In the recent case of Manchester College v Hazel the employer became responsible for 1,500 new employees, as a result of a TUPE transfer. Within a short time it became clear that redundancies would be necessary and voluntary redundancies were made.
Six months later costs still needed to be cut. The employer proposed to cut the pay of the new employees to bring them down to the level of its existing workforce. The new employees refused and were dismissed. They accepted work on the new terms but brought claims of unfair dismissal. The claimants argued that their dismissals were automatically unfair as being for a reason connected with the TUPE transfer and the EAT agreed.
The ‘ETO exception’ (a dismissal is not automatically unfair if made for ‘an economic, technical or organisational reason entailing changes in the workforce’) did not apply here. At the stage the dismissals were made, there were no ‘changes in the workforce’ as no-one was being made redundant.
Furthermore, the claimants were entitled to be re-engaged on their old rates of pay.
Points to note
• Note that the timing of the employer’s actions was key to the tribunal’s decision. At the time of these dismissals, the redundancy exercise (at which point any dismissals would have been for an ‘ETO’ reason and therefore potentially fair) had been completed. The reason for these dismissals was not redundancy but because the employees refused to accept the new terms. This was a reason connected with the transfer and the dismissals were automatically unfair. The structuring of any post-transfer changes is important if such claims are to be avoided.
• Tribunals are empowered to award successful claimants re-engagement (as opposed to compensation) but rarely do so. However, in this case, because the claimants had in fact stayed in post (though at lesser salaries), the tribunal considered there would be no practical problem in awarding re-engagement at the old rates of pay even though it would of course leave the employer with a ‘two-tier’ workforce and still in no better position regarding the cutting of costs.
Other cases in the UK employment law update for November 2012:
> TUPE: Reasonableness of covenant judged at date contract entered into
> Collective redundancies: Timing and content of consultation