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Harmonising contracts after a transfer - Court of Appeal confirm it's risky

TUPE can be a real headache.  When employees transfer to you on various different terms and conditions, this can make them very difficult to manage.

TUPE can be a real headache.  When employees transfer to you on various different terms and conditions, this can make them very difficult to manage.  We are often asked about harmonisation post transfer and when it can occur.  In an important Judgment, the Court of Appeal has found that dismissing and re-engaging an employee to change their contract post-transfer did not work in the circumstances considered.  The case of Hazel v The Manchester College is a warning for all employers considering post-transfer harmonisation.

The detail

Mrs Hazel TUPE transferred to the College in August 2009.  The College was faced with having no fewer than 37 sets of terms and conditions which applied to staff who had transferred.  The economic situation around the College’s contracts was also challenging and they concluded cost-savings were required. The College decided to undertake what is described as staff restructuring and efficiency savings.  After consultation, in mid-2010 Mrs Hazel was given notice of dismissal under her existing contract, but offered a new contract with different terms including a significant reduction in pay.  She accepted the new contract but expressed that she was doing so under protest.

Mrs Hazel brought an unfair dismissal claim.  Whilst this may appear unusual because she was still employed, if someone is dismissed and re-engaged they can still claim unfair dismissal.  She said that the dismissal was for a reason relating to the transfer and therefore was automatically unfair.  The Employment Tribunal accepted this.  Importantly it said the dismissal was not for an ETO reason (which can allow a dismissal to be potentially fair even if related to a transfer) - that is an economic, technical or organisational reason entailing changes in the workforce.  The outcome was that Mrs Hazel was reinstated to her employment on her old contract, which included recovering the lost back pay which had resulted from the reduction and meant the College’s attempted harmonisation failed.

The Court of Appeal has now confirmed that the Employment Tribunal was right.  It accepted that the fundamental reason for the College’s dismissal of Mrs Hazel was her refusal to accept the new terms, and this reason did not entail changes in the workforce as required to be an ETO.  The Tribunal was not required to look at the broader costs-saving plans identified by the College involving some redundancies.  As a result it upheld the finding and the outcome.  This Judgment does reinforce the risk of any attempt at post-transfer harmonisation, particularly where it occurs shortly after the transfer.

What does this mean for me?

Many of you will have sympathy for the situation in which the College found themselves, that is lots of groups of transferred staff on different terms.  Harmonisation does not always have to be related to the transfer, but in this case harmonisation a year after transfer was clearly considered to be.

Taking the route of dismissal and re-engagement may have been felt by the College as giving them a more certain outcome.  They endeavoured to link the changes in terms with redundancies that were occurring in the hope that an ETO would be established.  The Court of Appeal Judgment is dismissive of their attempt to do so. The fact that you may be reducing numbers as part of an exercise does not immediately enable you to change the terms and conditions of others and maintain it is an ETO.

Comment

TUPE was amended last week. The impact of this Judgment still applies under amended TUPE as this part of the ETO test was not changed. However, a dismissal is now only automatically unfair (and an agreed contractual change only invalid) if the principal reason for it is the transfer itself (not a reason connected to the transfer as it was before). It remains to be seen whether this will make Employment Tribunals less likely to connect harmonisation to an earlier transfer, and we will undoubtedly see some test cases before too long.  What this Court of Appeal Judgment reminds us however, is that when in doubt the Courts and Tribunals do appear to firmly emphasise the protection of employment element of TUPE.

If you have any queries arising from this decision please speak to your usual Weightmans contact or get in touch with Phil Allen in our Manchester office phil.allen@weightmans.com.