Whitehouse v Blatchford & Sons [I999] IRLR 492 (CA)
A dismissal for a reason connected with a transfer of undertaking is automatically unfair unless the employer can show it was for an "economic, technical or organisational reason entailing changes in the workforce".
This should provide protection for workers where the underlying cause of the dismissal was the transfer itself, not some other reason affecting the operation of the business. But how is this to be interpreted when a new contractor cuts staff following a competitive tender?
The Court of Appeal was considering this situation. There was competitive tendering for a contract to supply prosthetic appliances to a hospital. A new firm won the contract. They were told that they had to reduce staffing costs by reducing the number of technicians from 13 to 12. Surely this was a classic case of an unfair transfer-related dismissal? Not so said the Court of Appeal, agreeing with the Employment Tribunal and the Employment Appeal Tribunal in this case.
Not only is the outcome surprising. The reasoning appears flawed. The original findings of fact militated against an appeal in this case, but the judgement does raise a number of questions.
The Court attempted to grapple with the relationship between automatically unfair dismissal for a reason connected with the transfer (Regulation 8(1) of TUPE) and a dismissal for an "economic, technical or organisational reason" (an "ETO", Regulation 8(2)).
In Warner v Adnet the Appeal Court had said that Regulations 8(1) and (2) must be read as a whole and are not mutually exclusive, so if a dismissal is for a reason connected with the transfer it may still be for an ETO reason.
The Court of Appeal in Whitehouse approached the matter by accepting that if there was a dismissal "solely" for a reason connected with a transfer it was unfair but (at least according to the lead judgment) "if, in addition, there is an [ETO reason]" the court must go on to consider whether it was the principal reason. If so it effectively "trumps" the transfer reason and the court must consider whether the employer acted fairly in relying on it as a reason to dismiss.
One would have thought the reverse is true: if the transfer is the reason, the dismissal cannot be for an ETO reason. An ETO reason can only be something which would have arisen even if there were no transfer.
That was effectively the conclusion the court reached in this case. They were very keen to ensure that the transfer should not give Mr Whitehouse what they described as better protection than he would have had under unfair dismissal law generally. This is to misunderstand the argument.
It is difficult to see how a reason can qualify as an "economic" reason independent of the transfer when the very award of the contract which gave effect to the transfer was dependent on the dismissal. This comes very close to making the terms of the transfer itself an economic reason. This approach has been rejected by the courts when there has been a requirement to reduce staff in order to secure a sale of a business. Why should there be a different outcome when the reason is to secure the award of a contract?
The court's answer was that in this case the reduction would have been necessary anyway even if there had been no transfer and the contract had been retained by the previous contractor. This fails to give proper effect to the EAT decision of Wheeler v Patel [1987] IRLR 211 where it was said "if the economic reason were no more than the desire to obtain an enhanced price, or no more than the desire to achieve a sale, it would not be a reason which related to the conduct of the business". That was exactly the case here and the Court of Appeal should have rejected the employer's argument.
If the Court of Appeal's reasoning were taken to its logical conclusion it would provide a ready means of employers inserting stipulations on contracts which justify dismissals at the point of transfer. This cannot be right and it is to he hoped that the forthcoming amendment to the TUPE regulations will make it explicit that only dismissals which relate to the future conduct of the business and would have occurred even if there was no transfer can be for an ETO reason.