondent was found to be wholly insufficient). The Adjudicator awarded the maximum compensation of €5,120 in relation to this complaint.

Takeaway for Employers: TUPE is a complex area of employment law and many employers struggle to successfully navigate its intricacies. The Adjudicator in this case commented that it is an area where the commercial reality of the marketplace meets the acquired rights of a worker. This case is notable in that there had been a serious breach of the statutory obligations and a significant award was ordered as a deterrent. Where a change of legal ownership of a business is being considered (whether it be in a merger scenario, sale of part or the entirety of the business) employers should be on notice that the TUPE Regulations may apply and would be well advised to seek legal advice in relation to same.

Link - https://www.workplacerelations.ie/en/cases/2023/november/adj-00033852.html

Authors – Tara Kelly, Jenny Wakely and Anne O’Connell