A recent decision of the Employment Appeal Tribunal serves as a useful reminder of how employers can fairly dismiss employees for an economic, technical or organisational (ETO) reason following a Transfer of Undertakings (Protection of Employment) Regulations (TUPE) transfer.(1)
The case concerned the dismissal of a group of employees who had transferred from the London Borough of Barnet to Capita Business Services Ltd when Barnet decided to outsource various services, including pensions, benefits and human resources-related services. Thirty employees brought claims alleging that they had been automatically unfairly dismissed under TUPE, of which nine were selected as lead cases in the employment tribunal.
It was common ground that the outsourcing had amounted to a 'service provision change', so TUPE applied. As the employees qualified for the special protection against dismissal that TUPE affords, the question became: what was the reason for the dismissals?
Under TUPE, if the sole or principal reason for dismissing an employee post-transfer is the transfer itself, that dismissal will be automatically unfair (although the employee still needs two years' service to bring an unfair dismissal claim). However, where the sole or principal reason for the dismissal is an ETO reason – an "economic, technical or organisational reason entailing changes in the workforce" – the dismissal will be potentially fair (subject to normal principles regarding reasonableness of dismissal).
The test for whether there is an ETO reason is twofold. First, the employer must establish an ETO reason, which may be relatively straightforward. It could rely, for example, on cost-saving requirements (economic), automation of processes (technical) or restructuring needs due to post-transfer overstaffing (organisational). However, in all cases the reason must also "entail changes in the workforce".
Case law has established that 'changes in the workforce' means a change in the number of employees or in the functions which they perform.(2) Since amendments to TUPE in 2014, it is also possible to rely on the relocation of roles as something that entails changes in the workforce.
Capita's argument that it had an ETO reason was successful, save in relation to two employees.
Seven of the employees had been dismissed because Capita had split their job functions and redistributed those functions across several different sites. This therefore constituted an ETO reason, because it entailed changes in the job functions of the workforce.
Further, in relation to the other two employees, the reason for dismissal was the relocation of their roles with no significant changes to their functions. As the transfer occurred before the 2014 changes to TUPE, Capita could not rely on relocation to meet the 'changes in the workforce' condition. These two employees had therefore been automatically unfairly dismissed.
While the tribunal's judgment does not say much that is new – and is already behind the times on the relocation point – it is a helpful reminder of the two elements needed to establish an ETO defence.
With careful planning and detailed analysis of the reason for the dismissal, employers can often navigate this issue and achieve a fair dismissal notwithstanding the protection for employees that TUPE affords. Had the transfer to Capita taken place after January 31 2014, relocation would have qualified as a change in the workforce and it is likely that none of the dismissals would have been automatically unfair.
For further information on this topic please contact Richard Moore at Lewis Silkin by telephone (+44 20 7074 8000?) or email (email@example.com). The Lewis Silkin website can be accessed at www.lewissilkin.com.
(1) Osborne v Capita Business Services Ltd (UKEAT/0048/16).
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