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Harmonisation dismissals following a business transfer ruled unlawful

Harmonisation dismissals following a business transfer ruled unlawful

The Court of Appeal today handed down Judgment in the Hazel v Manchester College which has been eagerly awaited by employers and the Human Resources industry.   The Court decided that a dismissal, following a transfer of an undertaking, which was motivated by a wish to harmonise terms and conditions of employment was unlawful, thus securing the rights of employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006.  The Court of Appeal upheld an order that the employees in this case should be re-engaged by the employer on the pay they had when transferred.

Although an employer may be allowed to dismiss an employee because of redundancy or reorganisation, it is unlawful to dismiss an employee who is not redundant simply to cut costs and potentially avoid future redundancies.  Lord Justice Underhill stated:

[T]he effect of the Directive (and thus of TUPE) is that the right of employees to preserve their existing terms must prevail over the interest of the employer in achieving harmonisation, at least when it is “connected with the transfer”. 

The government has introduced from the end of January 2014 the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (SI 2014/16).  These appear to remove dismissals which are merely “connected with the transfer” from protection.  The Court of Appeal’s judgment highlights a short coming of the new regulations because it indicates that under the case law of the Court of Justice of the European Union, dismissals which are for a reason connected with a transfer of a business, as well as those where the transfer itself is the sole or principal reason for the dismissal fall within the Directive on which the Regulations are based. One of the challenges to the new Regulations is likely to be whether the narrowing of the protection against unfair dismissal in this respect is compatible with the Directive.

Declan O’Dempsey and Adam Ohringer from Cloisters were instructed by Victoria Regan of Dawson Hart and acted pro bono on behalf of the two employees. Nathaniel Caiden also represented the claimants pro bono before the Employment Tribunals during some of the remedies hearings.  This case previously made new law in relation to costs protection: The Manchester College v Hazel & Huggins [2013] IRLR 563; [2013] EWCA civ 281.

Notes

The new regulations alter the rules about dismissals for a reason connected with a transfer

8.  (1)  In regulation 7 (dismissal of employee because of relevant transfer), for paragraphs (1) to (3) substitute—

“(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee is to be treated for the purposes of Part 10 of the 1996 Act(1) (unfair dismissal) as unfairly dismissed if the sole or principal reason for the dismissal is the transfer.

(2) This paragraph applies where the sole or principal reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer.

However as the Court of Appeal pointed out in its judgment para 16:

I should also note the decision of the CJEU in Martin v South Bank University (C-04/01) [2003] ECR I-2859, [2004] ICR 1234.  In that case an NHS training college became part of the University in circumstances attracting the operation of TUPE.  Staff at the college had different terms governing early retirement than the staff of the University.  The University offered them early retirement on the same terms as their existing staff.  The Court held that it was not entitled to do so.  The evidence was that its only motivation was “merely to bring the terms upon which it offered early retirement to employees of [the] College into line with those offered until that time to its other employees”, and in those circumstances, it held, “an alteration of the employment relationship must be regarded as connected to the transfer”: see para. 44 (p. 1259).  The issue there was not, as in Berriman, the scope of the ETO defence, but rather whether the change was “connected to the transfer” in the first place.  But the judgment confirms the view taken in Berriman that the introduction of adverse changes in the terms of transferred staff in order to achieve harmonisation with the terms of existing staff is not, where it is connected with the transfer, consistent with the requirements of the Directive. 

View the judgment here.

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