Labour & European Law Review Weekly Issue 363 01 April 2014
It is unfair under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) to dismiss an employee if the reason is connected with the transfer and is not an ETO reason entailing changes in the workforce. In Hazel and anor v The Manchester College, the Court of Appeal held that dismissing employees to harmonise staff terms and conditions could not constitute an ETO reason.
After successfully bidding for a number of Offender Learning contracts in six regions in 2009, Manchester College discovered some hidden costs which it had not noticed prior to the transfer of the contracts. It initiated a staff restructuring exercise which involved a number of voluntary redundancies and then decided to harmonise the terms and conditions of all its staff.
Ms Hazel and Ms Huggins (the claimants), whose employment had transferred over to the college when it won the contracts, were told in June 2010 that they would have to accept a cut in salary as part of the harmonisation process.
The claimants refused and were dismissed. They accepted the new contracts, which included the reduction in pay, “without prejudice” to their claims for unfair dismissal from the old contracts. They remained in employment but brought claims under regulation 7 of TUPE which states that it is automatically unfair to dismiss an employee if the reason for the dismissal is the transfer itself, or connected with the transfer and not for an economic, technical or organisational (ETO) reason entailing changes in the workforce.
Tribunal and EAT decisions
The tribunal found that the reason for the women’s dismissal was their continued objection to the cut in pay. This was connected with the transfer and was not for an ETO reason entailing changes in the workforce. The redundancy process had ended by that stage and the harmonisation process (which was separate from it) did not entail any changes in the workforce. The tribunal ordered re-engagement to preserve the old rates of pay.
The EAT agreed with the decision and that the appropriate remedy was re-engagement on the women’s new contracts but on their old rates of pay.
Employer’s appeal to the Court of Appeal
The college appealed arguing that the tribunal was wrong to focus exclusively on the immediate reason for the dismissals (the refusal of the two women to accept the reduction in pay) and ignore the wider context of the college’s cost-saving plan. Although the decision in Berriman v Delabole Slate established that dismissal for refusal to accept a change in terms and conditions designed to achieve harmonisation was not for a reason "entailing changes in the workforce”, it argued that this case was different.
It also argued that as the women had signed up to the new terms on 20 October 2010 and the employment relationship was ongoing, they could not be “re-engaged”on their old contracts, as the tribunal had ordered.
Court of Appeal decision
However, the Court disagreed on both counts. As the women were dismissed because of their refusal to agree to a reduction in pay, this did not entail changes in the workforce and the dismissals were automatically unfair.
It also disagreed with the employer’s argument that the tribunal could not order re-engagement. Holding that the college had confused termination of the contract of employment with termination of the employment relationship, the Court held that where an employee has been unfairly dismissed for refusing to accept an adverse change in their terms, it was entirely in accordance with the purpose of the legislation that they should be reinstated or re-engaged on the pre-transfer terms.
Under TUPE 2006, a strict and narrow test applied for claims of automatic unfair dismissal by reason of the transfer itself. Following the introduction of the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (CRATUPE), “TUPE-connected” dismissals no longer exist for claims involving a relevant TUPE transfer on or after 31 January 2014. However, under CRATUPE there are wider circumstances in which the “sole or principal” reason for dismissal is the transfer itself, a point highlighted in the BIS Guidance published in January 2014.