Employment law

TUPE and negligent misrepresentationHagen v ICI Chemicals and Polymers Ltd (2002) IRLR 31This decision of Mr Justice Elias is described by the editor of the IRLR as 'monumental'.

Indeed, the facts were unusual.

The 439 claimants were employed for specialist engineering work on Teesside.

Employment at ICI was highly prized, especially because of the generous benefits, notably pensions, and the company's commitment to security of employment.

In 1994, the engineering department in which they worked was transferred to a company known as RES.

RES agreed to continue the employees' contracts on the same terms as before and to provide a pension scheme roughly comparable with the ICI scheme.

The employees were kept fully informed throughout the negotiations, but were reluctant to accept the prospect of the engineering department being transferred to RES.

The employers accepted that, without employees' support, the transfer would not go ahead.

Therefore, they had to persuade the staff that the transfer was in their best interests.

The claimants alleged that they were only persuaded to agree to the transfer because of promises given and representations made to them both by ICI and RES.

ICI was said to have represented that there would be a guarantee of five years' employment with RES and that the pensions offered would be within half of a percent of the ICI pensions.

RES allegedly represented that there was no plan to make any of the transferred staff redundant.

The claimants alleged that the representations were false and negligently made and that loss was suffered as a result.

With regard to pension rights, for some employees, there were variations up to 5%.

The claimants further alleged that ICI's conduct in making the representations constituted a breach of the duty not to undermine trust and confidence, the duty to act fairly and in good faith and the duty to take all reasonable steps to ensure that the employees were made aware of the true position in regard to their pension rights and to all other benefits and entitlements under their contracts.The High Court held that there was a duty on the defendants to take reasonable care to ensure that the statements made to the claimants regarding the transfer of the undertaking were true.

However, there was no positive duty to make employees aware of their pension rights, or of other terms and conditions of employment.

ICI knew and intended that statements made would be drawn to the attention of the employees.

Those statements were made, at least in part, to encourage the employees to agree to transfer to RES, by giving them reassurances about their future with RES.

The class of employees affected was limited and clearly identifiable, that is to say, those employed in the business to be transferred.

ICI was in a particularly good position to know the veracity of the information and opinions they were expressing, given that it was a party to the negotiations.ICI had access to information which the employees did not have, in particular, knowledge as to future plans, and also had a material interest in the transfer going ahead.

Accordingly, it was just, fair and reasonable to impose a common law duty of care in making statements to employees in 'a transfer situation', notwithstanding the statutory duty on an employer to inform and consult about a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).

The duty under TUPE is owed not to any individual but to the recognised union or employee representatives and the scope of information to be provided is limited.

Furthermore, RES, as the claimants' prospective employer, was also under a duty in tort to take reasonable care to ensure that any information given was accurate and that any statement of intentions was capable of being fulfilled.

But there was no evidence that RES had breached that duty.On the facts, ICI had negligently misrepresented the position to the claimants in respect of pension benefits they could expect to receive when their employment transferred to RES.

Thus it was in breach of the duty of care.

The claimants had reasonably relied on ICI's misrepresentation regarding pension rights in deciding to agree to the transfer and were, therefore, entitled to damages for any consequent loss.

Although it would have been unrealistic for an individual claimant saying that he would not have entered into a contract with the transferee but for the misrepresentations, it was wholly realistic to say that if the group of staff to be transferred had not been satisfied about the terms, they would have - as a collective group - resisted the transfer and that such resistance would probably have been successful.

ICI's liability in tort did not transfer to RES under TUPE, because, pursuant to regulation 7, no liabilities transfer where they arise 'under or in connection with' so much of the contract as relates to an occupational pension scheme.Definition of disabilityCruickshank v VAW Motorcast Ltd (2002) IRLR 24A foundry worker developed breathing difficulties, diagnosed as probably caused by occupational asthma.

Following medical advice that he should not work where he would be exposed to fumes, he was transferred to other duties.Later, a reorganisation meant that he had to work in a part of the foundry with greater exposure to fumes.

This appeared to trigger the asthma and led to a great deal of sick leave.

The medical adviser concluded that the only safe work for the employee would need to be outside the foundry, in either the offices or the yard.

The employers decided that there were no vacancies in these areas and dismissed the employee.

He claimed that the dismissal was unfair and contrary to the Disability Discrimination Act 1995.

A tribunal rejected both claims.

The Employment Appeal Tribunal (EAT) upheld the employee's appeals.

The tribunal was wrong to find that the employee was not disabled in terms of the Act because his impairment did not have a substantial adverse effect on his normal day-to-day activities.

The tribunal was wrong to consider the employee's condition as at the time of the tribunal hearing.

The time at which to assess the disability is at the time of the alleged discriminatory act, in this case the dismissal.

The tribunal also erred in failing to assess whether the employee met the definition of disability on the basis of his ability to carry out normal day-to-day activities during his employment and by making that assessment instead on his absence from work.

In a case where, as a result of a medical condition, the effects of an impairment on ability to carry out normal day-to-day activities fluctuate, and may be exacerbated by conditions at work, the tribunal should consider whether the impairment has a substantial and long-term adverse effect on ability to perform such activities both at work and while not at work.

If, while a person is at work, his symptoms are such as to have a significant and long-term effect on ability to perform day-to-day tasks, those symptoms should not be ignored simply because the work itself may be specialised and unusual.

The Act does not limit protection to those people who have an incapacity of more or less constant effect in ordinary day-to-day circumstances.Constructive dismissalMorrow v Safeway Stores plc (2002) IRLR 9The EAT held that a tribunal was wrong to hold that, although a manager's conduct in giving a public reprimand amounted to a breach of the implied contractual term of trust and confidence, it was not sufficiently serious as to amount to repudiatory conduct justifying a claim of constructive dismissal.

According to the EAT, a finding that there has been a breach of the implied term of trust and confidence will mean inevitably that there has been a fundamental or repudiatory breach going necessarily to the root of the contract.

By Martin Edwards, Mace & Jones, Liverpool