The underlying dispute in this case concerned the enforcement of restrictive covenants in Mr Marcroft's contract.  He had been employed by PMI in its commercial insurance business.  While he was working out his notice, the directors of PMI told him, at a meeting, that they were negotiating to sell the commercial insurance part of PMI's business to Heartland.  PMI agreed with Mr Marcroft that for the remainder of his notice period he would not be required to attend the office, but should be on call at home if necessary.

Once his employment had ended, Mr Marcroft went to work for a competitor and Heartland brought a claim against him for breach of his restrictive covenants. In his defence, Mr Marcroft argued that his contract had not transferred to Heartland under TUPE because he was no longer assigned to the commercial insurance business at the date of transfer.  He also argued that the transfer of his contract was ineffective because PMI had deliberately failed to provide him with the information required by Regulation 13 of TUPE and therefore he had been unable to object to the transfer. 

The Court of Appeal rejected his arguments and held that Mr Marcroft's contract had been transferred under TUPE to Heartland.  It held that Mr Marcroft's resignation did not prevent him from being assigned to the part of the business that was transferring.  It would not be right that an employee would lose the protection of TUPE simply as a result of handing in his notice.  It also held that the information that must be provided to representatives of affected employees does not include information about their right to object.  In any event, where the employer is in breach of that duty, the remedy is a claim in the employment tribunal for compensation.  Compliance with the duty to provide information is not a necessary precondition for an effective transfer and a breach does not have the effect of avoiding the transfer.  Finally, Mr Marcroft was also not able to persuade the court that there was an implied term in his contract of employment that the transfer would be invalid if he was not personally provided with the information required by Regulation 13.

Impact on employers

• This decision confirms that it is not necessary for the employer to provide employees with information about their right to object to the TUPE transfer.  There is, however, nothing to stop that information being included in the letter to employee representatives, especially in view of the draconian impact – an employee who does object will not transfer but is also not treated as dismissed and therefore loses the right to claim for unfair and wrongful dismissal.
  
• It also confirms that while the duty to provide affected employees with information is an important aspect of TUPE, the remedy is a claim for compensation, not the avoidance of the transfer.
  
• When purchasing a business or entering into a contract to take over a service, potential transferees should bear in mind that an employee under notice will, under the principles set out in this judgment, transfer to them.  Proper diligence should highlight any employees under notice and in most cases a transfer will not be problematic.  However, especially where restrictive covenants are important, both employer and employee should take care to analyse their position and consider what outcome will best achieve their objectives.
  
• If it seems unfair that an employee who has been kept in the dark is bound to a new employer, it should be remembered that the courts have previously held, in New ISG Limited v Vernon, that if the employee does not know the identity of a buyer prior to the transfer they can exercise their right to object to the transfer after it has taken place.