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TUPE dismissals and "changes to the workforce"

Submitted by Firm:
Addleshaw Goddard
Firm Contacts:
Michael Leftley, Sarah Harrop
Article Type:
Legal Update
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The EAT has held that dismissal and re-engagement for a refusal to accept new terms and conditions, was for an economical, technical or organisational reason, but did not entail "changes to the workforce", and was, therefore, automatically unfair. The EAT also upheld the Tribunal's decision to award the unfairly dismissed employees re-engagement, rejecting the argument that this was not just and equitable and would cause upset in the workforce (The Manchester College v Hazel and another).

TUPE 2006 provides that where a transferring employee is dismissed for a reason relating to a transfer, such dismissal will be automatically unfair unless it is for an economic, technical or organisational one (ETO reason), which also entails "changes to the workforce". It has been established in case law that changes to the workforce means a change in the numbers of the workforce or their functions. It is also well established that harmonisation of terms and conditions does not constitute a change in the workforce.

The Respondent is a further education provider, delivering offender learning to over 78 different establishments. Owing to the transfer of certain contracts, 1500 employees transferred to the Respondent. The new employees were employed on 37 different employment contracts. Following an independent review, significant hidden costs related to the new contracts were revealed and, given the economic situation facing the further education sector, the Respondent's principal proposed efficiency savings and restructuring in order to save £5 million.  This included a redundancy programme and also changes to the terms and conditions of employees' contracts.

The Respondent entered into negotiations with the union and a number of voluntary redundancies ensued. As a result, the Claimants were told that they were no longer at risk of redundancy and were, instead, offered new terms and conditions, which included a substantial pay cut. The Claimants objected to the proposed pay cut and were ultimately dismissed and re-engaged on the new terms. However, the Claimants pursued claims for unfair dismissal and sought the remedy of reinstatement to their original terms.

The Employment Tribunal (ET) found that the reason for the Claimants' dismissal had been their continued objection to the new terms and conditions and this was connected to the transfer. However, it also found that there was an ETO reason for the dismissals. The key issue was whether the changes to the contracts entailed changes in the workforce.  By a majority, the ET found that the change of the Claimants' terms and conditions was for the purpose of harmonisation and this did not entail a change in the workforce. 

The ET ordered re-engagement on the new terms and conditions, save that the rate of pay was to be restored to its previous level. The ET also ordered that the Claimant's rate of pay would be frozen until such time as their colleagues' pay rates had caught up. 

The Respondent appealed arguing that the redundancies and the changes to the terms and conditions should be viewed "holistically".   It argued that the reason for the dismissals was the Claimants' failure to sign the new contracts in the context of an overall process involving changes in the workforce (i.e. the redundancy programme). The EAT rejected this argument, holding that the redundancy issues had been resolved before it had been decided to dismiss and re-engage the Claimants on the new contracts.  The EAT also held that the re-engagement order was practicable and was the only way in which the breach of the TUPE regulations could be recognised.

Comment

The EAT drew attention to the fact that the two processes could not be viewed holistically because they were separate in time.  Would the outcome have been different if the redundancy programme and the harmonisation programme had been run together?  It seems unlikely as this would potentially offer a way of avoiding the strict rules in TUPE 2006 governing changes to terms and conditions of employment.  In theory, such an approach would mean that employers who wished to implement a programme of harmonisation  would simply need to ensure that it effected some redundancies at the same time in order to discharge the burden of showing there were changes to the workforce. 

In respect of re-engagement orders following dismissal, whether TUPE-related or not, this case shows that Tribunals are willing to be creative and practical so it is worth considering a compromise that both parties can live with.