Employment Update: TUPE



Were dismissals by an administrator made for economic reasons (and therefore fair) or TUPE-related and automatically unfair?

In Dynamex Friction Ltd v Amicus an administrator had dismissed the entire workforce immediately on being appointed because the company had no money to pay its debts. At that time no transferee of the insolvent business had been identified and there was no prospect of a sale. However, the administrator did shortly afterwards agree a sale of the remaining company assets to a newly formed purchaser company that had links with the directors of the ‘old’ company. There was evidence to suggest that this transfer had been ‘stage managed’ by the directors of the ‘old’ company from a date well before the administrators appointment.

The employment tribunal decided that the administrator had dismissed the employees for an ‘economic technical or organisational reason’, simply because he had no money with which to pay them. So, the dismissals were not TUPE-related and so not unfair.

The EAT decided that the employment tribunal had not adequately explained its reason for thinking that it was a simple economic dismissal by the administrator. Did he not appear to be the 'unwilling tool' of the directors who were simply trying to get rid of the debts of the transferor company by putting it into administration and transferring only the assets they wanted into a new 'phoenix' company?

The Court of Appeal (but only by a 2:1 majority) disagreed. The tribunal did not have to look behind the administrator's decision to dismiss if it was satisfied that there was no actual collusion between him and the directors on the issue.

Points to note:

· This case was decided under the ‘old’ TUPE Regulations 1981 but the issue would have been the same under 2006 TUPE. The appointment of an administrator is not included in ‘relevant insolvency proceedings’ in which all pre-transfer obligations remain with the transferor or the DBERR in any event.

· Dismissals by an administrator may be transfer-related if there is evidence of collusion between transferor and transferee to effect the dismissals before any transfer of other assets takes place. Expert advice should always be obtained to minimise the risk of ‘transfer-related’ dismissals as they are automatically unfair.

Agrievance letter sent to the transferor one year after a TUPE transfer but copied to the transferee was sufficient to trigger the statutory grievance procedure

In Bottomley and others v Wakefield District Housing the respondent employer had taken the employees over from the local authority on a TUPE transfer.

One year later, the employees' solicitor filed statutory grievances on their behalf with their old employer, the local authority, alleging that the employees had an equal pay claim. He copied the grievance letters to the respondent.

The employees then brought their equal pay claims against the respondent.

The respondent complained (and the employment tribunal agreed) that the employees had not filed a proper grievance with their current employer before bringing their claims.

The EAT now disagrees and says that the claims may proceed. There is not meant to be any formality about the SGP. It was sufficient that the respondent had received a copy of the grievance and knew that a claim was threatened. This was exactly the kind of liability hat should pass to the transferee under TUPE.

Points to note:

· The EATreaffirms yet again that only minimal formality is required in order to trigger the statutory grievance procedure. As is stated in Employment Act 2002 Sch 2 Reg 6, the employee need only ‘set out the grievance in writing and send the statement or a copy of it to the employer’.

· On a TUPE transfer, the responsibility to respond to any grievance already raised will pass automatically to the transferee.

· In Bottomley, the grievance was raised after the TUPE transfer. The EAThas said that the equal pay claims may proceed but, as the comparators named by the claimant worked for the local authority transferor and were not employed by the respondent transferee, it seemed likely that they will be struck out at the next stage of the tribunal proceedings.