Objection to a transfer

Case 2: The facts

ISG was a recruitment agency to the rail industry. When it went into administration, the business was transferred to New ISG – a subsidiary of UK Rail Services (UKRS) – but ISG’s employees were not consulted about this or told the identity of their new employer until the transfer had already taken place. They all objected to working for UKRS, and resigned with immediate effect.

The employees’ contracts with New ISG contained restrictive covenants which prevented them from soliciting, canvassing or dealing with clients or temporary workers of the company for 12 months after the termination of their contracts. New ISG tried to enforce these covenants, arguing that the employees’ objections to the transfer were invalid as they had not been made before the transfer.

The ruling

The High Court held that the employees’ objections to the transfer were valid, even though they were made after the transfer took place; this was because the employees had not been told the identity of the new employer beforehand. As they had raised objections to the transfer at the earliest opportunity, they had not legally transferred to New ISG, which therefore could not enforce the restrictive covenants.

New ISG Ltd v Vernon and others [2007] EWHC 2665