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TUPE, dismissals and changes in the workforce

The EAT has published its decision in the case of Manchester College v Hazel & Huggins.

Miss Hazel and Mrs Huggins joined Manchester College in 2009 following a TUPE transfer which saw the college take on 1500 members of staff. Shortly after the transfer, it came to light that there were hidden costs that had not been picked up in the due diligence exercise prior to the transfer. Following this discovery, the Principal of the college made a proposal for staff restructuring and efficiency savings which included a request to make 300 staff redundant.

Negotiations followed with the employees’ union, UCU, and some compromises were made. In the event, enough staff volunteered for redundancy and it was not necessary to make any compulsory redundancies.

The college then sought to make changes to employees’ terms and conditions, including significant reductions in Miss Hazel’s and Mrs Huggins’ salary. They objected to the changes and the college terminated their contracts as a result. Both employees eventually agreed to the wage cuts and continued to work for the college but brought claims for unfair dismissal.

Regulation 7 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) makes it automatically unfair to dismiss an employee for a reason connected with a transfer unless it is for an economic, technical or organisational reason entailing changes in the workforce (the so-called ‘ETO defence’). There is no statutory definition of ‘entailing changes in the workforce’ but the courts have restricted it to mean changes in the numbers employed or the functions performed by the employees.

An Employment Tribunal found that the reason for the dismissals was the employees’ refusal to accept the changes to their contracts of employment. This was a reason connected with the TUPE transfer. However, there was no valid ETO defence as it did not “entail changes in the workforce”. Although the college had recently been through a redundancy process, the subsequent changes to the contracts were made as part of a separate process. The Tribunal found in favour of Miss Hazel and Mrs Huggins, the remedy being re-engagement on their new contracts but on their old rates of pay.

The EAT confirmed that the Employment Tribunal had been correct in its construction of TUPE and saw no reason to interfere with either the decision or the remedy.

Employers who want to be able to rely on the ETO defence when dismissing employees following a TUPE transfer need to remember that the economic, technical or organisational reason must also entail changes in the workforce. Whether there is an ETO reason is very fact specific. In this case the tribunal may have reached a different conclusion had the new contracts been offered while the redundancy process was still ongoing.

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