Employment Update: Transfer undertakings

20 March 2007

An employer who dismisses an employee pre-transfer because that employee will be redundant post-transfer will have dismissed that employee unfairly for a transfer-related reason. If the transferee had dismissed the same employee post-transfer the dismissal, being for an ‘economical technical or organisational reason’ (‘an ETO reason’), would have been potentially fair.

The relevant regulations state that for a dismissal to be fair it must be for an ETO reason ‘entailing changes in the workforce of either the transferor or the transferee before or after the relevant transfer’. (reg.8(2) old TUPE / reg. 7(2) new TUPE). In Hynd v Armstrong the Scottish Court of Session held that the transferor could not claim to have an ETO reason for the dismissal because, so far as it was concerned, the employee was not redundant. A dismissal pre-transfer by the transferor cannot be called fair if it is made for reasons relating to the future conduct of business by the transferee – whether or not the transferee was in existence at the time of the dismissal. To decide otherwise would mean that TUPE was being used to reduce employer’s liability for redundancy payments rather than to protect the interests of the employees.

A distinction can be made in the case of a transferor making redundancies which were required in any event quite apart from the transfer (as in the case of Warner v Adnet) The employer must dismiss for a reason of its own.

Points to note –

  • Normally there will be less risk of unfair dismissal claims if all the employees in the undertaking transfer on a TUPE transfer and it is then left to the transferee to decide whether redundancies (potentially fair dismissals) are necessary.

  • Where the combined workforces of the transferor and transferee are greater than required post-transfer and the transferee is selecting for redundancy it must consider all the employees of the combined workforce on an equal footing.

  • In this case the old (1981) TUPE regulations applied but the outcome would have been the same under the new TUPE regulations 2006. On other issues, the 2006 regulations impose new obligations – for instance the duty on the transferor to notify ‘Employee Liability Information’ pre-transfer. Our expertise in the outsourcing business makes us well-placed to provide specialist advice on all TUPE issues.