This case concerns harmonisation following a transfer. In cases of harmonisation the argument often run is that the harmonisation was for reason(s) independent of the transfer. Usually, that the business was under financial pressure or there were industrial relations issues or a management difficulties arising from having different sets of Ts and Cs. Crucially in this case it was accepted by the employer in the Tribunal that the harmonisation was connected to the transfer and case was fought on the basis that there was a valid ETO reason.
The employer which operated in the education and vocational sector won six contracts for providing educational services in prisons. In doing so it acquired about 1500 new members of staff. In January 2010 it decided to implement a process of harmonising 37 different sets of terms and conditions that it had inherited. This was to be undertaken by dismissal and re-engagement on a new contract which would be standard across the relevant part of the organisation. The Claimant employees were initially warned that they would be made redundant. It then became clear they would retain their existing posts but would suffer substantial pay reductions under the new contract and there would be changes to other terms. They were re-engaged on the new terms under protest. They commenced ‘ordinary’ unfair dismissal proceedings.
In the Tribunal the judge raised the issue of TUPE and in particular whether the dismissals were because of the transfer itself or a reason connected to the transfer and therefore automatically unfair under Reg 7 unless for an ETO reason.
The Court of Appeal
The employer lost in the ET, EAT and Court of Appeal on the issue of liability essentially because for an ETO defence to succeed it is a requirement that the dismissal of the particular employee that must entail changes in the workforce. In this case there were dismissals for redundancies which entailed changes in the workforce but the dismissals of the particular employees did not entail any such change because they were no longer at risk of redundancy when they were dismissed.
In the Court of Appeal Underhill LJ held (para 23) that:
“I accept of course that the proposed harmonisation of terms was in a general sense related to the proposal for redundancies: they were adopted as part of the same package of proposals, and both were intended to contribute to the required costs savings (with the asserted corollary that the achievement of the standardisation of terms would reduce the number of redundancies needed). But the fact that there was a relationship of that kind has no bearing on the statutory question of what was “the sole or principal reason for” the Claimants’ dismissals. It is trite law that for the purpose of sec. 98 of the 1996 Act (and thus also of reg. 7 of TUPE, because that plugs into the general law of unfair dismissal) what matters is the factors that operate on the employer’s mind so as to cause him to dismiss the employee.”
The employer appealed on the issue of remedy. The Tribunal had ordered re-engagement under the new contracts but under the remuneration provided for under the old contract (the employees were content to accept the other changes to terms and conditions). It was argued in the Court of Appeal that because the employees had worked under the new contract they could not be reinstated under their old contractual terms relating to pay. This argument was rejected for the reasons that: (i) it overlooked the fact that the employees had been dismissed and were entitled to the remedies under Part X of the ERA. (ii) that the wording of section 115 of the ERA provides for engagement on specified terms from the date specified in the order.
The employer in this case did not contest that the dismissals were connected to the transfer. Under the amended regulations in force from 31 January 2014 Reg 7 has been amended so that a dismissal will be unfair if the sole or principal reason is the transfer itself. If it is merely connected to the transfer it will not be unfair. Because of this the concession that was made in this case is unlikely to be made in a future case. Whether the amendment to Reg 7 is compatible with the Directive and the CJEU case law remains to be seen as case law (but not the Directive Art 4) uses the expression ‘connected to the transfer’ (see in particular Martin v Southbank University para 44)