The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect employees from unfair dismissal in certain circumstances. In Spaceright Europe Limited and Baillavoine and anor, the Court of Appeal said that the law does not require a particular transfer or transferee “to be in existence or in contemplation at the time of the dismissal” for it to be unfair.
Mr Baillavoine, who had been chief executive of Ultralon Holdings Ltd from 3 September 2003, was dismissed on the same day that the business went into administration on 23 May 2008.
The administrators justified his dismissal on the basis that the company would be easier to sell without a CEO in place on a salary of £120,000. A month later, the business was sold to Spaceright as part of a TUPE transfer, along with another Ultralon company.
Mr Baillavoine claimed that his dismissal was automatically unfair under Regulation 7(1) of TUPE, as the administrators already had a transfer (albeit not an actual transferee) in mind when they dismissed him, with the result that it was “connected with” the transfer.
Regulation 7(1) of TUPE states that if the sole or principal reason for dismissal is the transfer itself, or a reason connected with the transfer that is not an economic, technical or organisational (ETO) reason entailing changes in the workforce, then the dismissal will be automatically unfair.
Tribunal and EAT decisions
The Tribunal held that Mr Baillavoine's dismissal was automatically unfair. Firstly, it was connected to the transfer because the administrators had decided that the business would be more attractive to a prospective buyer if it did not have a CEO in place on a high salary.
Secondly, it was not for an ETO reason because the reason for his dismissal was, at least in part, economic and could also be said to be organisational. It did not entail changes in the workforce as Ultralon Holdings was a holding company and did not have a workforce.
The EAT looked at two conflicting decisions - Harrison Bowden v Bowden and Ibex Trading v Walton - and upheld the view of the Tribunal that Harrison was the correct approach. The dismissal could, therefore, still be connected to the transfer even though the administrators had not identified a specific transferee when they dismissed him.
The Tribunal was entitled to consider why, given that a going concern would need a managing director, the administrators made Mr Baillavoine redundant. It was therefore entitled to conclude that the reason was connected to the sale of the business.
Court of Appeal decision and the Court of Appeal agreed
It held that “the natural and ordinary meaning of the language of Regulation 7(1) does not require a particular transfer or transferee to be in existence or in contemplation at the time of the dismissal”.
This is because “an earlier event (A) may sensibly be considered to be "connected with" a later event (B), even though it was not known, contemplated or foreseen at the time of event (A) that event (B) would happen.”
It agreed that the broader interpretation adopted in Harrison was more consistent than the approach in Ibex with the broad purpose of the European directive which underpins TUPE - to protect employment in the event of the transfer of an undertaking.
Finally, it held that the dismissal was not for an ETO reason which requires an intention to change the workforce and to continue to conduct the business, as distinct from the purpose of selling it.
A helpful case which confirms that the courts should adopt the purposive approach to the TUPE Regulations as per Harrison Bowden v Bowden and Morris v John Grose as opposed to the more literal reading of the Regulations preferred in the Ibex case, which should not be followed going forward.