TUPE dismissal for a composite reason: Meaby & Co are successful at the Court of Appeal in further clarifying the law on the complex area of TUPE.

The recent Court of Appeal decision in Hare Wines Ltd v Satwant Kaur (handed down 22 Feb 2019) provides guidance on the proper approach to determining when a dismissal occurs by reason of a TUPE transfer (that is, by reason of a relevant transfer for the purposes of the Transfer of Undertakings (Protection of Employment etc) Regulations 2006 – SI 2006/246).

Both the decision and some obiter comments in the course of the appeal will be of immediate interest to those lawyers, managers and HR professionals handling TUPE cases.

The facts and background relate to our client Mrs Kaur who worked for a wholesale wine importer and cash and carry, H & W Wholesale Ltd (“H & W”) and she had ten year’s continuous employment. The business was being transferred to Hare Wines Ltd  along with its employees. In the event, all of H & W’s employees transferred save for Mrs Kaur who was dismissed on the actual day of the transfer (December 9  2014). She claimed automatic unfair dismissal under the TUPE regulations.

As part of her claim, Mrs Kaur claimed to have been expressly dismissed; H & W denied this, stating that she had resigned. The Employment Tribunal at first instance, rejected H & W’s account, finding as a fact that it was indeed a dismissal. It was otherwise conceded by Hare Wines that this was a ‘relevant transfer’, and there was no reliance on an Economic, Technical or Organisational (ETO) defence that might make the transfer dismissal potentially fair.

As part of its findings as to the reason for the dismissal, the Tribunal found Mrs Kaur had been dismissed due to ‘ongoing difficulties’ in her relationship with a colleague, Mr Chatha. It was material that Mr Chatha, post-transfer, would have managed Mrs Kaur and worked with her more closely than before. The Employment Judge had therefore found that Hare Wines’ anticipation of such difficulties caused them not to want her contract of employment to transfer to Hare Wines Ltd.

The Employment Tribunal had applied the TUPE Regulations 2006, which provide at reg 7(1), that any dismissal will be automatically unfair if the “sole or principal reason” for the dismissal is the transfer, and held that this dismissal was because of the transfer.

On appeal to the Employment Appeal Tribunal and then (on the same grounds) to the Court of Appeal, Hare Wines referred back to the originating provision in the Acquired Rights Directive – 2001/23/EC where, at Article 4(1) it states (emphasis added):

”The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee. …

Mr Crosfill, Counsel for Hare Wines, argued that a proper construction of the wording of the Directive which merely refers to ‘the transfer’, and proper regard for the ‘sole or principal reason’ formula in the transposed TUPE regulations required a narrow focus on ‘the transfer’ alone as the prohibited reason. Any reason extraneous to the transfer was not covered.

In Mrs Kaur’s case, Hare Wines argued, the Employment Tribunal had misdirected itself by considering purely personal reasons (the anticipation of ongoing difficulties in the working relationship of Mrs Kaur and Mr Chatha) to be a ‘transfer’ reason. It was further an error for the Employment Tribunal to apply the low threshold of a ‘but for’ test and ask whether, but for the transfer, Mrs Kaur would not have been dismissed. A TUPE reason should, it was submitted, be one pertaining only to the transfer and not one involving the qualities of the person transferred. It was submitted that the fact others had transferred, while Mrs Kaur alone had not, pointed to the reason being personal to her and not because of the transfer.

Hare Wines further submitted that a category of purely personal reasons should exist to describe circumstances where a dismissal occurred for a reason that might be connected with the transfer, or occasioned by the transfer, but without being an unfair ‘transfer’ reason. The transfer was no more than the occasion for the dismissal, and it did not follow that the correlation of transfer and dismissal implied causation.

 

The Judgment

Underhill LJ and Bean LJ were unequivocal in rejecting this line of argument, and the Court dismissed the appeal.

Bean LJ, at para 29 of the Judgment, set out the Employment Tribunal judge’s decision as follows:

“Once it was found that Ms Kaur had not objected to the transfer the central question became whether

(a) she was dismissed because she got on badly with Mr Chatha (who was about to become a director of the business) and the proximity of the transfer was coincidental,

or

(b) she was dismissed because the transferee did not want her on the books, the reason for that being that she got on badly with Mr Chatha.

Which of these two was the sole or principal reason was a question of fact and the employment judge was entitled to prefer the latter to the former.”

Underhill LJ held that the Appellant’s proposed distinction between a transfer being the mere occasion for a dismissal and transfer as the reason for the dismissal was an artificial one. At para 25 of the judgment, he held that since Hare Wines (the transferee)  had considered that

Ms Kaur’s problems with Mr Chatha, which had been tolerable pre-transfer, would not be tolerable post-transfer … that means that the transfer was not simply the occasion for her dismissal but was, if not the sole reason, at least the principal reason for it: it was the transfer that made the difference between the problems being treated as a cause for dismissal and not.

In obiter comments Underhill LJ had referred to a ‘composite reason’ – that is, both difficult working relations and the transfer. But if the reason were a composite, that did not absolve the transferee from a TUPE dismissal as the transfer was an integral part of the transferee’s decision not to put up with difficult relations with Mrs Kaur. As para 25 above appears to make clear, where it is the transfer that makes the difference between dismissal and non-dismissal, that is enough for a finding that the transfer is the principal reason. That test as to whether it were the transfer that made the difference would seem very close to a ‘but for’ test being sufficient in law to make out causation for the ‘sole or principal reason’ test.

 

Provisional Conclusions

The judgment makes clear there is little scope for employers to avoid a tribunal concluding that the reason for a dismissal was a TUPE transfer in circumstances where that dismissal occurs in close proximity to the transfer and absent some other compelling reason that is untainted by the transfer. In unreported discussion during the appeal, Underhill LJ even indicated that a conduct or performance dismissal pre-transfer, if carried out by an accelerated process at the request of the transferee, would also fall to be considered a TUPE dismissal, presumably by an application of his dictum that where the transfer makes the difference between dismissal and non-dismissal, the transfer is the principal reason.

Another formulation for the relevant test, it is submitted, would be to ask whether the employer’s proffered reason was an integral part of the reason not to transfer the contract of employment. Such a test of whether or not the transfer is integral to the dismissal would appear to take the law on TUPE some way further forward, and by any measure must represent a liberal approach to how a reg 7(1) TUPE ‘sole or principal’ reason is to be defined.

It is a particularly interesting interpretation since the TUPE 2006 regulations were amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014.  That 2014 amendment to the 2006 Act omits to make a dismissal for ‘a reason connected with the transfer’ a basis for automatic unfairness. But the thrust of this appeal decision must be that that 2014 amendment has not significantly weakened TUPE protection for dismissed workers.

There is not, for the present, any indication as to whether the appeal will proceed to the Supreme Court. 

Mrs Kaur initially instructed Steven Eckett in 2015 who assisted her in preparing for her Employment Tribunal claim.       Since joining Meaby & Co Steven Eckett has continued to be instructed.

Alexander MacMillan is an employment barrister at St Philips Chambers who was instructed to represent Mrs Kaur at the initial Employment Tribunal hearing, in the Employment Appeal Tribunal and at the Court of Appeal, being successful at each instance.    

If you have concerns relating to TUPE, then do not hesitate to contact Steven Eckett, Partner and Head of Employment at Meaby & Co on 020 7703 5034 or by e-mail  seckett@meaby.co.uk