New ISG Ltd v Vernon and others: [2007] EWHC 2665 (Ch)

Ch D: Judge Behrens QC sitting as a High Court judge: 14 November 2007

The defendants were employed by a company which went into administration. The administrators sold the company’s business to the claimant, but the defendants were not informed of the identity of the transferee until the sale had been agreed. The defendants did not want to be employed by the claimant and resigned four days later. The claimant obtained interim injunctions enforcing post-termination restrictions in the defendants’ contracts of employment. The defendants resisted the continuation of the injunctions on the ground that they had objected to becoming employed by the claimant within the meaning of regulation 4(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, so that neither their employment nor their contracts transferred to the claimant with the result that the claimant could not enforce the restrictive covenants relied on. They contended that Council Directive 77/187/EEC, which the 2006 Regulations implemented, was not to be construed as obliging an employee to continue his employment with a transferee if he did not wish to do so.

The claimant applied to continue the injunctions.

Judge Behrens QC held:
Regulation 4(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 should be construed so as to give effect to the purpose of Directive 77/187 and to preserve the fundamental freedom of an employee to choose his employer, and that freedom would be undermined, where the employee was not informed of the identity of the transferee until after the date of the transfer, if notification by the employee of his objection to being employed by the transferee had to take place before the transfer. Accordingly, regulation 4(7) should be construed so as to apply to an objection by an employee made after a transfer. Given that there was no prescribed method of notifying such objection, the defendants’ letters of resignation, two working days after the announcement of the sale of the company to the claimant, were to be taken as objections within the meaning of regulation 4(7). The claimant was not, therefore, entitled to the injunctions.

Application refused.

Appearances: Iain Pester (Coffin Mew LLP, Southampton) for the claimant; Simon Devonshire (Berwin Leighton Paisner LLP) for the first and second defendants; Shaen Catherwood (Just Employment, Guildford) for the third and fourth defendants.