The EAT have issued a reminder of the consequences of harmonising terms following a TUPE transfer.
This case involved a tender for a contract to provide learning services to offenders in a large number of institutions. Manchester College was the successful bidder for the contract and as a result the contracts of employment of 1500 staff transferred to its employment under TUPE. Soon after it became clear to the College that there were hidden costs in the tender which had not been revealed by the due diligence process. Although they were able to persuade the Learning and Skills Council (who had commissioned the contract) to compensate them, this was not at the level they sought. This, coupled with the increasingly severe economic situation for further education generally, led the College to conclude that it would have to make savings of £5million in its Offender Learning service.
As part of these savings, a redundancy programme was implemented and 300 staff left. That did not affect the two claimants, Mrs Hazel and Mrs Huggins. A second programme did, however, affect them and that was the proposal to reduce their salaries by 18% as part of an exercise to harmonise their terms with those of other similar employees to which both objected. They were dismissed but offered re-engagement on the new reduced terms which they accepted.
They then brought a claim in the Employment Tribunal under which they sought restoration of their old salaries. The Tribunal upheld their claim and ordered re-engagement on the old terms. The EAT agreed with their decision on the following basis:
- The starting point is that any dismissals connected with a transfer are automatically unfair.
- This can be avoided if the employer can show that the dismissals were for an “economic, technical or organisational reason entailing changes in the workforce”.
- The highlighted words were critical here: previous case law makes it clear that this means either a reduction in the numbers required or a change in the way work is done. Although redundancy falls within this, harmonising terms does not.
- The fact that both redundancy and harmonisation were part of one overall programme did not help the College. The reason for the dismissal of these employees was clearly because of harmonisation and so outside the exception to the principle of automatic unfair dismissal.
- The decision to restore the old terms through re-engagement was a decision which was within the discretion of the Tribunal on the evidence; as the two claimants had returned to work it could not be said that there was any breakdown in the employment relationship.
Although to some extent case-specific on the facts, this decision is a stark reminder of the problems that are faced by an organisation like the College in integrating employees transferring from another organisation under the automatic transfer provisions in TUPE. Although it is understandable that an employer would want its employees to be working to consistent standard terms and conditions of employment, this, as this case illustrates, is very difficult, if not impossible, to achieve when part of the workforce has arrived as a result of a TUPE transfer.
Is there anything that can be done? The following options can be considered:
- If the terms of employment of transferring employees present serious cost problems for the organisation, these are best dealt with through effective due diligence in the tendering process and the price quoted for supplying the tendered services.
- Where this is not possible then the least risky route is cutting numbers of staff. Provided the normal principles of fairness are followed (consultation, objective selection criteria, reasonable efforts to identify alternative employment) then claims should be avoided;
- If that too, however, presents practical problems then changing terms may be the only choice. If this can be done in a way which does not focus only on transferred staff but on the workforce as a whole then the danger represented by the Manchester College case may be avoided. It should be possible to show clearly that the changes are not “connected with the transfer” but are for a different reason.
Transfer of Undertakings (Protection of Employment) Regulations 2006
For further information or to discuss the issues raised, please contact David Widdowson, or Emma Clark on +44 20 3051 5711.