Morris v John Grose Group Limited [1998] IRLR 499 (EAT)
The Transfer of Undertakinga Regulations (TUPE) give protection against unfair dismissal. This protection applies where the "transfer or a reason connected with it is the reason or principal reason for [the] dismissal" (TUPE Regulation 8(1)).
Sometimes it will be obvious that the transfer is the reason, particularly where the dismissal occurs at the same time as the transfer. On other occasions it is less clear.
This may be because some time has elapsed since the transfer and the employer blames the dismissal on changing business conditions. But difficulties may also arise where the dismissal takes place before the transfer.
This is what happened to Mr Morris. He found himself in a position which is all too common. Receivers were called in to the company where he worked. Within days they dismissed a number of employees to reduce the workforce and make the business more attractive to a purchaser as a going concern.
Shortly after, John Grose Group started negotiations with the receiver and purchased the company a little over a month later.
An Employment Tribunal decided that the dismissal was not connected to "the" transfer as at the time of the dismissal the transfer to the eventual purchaser was not contemplated, only "a" possible transfer if a purchaser could be found. This approach had been taken by the Employment Appeal Tribunal in a case called Ibex Trading v Walton [1994] IRLR 564, but not in another case called Harrison Bowden Ltd v Bowden [1994] ICR 186.
The EAT in Mr Morris' case looked at the issue afresh. They said that the words "the transfer" do not necessarily refer to the particular transfer which had actually taken place.
They pointed out that confining the protection to situations where a dismissal was attributable to a particular identified transfer would lead to unfair anomalies. A worker may be dismissed because of a proposed transfer to company X which falls through because company Y bids more money at the last moment. Why should the worker lose protection?
This means a tribunal should ask whether a transfer to any transferee who might appear, or a reason connected with such a transfer, was the reason for the dismissal. Any other conclusion would lead to unfair results and potential abuses.
Insolvency practitioners would be encouraged to dismiss first before identifying potential purchasers in order to avoid any transfer of liability to the eventual purchaser. Public authorities or private companies putting services out to tender would be encouraged to dismiss before commencing the tendering exercise so that potential bidders had not yet been identified.
It is right that the EAT should close the door on these abuses. It is significant that this occurred in the case of a company in financial difficulties. The sack first and ask questions later approach of many insolvency practitioners is of great concern and it is worrying that the revised Acquired Rights Directive will weaken protection for employees in insolvency situations.