Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), a dismissal is automatically unfair if it has something to do with the transfer, unless certain exceptions apply. In Spaceright Europe Ltd v Baillavoine the Employment Appeal Tribunal (EAT) said that the dismissal could be for a reason connected with the transfer even though no prospective transferee had been identified at the time of the dismissal.
Basic facts
Mr Baillavoine was the chief executive officer and majority shareholder in a business that started to have financial difficulties in February 2008. By April the position had worsened and on 23 May, it went into administration. He was dismissed by the administrators on the ground of redundancy on the same day.
A month later, the administrators sold the firm along with a subsidiary company to Spaceright Europe, a sale that was governed by the TUPE Regulations. The directors of the new company included three individuals who had played a prominent role in the original business.
Mr Baillovoine alleged that the administrators had colluded with his erstwhile colleagues to hold other bidders for the company to tight time lines to prevent effective bids; and that the transfer had already been agreed at least in principle at the time of his dismissal.
He brought a claim for unfair dismissal.
Relevant law
Regulation 7 of TUPE states that a dismissal will automatically be unfair if the principle reason for the dismissal is the transfer itself, or a reason connected with the transfer that is not an economic, technical, or organisational (ETO) reason entailing changes to the workforce.
Tribunal decision
The Tribunal made no findings on collusion as claimed by Mr Baillavoine, but said that, as he had been dismissed so that someone could buy the business without a CEO on a salary of £120,000, it was for a reason connected with the transfer.
However, although it might have been for a reason that was economic and organisational, it did not entail changes to the workforce as the business was a holding company and did not have a workforce.
The dismissal was therefore unfair.
EAT decision
And the EAT agreed. It said that the Tribunal was entitled to consider why, given that a going concern would need a managing director, the administrators made Mr Baillavoine redundant. The reason was therefore related to the sale of the business.
And nor was his dismissal for an ETO reason entailing changes to the workforce as the reason did not relate to the conduct of the business as a going concern, which was always going to need a managing director.
The reason did not contemplate a reduction in the number of employees in the ongoing business, as the new directors had foreseen that Mr Baillavoine would have to be replaced (as indeed he was). The reason was therefore related to the sale of the business. They went on to confirm that collusion with existing managers or owners was not the only reason to find that a dismissal was connected to a transfer.
Finally, the EAT found that the Tribunal was correct to follow the line of reasoning in Harrison Bowden v Bowden which held that dismissals could be for a reason connected with the transfer even though no actual prospective transferee had been identified at the time of the dismissal.