A recent decision of the EAT potentially leaves employers with little wriggle room in relation to ETO reasons for TUPE related dismissals.  As Sarah Lamont explains, a college was held to have automatically unfairly dismissed two teachers for refusing to agree to new terms following a post-TUPE redundancy and harmonisation exercise.

The background

Where a dismissal is related to a TUPE transfer, the dismissal will be usually be automatically unfair.  One ‘escape route’ for employers is if they can show that the dismissal is:

  • for an ‘economic, technical or organisational reason’; and
  • which entails changes in the workforce’.

If the employer can meet both these requirements, then they may be able to establish that a dismissal is for an ‘ETO reason’.  Any resulting dismissal will not be automatically unfair, notwithstanding that it was because of, or linked to, a TUPE transfer.

The term ‘changes in the workforce’ does not include all and any changes; the relevant ‘changes’, for an ETO reason to be valid, are limited to changes to the ‘numbers and functions’ of employees.

Once a finding of unfair dismissal has been made (whether related to TUPE or not), a Tribunal may be asked to make a ‘reinstatement’ or ‘re-engagement order’.

A reinstatement order effectively puts the employee back in the position they would have been in had they not been dismissed, i.e. back at work, on the same terms and conditions, with no loss of back pay.

A re-engagement order requires that the employee is placed in a comparable job, or in other suitable employment. Unless there has been contributory fault by the employee, the re-engagement order must be on terms which are, so far as reasonably practicable, as favourable as reinstatement.

In Manchester College v Hazel and another the EAT was asked to consider whether:

  • the dismissal of two teachers following a TUPE transfer was unfair for lack of an ETO reason; and
  • whether the tribunal was correct to make an order for re-engagement.

The facts

The facts in this case are relatively straightforward.  Mrs Hazel and Mrs Huggins (the Claimants), along with about 1,500 other employees, were transferred to The Manchester College under TUPE.

Five months later, the College proposed cost saving measures, which comprised of around 200 redundancies together with changes to terms of employment for the remaining staff.

Mrs Hazel and Mrs Huggins were informed that they were not at risk of redundancy and were offered alternative employment on new contracts which involved, among other things, a pay cut of 13.2% and 18.5% respectively.  The College said that the new terms were necessary to harmonise terms across the workforce, to “remove inequalities” and avoid further redundancies. Mrs Hazel and Mrs Huggins refused to agree to the new terms and were dismissed.

The College once again offered employment on the new contracts, which the teachers accepted, and returned to work after their dismissals. However, they brought claims arguing that their dismissals had been unfair and sought, among other things, reinstatement on their old conditions. 

An Employment Tribunal found that the teachers had been automatically unfairly dismissed, and that the changes to the teachers’ terms and conditions were not for an ETO reason because there was no change to the numbers or functions of the employees in question. 

The Employment Tribunal also ordered that the teachers should be re-engaged on their original salary but with a ‘pay freeze’ until their pay equalled that of their colleagues.

The decision

The Employment Appeal Tribunal (EAT) agreed with the Employment Tribunal, and rejected the College’s appeal. Whilst the College was able to show an ‘economical, organisation or technical’ reason for the new contracts (i.e. the need to standardise contracts and save costs) there were no linked ‘changes in numbers or functions of employees’.  

The College argued that the question of ‘changes in the workforce’ should be looked at holistically, so that the changes in the teachers’ contracts were part of a ‘package’ of measures, including redundancies, and therefore the changes were for an ETO reason.

However, the EAT said that the changes to the teachers’ contracts were a standalone matter, separated in time from the redundancy exercise: the teachers were told that they were no longer at risk of redundancy, and the next matter on the agenda was harmonisation of terms.

Rather poetically, the EAT said that the Employment Tribunal was right to “look into the mind of the actors in this drama” in relation to the question of timings: at the time the teachers were dismissed, it was because they refused to agree to the harmonisation of their terms of employment; by that point in time, the question of redundancies had been resolved.  Accordingly, the Employment Tribunal was right to divide the issue as between

(a) redundancies - changes in the workforce; and
(b) harmonisation – no changes in the workforce.

The EAT also upheld the Employment Tribunal’s order for re-engagement, with a ‘pay freeze’ until the teachers’ colleagues (who had agreed to the reduced terms) had caught up.

What does this mean for me?

Here there was found to be a clear separation in time between headcount changes and harmonisation of terms, and the finding was that the harmonisation could not therefore be for an ETO reason, even when the harmonisation was part of a cost-saving package for the employer which had included earlier redundancies. 

This makes it more difficult to predict how a Tribunal will view changes to terms post transfer.  It is, of course, possible that a different tribunal would view the situation differently and clearly possible that a different tribunal would allow post-TUPE harmonisation of terms if the new terms were for ETO reasons and were offered as part of a package of possible measures before a redundancy exercise had concluded, so that the employees concerned were still at risk. 

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