Warner v Adnet (IDS Brief)

There is an apparent contradiction in the wording of the Transfer of Undertakings (TUPE) Regulations when it comes to dismissals. The Regulations say that a dismissal for a reason connected with a transfer is automatically unfair.

However, they go on to state that a dismissal may be fair if it is for an economical, technical or organisational (ETO in the jargon) reason entailing changes in the workforce. This raises the question of how these two provisions inter-relate.

Many have argued that it is contradictory to suggest there can be two reasons for dismissal. A dismissal is either for a reason connected with a transfer or it is for an ETO reason: it cannot be for both.

Applying this argument, a tribunal which determines that a dismissal is for a reason connected with a transfer would be precluded from deciding that the dismissal is for an ETO reason. A dismissal can only be for an ETO reason if that reason is unconnected with a transfer, in the sense that the reason for dismissal would have arisen in any event even if the transfer had not taken place.

This argument was raised by the Advocate General in the European Court decision of D'Urso. It was pursued unsuccessfully in the Employment Appeal Tribunal in the case of Trafford v Sharpe [1994] IRLR 325. It has now been dealt a further, and perhaps fatal, blow by the Court of Appeal in the case of Warner v Adnet Ltd.

Mr Warner was employed by a computer company which encountered financial difficulties. Administrative receivers were appointed.

The company was unable to pay its debts. A financial report indicated that four employees would have be made redundant, that the receivership would allow the company to trade in the short-term and that the business would be offered for sale as a going concern.

All staff were dismissed. Some were offered re-employment, but not Mr Warner who, along with three other employees, was made redundant and not given the opportunity of re-engagement.

The IT found that the dismissal was for a reason connected with a transfer, but that it was also for an ETO reason with redundancies of non-essential staff being necessary regardless of the transfer. They went on to decide that the dismissal was fair, despite deficiencies in the consultation procedure, as consultation would not have made any real difference in the circumstances.

The Employment Appeal Tribunal and the Court of Appeal rejected Mr Warner's arguments against this decision. They said that when a tribunal decides that a dismissal is for a reason connected with a transfer, it is permissible for the tribunal then to consider whether or not a dismissal is for an ETO reason.

This was consistent with the wording of the Regulations and the Directive, which said that the provision on automatically unfair dismissals 'shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce'.

There is a danger that this approach can lead to unacceptable outcomes. Reorganisations often take place consequent upon a transfer. If dismissals in connection with those reorganisations are to be regarded as ETO reasons, this could lead to an unacceptable reduction in protection.

It cannot be right that a reduction in the needs for the workforce directly caused by transfer to a new employer is placed outside the automatically unfair dismissal protection.

The Court of Appeal probably did not need to reach its decision in this way. In Mr Warner's case, the economic circumstances leading to the dismissal predated the transfer.

Indeed, the economic circumstances appear to have driven the transfer. This must surely be different from a situation where the economic circumstances only arise as a result of the transfer: in those cases an employee should be entitled to the full protection of the Directive. Employers should not be able to engineer circumstances on the occasion of a transfer which enabled them to dismiss employees and rely upon the ETO defence.