Dismissal for failing to agree to new terms and conditions following TUPE transfer was automatic unfair dismissal

The Employment Appeal Tribunal (“EAT”) has held that the dismissal for failing to agree to new terms and conditions following TUPE transfer was automatic unfair dismissal.

Background

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) following a TUPE transfer, an employer can only change a transferring employee’s terms of employment if the reason for the change is not connected with the transfer or if the change is for an ETO reason entailing changes in the workforce.

Further, any dismissal of an employee will be automatically unfair where the sole or principal reason for the dismissal is either the transfer itself or a reason connected with the TUPE transfer that is not an ETO reason entailing changes in the workforce.

In the case of Manchester College v Hazel & Huggins, Manchester College won a number of Offender Learning Contracts from the Learning and Skills Council which resulted in the transfer of 1,500 staff, including Mrs Hazel and Mrs Huggins, to Manchester College in August 2009.

Six months after the TUPE transfer the College discovered unforeseen financial difficulties and began to implement costs savings, including proposing approximately 200 redundancies. At the end of this process Mrs Hazel and Mrs Huggins were told that they were no longer at risk of redundancy.

After the redundancy exercise, the College decided to reduce costs further by harmonising employee’s terms and conditions of employment. The College’s rationale for the new terms was that, without them more redundancies would be necessary. Staff, including both those who had transferred and existing employees, were asked to agree to a reduction in wages. Mrs Hazel and Mrs Huggins objected to this pay cut and they were dismissed in July 2010, with an offer of employment on new terms which included the pay reduction. Mrs Hazel and Mrs Huggins accepted employment on the new lower terms and brought claims that they had been unfairly dismissed from their old contracts of employment.

Employment Tribunal Decision

The Employment Tribunal upheld Mrs Hazel and Mrs Huggins’ claims.

Employment Appeal Tribunal Decision

The College appealed, arguing that as the change to terms and conditions had been linked to a potential need to make redundancies across the college the dismissals should have been regarded as an ETO reason entailing changes in the workforce.

The EAT agreed that the reason for the dismissals was their refusal to sign new contracts. Although this was potentially an ETO reason, the Employment Tribunal had been correct in holding that in the circumstances it was not a valid ETO reason. The EAT confirmed that in order to be a valid ETO reason, there must be either a change in the numbers of workers or a change in their job functions. The College had accepted there was no change in the functions and so the issue was whether there was a change in the numbers. The Employment Tribunal had been entitled to hold that because Mrs Hazel and Mrs Higgins had both been told they were not at risk of redundancy and the redundancy process had ended by the time of their dismissals, there was no link between redundancies and harmonisation of terms. Harmonisation alone is not an ETO reason. Therefore the Employment Tribunal were entitled to hold that their dismissals were automatically unfair.

The Employment Tribunal had taken the unusual step of ordering the College to re-engage the Mrs Hazel and Mrs Huggins on the new terms and conditions with the exception of the salaries, which would be restored to their original rates of pay, and then be frozen until the new pay scale caught up with their salary. The EAT held that this was practicable as the employees had continued working so the relationship of mutual trust and confidence had not broken down. The College’s argument that it would lead to ‘worker discontent’ was rejected by the EAT, noting that the order only affected two employees out of the thousands employed at the College.

Practical Tips

This case demonstrates how TUPE operates to limit an employers ability to harmonise the terms of conditions of the employees it ‘inherits’ as a result of a TUPE transfer, with the terms and conditions of their existing workforce.

The employers in this case fell foul of TUPE because their redundancy process had finished by the time these employees were dismissed for failing to agree to the new (harmonised) terms and conditions of employment. Therefore the reason for their dismissal was not an economic technical or organisational (‘ETO’) reason (i.e. redundancy) but instead was to achieve harmonisation of terms and conditions of employment (which is not an ETO reason). As their dismissals were connected to the TUPE transfer and were not for an ETO reason, they were automatically unfair.

Key Points of the EAT’s Decision:

  • An ETO reason which entails ‘changes in the workforce’ means either a change in the numbers of workers (i.e. redundancies) or a change in the employee’s functions.
  • The employees were dismissed for not signing new contracts of employments which, by itself, is not an ETO reason.
  • Although the employer had carried out a redundancy exercise following the transfer, this process had ended and neither employee was at risk of redundancy by the time of their dismissal.
Dismissal for failing to agree to new terms and conditions following TUPE transfer was automatic unfair dismissal

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