In August 2009 two claimants, together with 1,500 other employees, TUPE transferred to Manchester College when the college took over the contract for providing offender learning at HM Prison Elmley.

In January 2010 about 200 redundancies were proposed. The two claimants were told that their jobs were not at risk but would be affected by proposed changes to their terms and conditions. The most significant change was a pay cut.

The claimants refused to accept the new terms and were dismissed by letter. The college re-offered the claimants employment on the new contracts and, this time, the claimants accepted and returned to work. As the claimants had both been dismissed, they were able to bring a claim for unfair dismissal and asked for reinstatement on their old terms (Manchester College v Hazel and another UKEAT/0642/11).

Under TUPE, a dismissal of an employee will be automatically unfair where the sole or principal reason for the dismissal is either the transfer or a reason connected with the transfer unless the dismissal is for an 'economic, technical or organisational reason entailing changes in the workforce' (ETO reason) (Regulation 7(1) TUPE).  A change in the workforce has been held to be either a change in the numbers employed or a change to the functions performed by the employees.

The employment tribunal held that the reason for the dismissal was that the claimants refused to sign the new contracts and it was therefore connected with the transfer. However, whilst the decision to make changes was based on an economic or organisational reason, it did not entail a change in the workforce. The tribunal found therefore that the dismissals were not for an ETO reason, and that they were automatically unfair.  It ordered that the claimants be re-engaged at their old salaries.

Manchester College appealed the decision arguing that the redundancies proposed before the change in terms formed part of the ETO reason and, therefore, a change in the workforce. This was rejected. The redundancy process was over at the time of dismissing the claimants. Had the college gone through a redundancy process with the two claimants and offered them the new terms as part of that process, the ETO reason may well have stood. The college’s approach meant that it was not open to it to argue that re-engagement was inappropriate as the claimants were already working there.