The Employment Appeal Tribunal has rejected an appeal against a decision ordering an employer to re-engage two members of staff who refused to accept harmonisation of their terms and conditions following a TUPE transfer. The employment tribunal had decided by a majority that their dismissals were automatically unfair because they did not fall within the ETO exemption for transfer-related dismissals and they were therefore entitled to contracts preserving their pre-transfer salary.

The employer was a further education college based in the north of England which had successfully bid for a contract to provide education for offenders on a national basis. This involved the transfer of 1500 new staff, including the two claimants who were employed as academic staff at HMP Elmley in Kent.

Following the transfer there had been a round of redundancies. Although the claimants were put at risk at one point, they did not lose their jobs. Six months after the transfer, in common with nearly 800 other staff, they were invited to sign new contracts of employment as part of a harmonisation and cost-cutting process. They refused to agree to the new terms because that would have involved a substantial reduction in salary. The respondent then dismissed and re-engaged them on the new terms. They continued to work but brought proceedings for unfair dismissal.

It was agreed that the reason for their dismissals was connected with the transfer, and therefore automatically unfair unless the ETO exemption applied. It was accepted that the dismissals were for economic, technical or organisation reasons, but the claimants argued that since the dismissal did not “entail changes in the workforce”, the statutory definition of an ETO reason had not been satisfied. The respondent claimed that the situation had to be looked at holistically, and that because redundancies had preceded their attempt to harmonise terms and conditions, the dismissal did entail changes in the workforce. It added that the tribunal should not have exercised its discretion to re-engage the claimants because the vast majority of staff had accepted the new terms and conditions and would be most unhappy. The ET concluded that the claimants’ arguments were correct. The possibility of some unrest should not stand in the way of an order which would preserve the claimants’ old pay, but on the basis that they would not be eligible for increments or pay rises until the pay of their colleagues doing comparable jobs had caught up.

The EAT could not fault the way the tribunal had approached the case. There are only a handful of re-engagement orders each year, but that was not of itself a reason for challenging the tribunal’s decision. The fact that the employer might have been successful before another tribunal illustrates how unpredictable litigation on this aspect of TUPE has become. If it had implemented a headcount reduction in conjunction with the harmonisation, thereby engaging the statutory definition of an ETO more clearly, the outcome might have been different.