Employment Rights – TUPE

Part 4 – Dismissals and redundancies

The general law on unfair dismissal and redundancies applies in situations where a relevant transfer occurs or is in prospect. For example, the employer must follow the appropriate procedures when handling the dismissals, and act in accordance with the Dispute Resolution Regulations which came into force on 1 October 2004 (see the BERR guidance Resolving disputes at work: procedures for discipline and grievance, which is available on BERR’s website). The TUPE Regulations also provide some additional protections which limit the ability of employers to dismiss employees when transfers arise.

The additional TUPE protections

Neither the new employer (the transferee) nor the previous one (the transferor) may fairly dismiss an employee:–

  • because of the transfer itself; or
  • for a reason connected with the transfer, unless that reason is an "economic, technical or organisational (ETO) reason entailing changes in the workforce."

If there is no such reason, the dismissal will be automatically unfair.

If there is such a reason, and it is the cause or main cause of the dismissal, the dismissal will be fair as long as an employment tribunal decides that:

  • the employer acted reasonably in the circumstances in treating that reason as sufficient to justify dismissal; and
  • the employer met the other requirements of the general law on unfair dismissal.

Also, if the dismissal occurred for reason of redundancy, then the usual redundancy arrangements will apply, and the dismissed employee could be entitled to a redundancy payment.

The onus lies on the dismissing employer to show that the dismissal falls within the ETO exemption to the automatic unfairness rule. Neither the Regulations nor the Acquired Rights Directive define what an ETO reason may be. The courts and tribunals have not generally sought to distinguish between each of the three ETO categories, but rather have treated them as a single concept.

To qualify as an ETO defence, an economic, technical or organisational reason must be one "entailing changes in the workforce." The courts have held that this means a change in the numbers of people employed or a change in employees’ particular functions.

Constructive dismissal

As described in Part 3, employees can object to a transfer and, by doing so, terminate their contracts. In many cases, those employees will not be able to claim unfair dismissal because they have in effect resigned and therefore have not been "dismissed". However, transferred employees who find that there has been or will be a "substantial change" for the worse in their working conditions as a result of the transfer have the right to terminate their contract and claim unfair dismissal before an employment tribunal, on the grounds that the actions or proposed actions of the employer had constituted or would constitute a de facto termination of their employment contract. An employee who resigns in reliance on this right cannot make a claim for pay in lieu of a notice period to which they were entitled under their contract.

This statutory right exists independently of an employee’s common law right to claim constructive dismissal for an employer’s repudiatory breach of contract.

Q. What might constitute a "substantial change in working conditions"?

A. This will be a matter for the courts and the tribunals to determine in the light of the circumstances of each case. What might be a trivial change in one setting might constitute a substantial change in another. However, a major relocation of the workplace which makes it difficult or much more expensive for an employee to transfer, or the withdrawal of a right to a tenured post, is likely to fall within this definition.

Q. Does this mean it is unlawful for the new employer to make such "substantial changes in working conditions" and it is automatically unfair when an employee resigns because such a change has taken place?

A. No. The Regulations merely classify such resignations as "dismissals". This can assist the employee if he subsequently complains on unfair dismissal because he does not need to prove he was "dismissed". However, to determine whether the dismissal was unfair, the tribunal will still need to satisfy itself that the employer had acted unreasonably, and there is no presumption that it is unreasonable for the employer to make changes. Also, because the statutory dismissal procedures do not apply in these circumstances, any failure by the employer to follow those procedures does not make the "dismissal" automatically unfair.

TUPE and redundancy

Dismissals on the grounds of redundancy are permitted by TUPE, as they will normally be for an ETO reason, although the new employer will need to make sure that the redundancy is fair within other employment legislation: e.g. selection for redundancy is fair, and not based simply on the fact that the person is a transferred employee.

Dismissed employees may also be entitled to a redundancy payment if they have been employed for two years or more. Employers must also ensure that the required period for consultation with employees’ representatives is allowed. More details are in the BERR guidance Redundancy consultation and notification available at www.berr.gov.uk/employment/employment-legislation/employment-guidance/page13852.html and Redundancy entitlement: Statutory rights available at www.berr.gov.uk/employment/employment-legislation/employment-guidance/page15686.html. Entitlement to redundancy payments will not be affected by the failure of any claim which an employee may make for unfair dismissal compensation.

Where there are redundancies and it is unclear whether the Regulations apply, it will also be unclear whether the transferor or new employer is responsible for making redundancy payments. In such cases employees should consider whether to make any claims against both employers at an employment tribunal.

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