Enterprise Managed Services Ltd v Dance

Under regulation 7(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, the question is the employer’s principal reason for changing terms and dismissing employees who resist the change. A post-transfer change is not automatically connected with the transfer merely because it produces harmonisation. Where the change is driven by a pre-existing productivity or efficiency initiative, it may be unconnected with the transfer. The issue is one of causation determined from the evidence. An Employment Tribunal must state its findings consistently: it cannot find both that harmonisation was the principal reason and that harmonisation was merely the consequence of a productivity drive.

The respondent appealed against the majority decision of an Employment Tribunal, chaired by Employment Judge Coles, whose Reasons were registered on 9 February 2011. The claimants’ employment transferred to the respondent under TUPE on 24 April 2009. The respondent subsequently proposed changes to their terms, including performance-related pay and different hours. When the changes were not accepted, the claimants were dismissed but continued working on the new terms.

The Tribunal unanimously found that the dismissals were not because of the transfer itself and were not ordinarily unfair under section 98 of the Employment Rights Act 1996. By a majority, it found that the principal reason for the changes was harmonisation with existing employees and that the dismissals were therefore connected with the transfer. The respondent appealed on the basis that the changes were driven by productivity and efficiency concerns which pre-dated the transfer.

1. Appeal allowed. The majority Employment Tribunal’s reasoning contained a material inconsistency and the case was remitted to a fresh three-person Employment Tribunal.

2. The relevant question under regulation 7(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 was the reason in management’s minds for proposing the contractual changes and dismissing employees who resisted them. The issue was one of causation, determined from the evidence.

3. The Tribunal’s findings that the respondent varied the building engineers’ terms to harmonise them with existing employees, and that harmonisation was merely a consequence of an intention to improve productivity, could not stand together. The evidence instead indicated a continuous productivity initiative: similar changes had been introduced for the respondent’s existing appliance engineers before the transfer and were repeated for the inherited workforce after it.

4. An employer may make productivity changes under ordinary employment law. Such changes do not become unlawful under regulation 7(1) merely because a relevant transfer has occurred, if the reason for them is the pre-existing drive for productivity and efficiency rather than the transfer.

5. The Employment Judge’s minority reasoning adopted the correct approach, but the EAT considered the ultimate causation question to be one of fact. It therefore remitted the issue whether the dismissals were for a reason connected with the transfer on 24 April 2009.

• Employment Tribunal: By majority, held that the dismissals were for a reason connected with the transfer. It unanimously found that the dismissals were not because of the transfer itself and were not ordinarily unfair under section 98 of the Employment Rights Act 1996.
• Employment Appeal Tribunal: Allowed the appeal and remitted the causation issue to a different Employment Tribunal.