TUPE: Harmonisation and re-engagement

17 Oct 2012

In Manchester College v Hazel and Huggins the Employment Appeal Tribunal considered claims of unfair dismissal under TUPE.  The case raised questions about the harmonisation of contractual terms and remedies. 

The relevant facts were:

  • Miss Hazel and Mrs Huggins were employed as academic staff at Elmley Prison in Kent.  In August 2009, they transferred to The Manchester College after it was awarded an Offender Learning contract with the HM Prison Service. 
  • The College inherited 37 models of contract for employees in 6 regions. 
  • In January 2010, the College needed to make savings of £5m.
  • The College planned to make the savings by declaring 300 redundancies and changing employees’ contractual terms.  It negotiated with the employees’ Trade Union and by the end of May had sufficient volunteers for redundancy to lift the threat of compulsory redundancies.  Nevertheless, it proceeded with “structural reviews” (pay cuts and other variations of terms of employment) under which Miss Hazel’s salary was cut by 18.5% and Mrs Huggins’ by 13.2%. They objected.
  • On 30 July 2010, Miss Hazel and Mrs Huggins were dismissed. They then accepted the new terms, returned to work and claimed unfair dismissal.

The Employment Tribunal found the reason for the dismissals was the Claimants’ objection to the change in their terms and the employer’s wish to impose those terms. This was both connected with the transfer and an ETO (economic, technical or organisational) reason. However, the ETO reason had two elements; cost saving and harmonising contractual terms.  The need for redundancies had passed by the time of the dismissals, so the change must have been to effect harmonisation.  That did not entail a change in the workforce so the ETO reason could not save the employer.  The dismissals were automatically unfair.

The Employment Tribunal considered re-instatement but decided this would not be practicable.  It then considered re-engagement and decided this was viable because the Claimants’ principal objection was to their reduced salaries. They could be re-engaged on the new terms and their former salaries red-circled.  The Tribunal acknowledged other staff might be “discontented” but the College could manage this.  The Tribunal also observed that other staff could have pursued the same path as Miss Hazel and Mrs Huggins if they were unhappy.

The College appealed.  It argued the Tribunal should have considered TUPE holistically: it should have looked at everything that was going on and seen harmonisation as part of a larger process of change through economic necessity.  The College also argued it was perverse to find it impracticable to order re-instatement yet to order re-engagement.

The Employment Appeal Tribunal (EAT) refused to reopen the Tribunal’s finding of the reason for the dismissal.  This was a question of fact and the Tribunal was entitled to reach its conclusions on the evidence presented to it. 

Turning to TUPE, the EAT acknowledged the College faced a “collective problem” (the substantial number of different contractual terms it acquired) but said that this is resolved by the Regulations.  The key is that TUPE protects employees and when a Tribunal looks at this, it must consider the Claimant’s dismissal alone.  When the risk of redundancy was lifted, the next item on the agenda was harmonisation.  New terms are not a change in the workforce so the Tribunal was correct; the dismissals were automatically unfair. 

Employees have a right to an effective remedy and the EAT did not accept the criticism of the order for re-engagement.  The Claimants were working on the new terms so arguments about loss of trust, the passage of time, water under the bridge, etc, were not available.  The Employment Rights Act expressly requires a Tribunal to consider a progression of remedies and the possibility of other workers feeling unhappy that they did not follow the route taken by the Claimants cannot defeat those Claimants' re-engagement.

Our view:

The EAT’s decision is a robust warning that TUPE has a long reach and a clear purpose.  It's also a reminder that the EAT is always reluctant to interfere with a Tribunal's finding of fact.

The lessons are that transferees must take their new employees as they find them and HR management is as much about nurturing individual employment relationships as managing collective schemes. 

Arguably, the most significant aspect of the case is the remedy.  In our experience, orders for re-instatement or re-engagement are extremely rare.  Nevertheless, the use of re-engagement in this case was imaginative.  With an eye on the Government’s proposals to reform parts of the practice on dismissals, we expect it to become a more prominent feature of the landscape.

Just in case anyone is thinking this case was a cleverly designed lawyer’s argument, we should say that Miss Hazel and Mrs Huggins represented themselves in the Tribunal.  Clearly they did very well.