The Regulations make it automatically unfair for an employer to dismiss an employee if the only or main reason for the dismissal was the transfer or a reason connected with it. This principle applies whether the employee was dismissed by the old employer or the new, and extends to all employees of both employers, whether or not they work in the part of the business that is transferred or under the contract concerned. In order to be entitled to bring an unfair dismissal claim on these grounds, an employee must have been continuously employed for one year or more.
Economic, technical and organisational reasons (ETO)
There is an exception to the principle that dismissals relating to a transfer are automatically unfair. If an employee has been dismissed for an economic, technical or organisational reason entailing changes in the workforce of the old employer or the new one (an ‘ETO’ reason), the dismissal will not be automatically unfair.
Instead, the reason for the dismissal will either be redundancy, if the statutory definition of redundancy applies (Defining redundancy), or some other substantial reason justifying the employee’s dismissal. The question of whether the dismissal was fair or unfair will depend on the normal tests, namely whether the employer followed the statutory minimum dismissal procedure (if it applies) and whether it acted reasonably in all the circumstances in treating the reason as a sufficient basis for dismissing the employee. (did the company act reasonably?).)
As yet, the decisions of the courts and employment tribunals have not given a clear picture of what amounts to an ETO reason. They have confirmed, however, that it must relate to the way in which the business is conducted, not its attractiveness to a potential buyer. It will not, therefore, apply if employees have been dismissed in advance of the transfer at the request of the new employer. An ETO reason must also entail changes in the size and make-up of the workforce, rather than merely changes in employees’ contractual terms. For example, the courts have confirmed that it would cover dismissals to reduce staffing levels or effect major changes in the content of employees’ jobs, but not dismissals to harmonise a workforce’s terms and conditions after a transfer.
As discussed above, if the old employer dismisses an employee before the transfer for a reason connected with it that is not an ETO reason, that dismissal is automatically unfair. Furthermore, liability for it passes to the new employer, even though the employee was no longer employed at the time of the transfer. For example, if the old employer dismisses employees at the request of the new employer, the new employer will inherit liability for those unfair dismissals.
If, on the other hand, an employee is dismissed for an economic, technical or organisational reason, or for a reason unconnected with the transfer, whether before or after the transfer occurs, the employer who dismissed the employee is legally responsible for the dismissal. The dismissal may be fair or unfair, depending on whether the employer followed the statutory minimum dismissal procedure (if it applies) and acted reasonably in deciding to dismiss.