As we saw in our previous post, employees of transferee businesses (the business being sold) acquire certain rights upon transfer to the transferor business (the business that is acquiring the transferee).
One of the rights that is conferred under TUPE to employees of the transferee business upon transfer to the transferor is that of protection against dismissal. If either the transferee or the transferor dismisses employees and the principal reason for their dismissal is the transfer itself or a reason connected to the transfer that doesn’t fall within the ETO exclusion then the employee will be treated as having been automatically unfairly dismissed. Further, the employee does not have to have been dismissed by their employer to receive TUPE protection. They can resign and claim constructive dismissal if there are substantial changes to their working conditions to their material detriment or there is a repudiatory breach of contract by the transferor or transferee.
In this post we’ll take a look at:
- When a transfer occurs
- When the reason for dismissal can be attributed to the dismissal itself or is connected to it
- The definition of an ETO
We’ll also take a look at a quick worked example to illustrate the protections available.
Who can claim for protection against dismissal?
Employees of the transferee who have at least one year’s continuous employment and are dismissed as a result of a transfer or for a reason connected to a transfer can pursue either the transferor or the transferee (which one depends on the circumstances) for automatic unfair dismissal.
When does a transfer occur?
This is a question of fact for the Employment Tribunal to decide. As we saw in a previous post, there has to have either have been a relevant transfer or a service provision change. The Employment Tribunal will look at the particular facts of the situation and arrive at a belief on the balance of probabilities as to whether a transfer has occurred.
When can the reason for dismissal be attributed to the dismissal itself or connected to it?
The Employment Tribunal will again look at the particular facts in the matter to determine whether the dismissal is because of the transfer or connected to it. If the dismissal takes place at the time of the transfer then there is a rebuttable presumption of a connection. However, dismissals both prior to and after the transfer can be connected to the transfer (even many years after the transfer in some cases). Although the difference between “because of” or “connected to” may appear to be semantic, they have very different implications for whether and how the employer unfairly dismissed the employee.
A dismissal is generally held to be as a result of the transfer itself if there are no “extenuating circumstances”. What “extenuating circumstances” actually amount to is relatively opaque – there is no statutory definition and the courts have, by necessity, only given piecemeal explanations of what can be considered to fall within “extenuating circumstances”. However, if the reason for the dismissal is a result of the transfer itself then the dismissal will be automatically unfair – there is no possibility of defending the claim by advancing an ETO reason.
The definition of an ETO
If there are “extenuating circumstances” upon a transfer and employees are dismissed, their dismissal will not be automatically unfair if the employer can show that an Economic, Technical or Organisational (“ETO”) reason necessitated the dismissal. There is no statutory definition of ETO reasons but it must relate to the profitability or market performance of the business (economic); or relate to equipment or product processes (technical); or relate to the management or organisational structure (organisational). The ETO must entail a change to the workforce or the functions of the workforce (such as a need to retrain employees to use different machinery), not just adjustments to their contracts, to be an ETO.
If the employer demonstrates that an ETO reason existed then the dismissal will not be automatically unfair under TUPE but may be unfair dismissal under the normal principles in the Employment Rights Act 1996.