A dismissal connected with a TUPE transfer will be automatically unfair unless it is for an economic, technical or organisational reason entailing changes in the workforce (‘an ETO reason’). The courts have interpreted ‘changes in the workforce’ to mean changes in job functions or numbers employed. Manchester College v Hazel & Huggins illustrates the limitations of the ETO defence when introducing new terms and conditions following a transfer.

In August 2009, 1500 staff transferred to Manchester College under TUPE, including the two claimants, Mrs Higgins and Mrs Hazel. Six months later, the College began a process of cost savings which included a request for volunteers for redundancy as well as pay cuts. The College also wished to rationalise the 37 different contracts they had inherited from the transfer, and to correct inequalities in these various terms and conditions.

The redundancies were largely achieved through voluntary redundancies, and in May 2010 Mrs Huggins and Mrs Hazel were informed that their jobs were safe. They were then asked to agree to a pay cut, but refused. Because of their continued objection to the pay cuts, they were dismissed. Although they subsequently agreed to the pay cut, and continued to work, they brought a claim alleging that their dismissals were automatically unfair under TUPE.

The tribunal held that Mrs Higgins and Mrs Hazel were dismissed because they would not agree to the new terms and conditions, which were connected to the transfer and therefore automatically unfair. The College argued that where there was harmonisation of terms and conditions as well as redundancies, it should be able to rely on the ETO defence. However, the employment tribunal held that the fact that others were previously dismissed for redundancy did not alter the fact that these particular employees were dismissed by reason of harmonisation, which, whilst it is a potential ETO reason, does not entail changes in the numbers or functions of the workforce. Therefore the claims of automatic unfair dismissal were upheld. Since the claimants had continued to work for the College, the tribunal made an order for re-engagement based on the new terms and conditions with the exception of pay. Their salaries were restored to their previous levels but frozen until other employees on the new pay scales caught up.

The EAT agreed with the tribunal’s judgment in relation to both liability and remedy, dismissing the employer’s argument that the redundancies and the harmonisation process should be seen ‘holistically’ as part of an overall process to achieve costs savings. It is conceivable that the outcome might have been different if the claimants had been asked to sign new contracts whilst the redundancies were actually being implemented.