April 8, 2014

TUPE update: Dismissals for ‘harmonisation’ are unfair


What is harmonisation?

Following a TUPE transfer, employers often want to change the incoming employees’ terms and conditions to harmonise them with existing employees. TUPE Regulations say that it is possible to change terms and conditions if there is an "economic", "technical" or "organisational" (ETO) reason for this change and it also involves changes to the workforce, i.e. a change in the number of employees or a change in the duties they perform.

If there is no ETO, or if the change does not entail changes to the workforce, the harmonisation is void, and employees can take action in the Employment Tribunal for breach of TUPE.

The case

In the Court of Appeal case of Hazel and another v The Manchester College, 1,500 employees TUPE transferred to Manchester College. The College put forward a cost saving plan involving 200 redundancies and changes to the remaining employees’ terms and conditions. The College offered the remaining employees new contracts, which included a pay cut. Some refused to accept the new terms, the College dismissed them and immediately offered re-engagement on the new contractual terms. As there has been a dismissal, employees in this situation have the option of rejecting the new terms and bringing a claim for unfair dismissal or accepting the new terms and remaining in employment and – wait for it - still bringing a claim for unfair dismissal. The Claimants in this case accepted the new terms but brought claims for automatic unfair dismissal, seeking re-engagement on their old salaries.

On the face of it, there appeared to be an ‘economic’ reason for the change – costs savings – and a change in the workforce, so the College presumably thought that they had a valid defence to the proceedings. However the Employment Tribunal disagreed, and the Court of Appeal upheld the Employment Tribunal’s reasoning.

Why? Even though there were changes to the workforce, the Tribunal’s view was that the ‘economic’ reason was not linked to these changes – the backdrop was redundancies, but the reason for the claimants’ dismissal was their refusal to accept the harmonised terms. The Court of Appeal also upheld the Tribunal’s decision that the employees be re-engaged on their new terms and conditions but with their old salaries.

Where does this leave employers?

If employees accept revised contractual changes where there are also changes to the workforce, it will be difficult for employees to subsequently challenge. However if they do not accept these changes and the employer attempts to impose the change by dismissing and offering reengagement on the new terms, there is a real risk that the employer will end up liable for significant compensation in Tribunal.

If you would like advice on risk-free TUPE transfers or any other employment law of HR matter please get in touch with members of our Employment & HR Team.

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