Case law update: EAT upholds a re-engagement order following a TUPE related unfair dismissal

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The EAT has recently upheld an ET’s decision to award re-engagement on employees’ original (higher) salaries, even where those employees had signed new contracts on a lower salary.

Legal background

The dismissal of an employee is automatically unfair in a TUPE scenario where the reason for the dismissal is the transfer itself, or a reason connected with the transfer that is not an ‘economic, technical or organisational reason entailing changes in the workforce’ (the courts have interpreted this to mean changes in the numbers employed or functions performed by the employees).

More generally, when a finding of unfair dismissal is upheld (i.e. not just in TUPE scenarios) and the claimant asks, an ET must consider making a reinstatement or re-engagement order – this will depend on various factors, including the employee’s wishes, whether it is ‘reasonably practicable’ for the employer, and whether the employee contributed to the dismissal. In practice, however, these types of order are rarely made.

The facts

Manchester College had taken on a contract to provide education in prisons. Employees had been put at risk of redundancy as part of a post-TUPE transfer redundancy process but in fact most redundancies were achieved through volunteers and only a few compulsory redundancies were made. The College wanted to reduce employees’ pay and dismissed the staff when they refused. Mrs Hazel and Mrs Huggins signed the new contracts which were offered (and which included the reduced salary) but nonetheless brought claims in the ET arguing that their dismissals had been unfair and sought reinstatement on their old terms and conditions.

Tribunals’ findings

The ET concluded that the reason for their dismissal was their refusal to sign new terms; that reason was connected with the transfer; but it was not for a valid ETO reason. That other employees had been dismissed for redundancy did not alter the fact that Mrs Hazel’s and Huggins’ dismissals themselves were connected with the harmonisation of terms. Their dismissals were therefore automatically unfair. The ET ordered re-engagement based on the new terms and conditions save that their salaries were restored to their previous levels, frozen until the new pay scale caught up. It thought this was practicable for the College - it only involved an instruction to payroll and any discontent amongst other staff could be managed.

The College appealed to the EAT. It did not disturb the ET’s findings, on the specific facts, that the reason for dismissal was the refusal to sign the new terms, which was connected to the transfer – this met the ‘economic, technical or organisational’ strand of the test but did not ‘entail changes to the workforce’. Upholding the re-engagement order, the EAT did note this was an unusual case because at the time it was made, Mrs Huggins and Hazel were already working for the same employer, albeit on new terms. (More commonly, employers argue against the practicability of re-engagement orders on arguments such as loss of trust and confidence, passage of time).

Comment

Employers must be careful when changing terms following a TUPE transfer. A desire to harmonise is not sufficient - there has to be an economic, technical or organisational which must involve a change in the workforce (either in numbers or functions). On this set of facts, the two processes (redundancy and harmonisation) were not carried out simultaneously. If they had been, the outcome may have been different - it would have been possible to argue that there would have been a change in the workforce because staff numbers were going to be reduced. And it might have looked a more realistic ETO reason if attempts had been made to change the functions of employees/overall operational structures.

The tribunals’ findings here on re-engagement are interesting too. It is generally thought that, in the absence of consent, the most certain way of achieving the desired changes to terms and conditions is to dismiss and re-employ on new terms and conditions (subject to managing the risk of unfair dismissal/other claims). However, this case illustrates that even when an unfairly dismissed employee has signed a new contract of employment, an ET can effectively reinstate the old contract or re-write the new contract with more equitable terms (as happened here). Employers could potentially, therefore, commit to the process of individual and (where numbers dictate) collective consultation, serve notice under the old contracts, breathe a sigh of relief when the new contracts are signed, only to find that there is the potential for the employees to reap the benefits of the very terms that they had sought to change.

Read the judgment.

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