Following the announcement that Crystal Palace Football Club had gone into administration in January 2010, the club's administrator wanted to sell the club as a going concern. Shortly after he signed a sale and purchase agreement with the newly formed Crystal Palace Football Consortium (CPFC) he discovered that the club had severe financial problems and decided to 'mothball' the club during the out of season period, in the hope of selling it in the future. However CPFC then decided to withdraw its offer for the club and on 28 May 2010 the four claimants were made redundant.
The administrator made public that the reason the club had not been sold to CPFC was that Lloyds Banking Group plc had not agreed a deal on the sale of Selhurst Park stadium, which was crucial to the purchase agreement. This led to increased media pressure on Lloyds which finally agreed to sell the stadium and complete the sale with CPFC in June 2010.
The claimants brought a claim for unfair dismissal under the Transfer of Undertaking (Protection of Employment) Regulations (TUPE), stating that liability for their dismissal should pass to the transferee CPFC.
The tribunal rejected their complaints and stated that the administrator’s reason for the dismissal was that he could no longer afford to pay all the club employees and that he had to 'mothball' the club in order to sell it as a going concern in the future. This constituted a valid 'economical, technical or organisational' (ETO) reason for the dismissal.
The claimants appealed this decision and the EAT held that they had been unfairly dismissed, as there was no ETO reason for dismissal. The EAT referred to Spaceright Europe Ltd v Baillavoine and another which clearly outlined that where dismissal is 'part and parcel of a process, with the purpose of selling a business' there is no ETO defence available. It was clear that the purpose of their dismissal was to ensure that the club could be sold in the future and as a result the dismissals were automatically unfair under TUPE.
This forthright interpretation of Spaceright will concern administrators who seek to keep a company afloat through the dismissal of employees. If, for example, dismissals are conducted at a time when it is hoped that the company may be sold at some stage in the future, no matter how far ahead, such dismissals could be caught by this decision and be deemed automatically unfair.