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Dismissal prior to TUPE transfer held unfair- 19/01/2012
Can the dismissal of an employee be because of a relevant transfer (within the meaning of Transfer of Undertakings (Protection of Employment) Regulations 2006 reg.7(1) (“TUPE”)) even where there is no purchaser for the business in existence at the time of the dismissal? Yes, says the Court of Appeal in the case of Spaceright Europe Ltd v Baillavoine.
Under TUPE the dismissal of an employee is automatically unfair if it is for a reason connected with “the transfer". This recent case has settled the issue of whether the word “the transfer” refers to a transfer contemplated at the time of dismissal, or whether it means any transfer that happens in the future, regardless of whether such a transfer was contemplated at the time of the dismissal.
The Facts
The Claimant, Mr Baillavoine, was the CEO of Ultralon Holdings Ltd which went into administration. The administrators dismissed the Claimant, along with other employees. The administrators then obtained bank funding in order for the business to continue trading, whilst beginning to search for a new purchaser for the business. A month after the dismissal, the business was sold to the Respondent, Spaceright Europe Ltd.
The Claimant made a claim for unfair dismissal and the employment tribunal found that the reason for his dismissal was connected to the transfer of the business, and was not an economic, technical or organisational (ETO) reason entailing changes in the workforce (following the reasoning in the case of Harrison Bowden Ltd v Bowden). In other words, the Claimant had been automatically unfairly dismissed in breach of TUPE, to allow the Respondent to buy the business without its CEO (who was on a salary of £120,000 per annum) and the ETO defence was not available.
The Respondent appealed to the EAT, who upheld the decision of the tribunal. A further appeal was made to the Court of Appeal, which also upheld the tribunal’s finding of automatic unfair dismissal. It held that the language of reg.7(1) should be given its natural and ordinary meaning, which does not require a particular transfer or transferee to be in existence or in contemplation at the time of the dismissal. It also held that ETO defence did not apply as there had to be an intention to change the workforce and to continue with the business. In this case the actual intention was to sell the business and to make it attractive to purchasers.
Comment
Where an employer has the need to make a dismissal during a period where it is likely that a business transfer will occur, they would be well advised to keep detailed evidence showing the true reason for the dismissal.
For further information, please contact Daff Richardson, Eugene Wojciechowski, Tom Walker or Sarah Johnson.