In the case of Manchester College v Hazel and another, the Employment Appeal Tribunal ("EAT") has upheld the decision of an Employment Tribunal that two employees who were dismissed for failing to agree to new employment terms (including a pay reduction) following a TUPE transfer were unfairly dismissed and should be re-engaged on their old rates of pay.

The Claimants’ employment transferred under TUPE to the Respondent in August 2009.  In January 2010, the Respondent proposed around 200 redundancies together with changes to terms and conditions for the remaining staff.  The Claimants were invited to agree to new terms including a pay cut, which they refused.  They were dismissed in July 2010, and offered re-engagement on the new terms.  Whilst they accepted re-engagement, they brought claims for unfair dismissal.

A dismissal will be automatically unfair where it is either because of a TUPE transfer, or for a reason connected to a TUPE transfer that is not an economic, technical or organisational ("ETO") reason that entails changes in the workforce.  "Changes in the workforce" is understood to mean changes to the numbers or functions of employees employed. 

The EAT has upheld the Tribunal’s decision that the Claimants were unfairly dismissed.  It concluded that the reason for the Claimants’ dismissal was their refusal to accept the new terms, and that this was a reason connected to the TUPE transfer.  Although this was for an economic reason, it did not "entail changes in the workforce".  Whilst other staff in the Respondent’s organisation had been made redundant, the Claimants’ dismissals had not been part of this process, but instead related to a process of harmonisation of terms.  The Respondent argued that the changes to the Claimants’ terms should be seen holistically, as part of an overall savings process which involved redundancies and thus changes to the workforce.  The EAT however found that the Tribunal was entitled to determine that the Claimants’ dismissals were not for an ETO reason entailing changes in the workforce as the redundancy process had concluded by the point the Claimants were offered the new terms, and the two processes were therefore distinct from one another.  The EAT also upheld the Tribunal’s decision on remedy which was to order re-engagement of the Claimants on the new terms with the exception of salary, which would be restored to the previous level and red-circled until their colleagues (who had agreed to the pay cut) caught up with them.

Impact for Employers

  • This case demonstrates the significant difficulties faced by employers in establishing an ETO reason entailing changes in the workforce in order to implement changes to terms and conditions following a TUPE transfer. 
  • The requirement that the reason for the change must "entail changes in the workforce" significantly reduces the scope for establishing an ETO reason.  In this case, even though redundancies had in fact taken place, the reason for the dismissal of the Claimants was their refusal to accept the new terms. which the Tribunal held was distinct from the redundancy process.
  • Had the redundancy process still been on-going and the Claimants been at risk of redundancy when they were dismissed, the decision may have been different.  Further, as this is an area of law that is highly fact-sensitive, it is also quite possible that a different Tribunal could have come to a different conclusion on these same facts.