Hazel & Anor v The Manchester College

Under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), an economic, technical or organisational reason is an exception to automatic unfairness only if it entails changes in the workforce. The tribunal must identify the sole or principal reason for the individual dismissal. A wider cost-saving package, including redundancies affecting other employees, does not alter that reason where dismissal was caused solely by refusal to accept harmonised terms connected with a transfer.

Such dismissal is automatically unfair. Acceptance of new terms after dismissal does not prevent a tribunal from ordering prospective re-engagement on pre-transfer terms, if practicable.

The Appellant, a further and higher education provider, acquired the Claimants’ employment under TUPE when it took over offender-learning contracts. It later sought to harmonise terms and conditions, including reducing the Claimants’ pay. The Claimants refused the pay reductions, received notices of dismissal, and then accepted the new terms under protest while continuing to work.

The Employment Tribunal majority held that the dismissals were automatically unfair because the reason was harmonisation, not an ETO reason entailing workforce changes. It ordered re-engagement at the former rates of pay. The Employment Appeal Tribunal dismissed the appeals: UKEAT0642/11&0136/12. The central issues were the correct identification of the dismissal reason and whether re-engagement was available and practicable.

The appeal was dismissed on both liability and remedy. Underhill LJ gave the judgment, with Kitchin and Moore-Bick LJJ agreeing.

1. Liability. In a TUPE case involving the ETO defence, the tribunal should ask: what was the sole or principal reason for the dismissal; was that reason the transfer or connected with it; and, if connected, was it an economic, technical or organisational reason entailing changes in the workforce? The final question ordinarily requires redundancies or redeployment.
2. The relevant reason is the factor operating on the employer’s mind so as to cause the individual dismissal. The Appellant’s broader cost-saving plan, including redundancies affecting other employees, did not form part of the reason for dismissing these Claimants. Their dismissals were caused by refusal to accept the new pay terms.
3. Following Berriman v Delabole Slate Ltd [1985] ICR 546, harmonisation of terms does not itself entail changes in the workforce. The fact that other employees were made redundant did not alter the character of these dismissals. The reason was connected with the transfer and the ETO defence therefore failed. The effect of TUPE, confirmed by Daddy’s Dance Hall C-324/86 and Martin v South Bank University C-04/01, is that preservation of transferred employees’ existing terms prevails over transfer-connected harmonisation.
4. Remedy. Termination of the original contract constituted dismissal even though the employment relationship continued. Acceptance of replacement terms did not waive the claims. Section 115 of the Employment Rights Act 1996 permitted prospective engagement on tribunal-specified terms, so there was no jurisdictional bar to re-engagement. Re-engagement on the pre-dismissal pay rates was consistent with the purpose of TUPE.
5. The Employment Tribunal was entitled on the evidence to find re-engagement practicable. Potential colleague discontent and equal-pay concerns did not make the order impracticable. The alternative conclusion that the dismissals would have been substantively fair under the ordinary test in section 98(4) was irrelevant because the actual dismissals were automatically unfair under TUPE.

A TUPE dismissal that is automatically unfair is not a nullity, but the employer’s refusal to comply with a re-engagement order leaves only the statutory additional financial award as the sanction.

• Court of Appeal (Civil Division): dismissed the appeal against both the liability and remedy decisions.
• Employment Appeal Tribunal: dismissed the appeals from the Employment Tribunal, citation UKEAT0642/11&0136/12.
• Employment Tribunal: the majority found automatic unfair dismissal and ordered re-engagement at the Claimants’ former remuneration rates.