Duty to mitigate
Labour & European Law Review Weekly Issue 288 27 September 2012
Employees who are dismissed have a duty to mitigate their loss by not unreasonably refusing an alternative offer of work. In F & G Cleaners Ltd v Saddington and ors, the Employment Appeal Tribunal (EAT) confirmed that the duty to mitigate does not arise until after the employee has been dismissed.
Mr Saddington and Mr Oliver worked for Actual Support Services Ltd cleaning windows in schools, libraries and other public buildings for various local authorities, including the London Borough of Redbridge. In 2008, Redbridge put the contract out to tender again and awarded it to F & G.
Although Actual told both men that their employment would transfer over, F & G took the view that the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) did not apply. It refused to continue to employ the two men on their current terms and conditions on the basis that the information provided to them by the transferor under regulation 11 of TUPE was misleading.
On 8 August F & G informed Mr Oliver’s wife by fax that her husband did not work for them and never had. On 14 August, however, F & G wrote to the two men offering them work on a self-employed basis at an hourly rate. The letter stated that: “We are not in a position to offer a “TUPE type contract”.
The men refused the offer and lodged a claim for unfair dismissal.
Regulation 4(9) of TUPE states that “Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.”
The tribunal held that TUPE applied to the transfer and that the men had been assigned to the group of employees whose work had transferred.
F & G’s refusal to continue their employment and offer terms of engagement “which were materially different to the terms and conditions of their employment” with Actual amounted to a dismissal. It also pointed out that the men would have lost valuable statutory rights (such as the right to claim unfair dismissal) had they accepted F & G’s offer.
As the transfer was the principal reason for the dismissal, the tribunal held that the men had been automatically unfairly dismissed.
The tribunal also found that the men had not failed to mitigate their loss by refusing to accept work on a self employed basis. Not only would they have lost their statutory rights but they would also have lost other differences in terms and conditions to which they were entitled under TUPE.
F & G appealed, arguing that the men had failed to mitigate their loss and had acted unreasonably in refusing to accept the alternative offer of self employment on the basis that they would lose their statutory rights. In particular, the offer of self employment was made after the employees were dismissed.
The EAT held that the employee’s employment transferred to F & G at the date of transfer as a matter of law and that therefore the employees were not actually dismissed until they refused the offer of self employment by F & G.
And as the dismissal occurred after the refusal of the offer, the duty to mitigate did not arise. (It is settled law that the duty to mitigate does not arise until after an employee has been dismissed).
The EAT rightly commented that the protection of TUPE would be undermined in a case such as this where a new employer refuses to accept that TUPE applies and offers employment on a self employed basis on less favourable terms and conditions.