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TUPE: Dismissal motivated by ‘personality clash’ was related to transfer

Michael Ryley looks at the recent case of Hare Wines v Kaur where a buyer’s reluctance to inherit a difficult working relationship led to an unfair…

The buyer in a corporate transaction will frequently structure the deal as a business transfer rather than an acquisition of shares so as to “cherry pick” the assets it requires and to leave behind unwanted liabilities. Where TUPE applies, as it frequently will in such circumstances, there is a tension between the buyer’s strategy and TUPE’s purpose of protecting the employees in the target business. The Judgment of the Court of Appeal in the recent case of Hare Wines v Kaur highlights the sort of problem which can arise as a consequence of this tension.

One way in which TUPE protects employees around the time of transfer is by limiting the ability of the employer to change employment terms or to dismiss. The buyer will inherit the entirety of the transferring workforce on like terms, save where an employee opts out of the transfer. The buyer cannot cherry pick amongst the workforce in the way that it cherry picks amongst the assets and liabilities.

So when Hare Wines was lining up the purchase of the business of H&W Wholesale, an associated wholesale wine merchant which was to cease trading for financial reasons, Mrs Kaur was in scope for transfer to Hare Wines. She was a cashier with H&W. Unfortunately, she did not get on well with a colleague, Mr Chatha, who was the senior of the two and was in line to become a director of Hare Wines following the acquisition. The Employment Tribunal found that there was nobody at fault in that relationship; it was simply a personality clash. Notwithstanding the strained relationship between Mrs Kaur and Mr Chatha, they had worked together for some while.

TUPE meant that Hare Wines was going to inherit that unfortunate situation, which they wished to avoid. In order to do so, a plan was hatched whereby Mrs Kaur would be dismissed by H&W before the business transferred to Hare Wines. She was told that her employment would be terminating by reason of the fact that the H&W business was terminating; meanwhile, all her colleagues were on the list to transfer by reason of TUPE. It is hardly surprising that she smelled a rat and brought a claim that her dismissal was unfair.

Reading the Judgment, it is difficult to imagine how H&W thought that they would get away with this plan or indeed why they have fought the point as far as the Court of Appeal, other than to acknowledge that these cases are very sensitive to the facts and there was a dispute about the evidence.

It is correct to say that an employee whose employment is terminated ahead of the TUPE transfer for a reason entirely unconnected with the transfer will not transfer, in the same way that changes to terms and conditions are valid where the reason for the change lies outside the transfer. However, Employment Tribunals will inevitably be vigilant to establish the real reason behind the employer’s actions in these circumstances. Mrs Kaur contended that the argument that her dismissal was unconnected with the transfer was not credible. The real reason was not that H&W was ceasing to trade; it was that the buyer was taking the opportunity to avoid a continuation of the difficult working relationship between her and Mr Chatha.

In this case the Tribunal and the appellate Courts agreed that the employer’s reason for dismissal was not credible and the real reason was the fact that Hare Wines did not want to inherit the difficult working relationship. The dismissal was thereby automatically unfair as being by reason of the transfer and liability passed to Hare Wines. As was pointed out, the fact that the dismissal took place with effect from the day of the transfer suggested that there was a link between the dismissal and the transfer. The Tribunal had also noted that the unsatisfactory working relationship had endured for some while and it was the imminent transfer which appeared to have precipitated a change. If that was merely coincidental then it would require some explanation.

The limitations on the ability of the incoming employer to avoid taking on unwanted staff and to change employment terms can be frustrating. However, it is better to be realistic and to factor those restrictions into operational planning and to costings, rather than to attempt a contrived reasoning. Where there is a genuine opportunity to take action by reason of factors which are unconnected to the transfer, this does offer an opportunity to circumvent the protections, but any Employment Tribunal will be vigilant to ensure that the motivation is genuine.

Michael Ryley,, 020 7822 7158 is a Partner in the Employment, Pensions and Immigration team and is based in London. Michael is an expert on the employment issues arising on business transfers and advising on the TUPE implications of outsourcing and major infrastructure projects. The second edition of his book "TUPE: Law & Practice" was published in April 2014.

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