In our February TUPE update we look at an EAT decision on dismissal by reason of redundancy and how that may be legitimised by the provisions of TUPE. We also include an update on two cases pending before the European Court on the meaning of the EU Acquired Rights Directive. Opinions of the Advocates General in both cases have now been published.

Dismissal on ground of redundancy following a TUPE transfer was for an economic, technical or organisational reason entailing changes in the workforce

In Davies v Droylsden Academy UKEAT/0044/16/BA the claimant was employed by Schools Plus Limited (SPL) as a venue lettings manager.  SPL provided a service to educational institutions letting the institutions' premises out of school hours.  In June 2012 the claimant was appointed by SPL as the venue lettings manager of Droylsden Academy.  With effect from 1st November 2014 Droylsden Academy terminated its contract with SPL, having decided to carry on the business of letting its premises on its own behalf.  In other words, it decided to take the contract back in house.  There was no dispute before the employment tribunal that this was a relevant transfer for the purposes of the TUPE Regulations.

However, the treatment of the claimant leading up to, and immediately after, this TUPE transfer was far from satisfactory.  The Academy had doubts about whether there would be a place for the claimant, in her capacity as a venue lettings manager, in its own structure going forward and ventured to say that the claimant might be redundant.  There was also an argument about whether the claimant was assigned to the service concerned for the purposes of her right to transfer under TUPE.  In the end it was conceded that the claimant was assigned.  Discussions began, pre-transfer, about the possibility of a redundancy in the future.

The claimant might have resigned at this point, claiming constructive dismissal; but she did not, and the tribunal found that her employment transferred to the Academy on 1st November.  But still no arrangements were made for her to take up her employment with the Academy.  The employment tribunal found that the Academy had considered a redundancy procedure of sorts and had considered the pool for selection for redundancy but had concluded that the claimant was effectively in a pool of one, given the unique nature of her role in the School.  In the circumstances, the Academy felt it was appropriate to dismiss her by reason of redundancy.  This was confirmed on 11th March 2015 and the claimant was given a redundancy payment.

The employment judge concluded that the transfer was not the sole or principal reason for the dismissal.  Rather, the sole or principal reason for dismissal was an economic, technical or organisational reason entailing changes in the workforce.  This was because, it said, the reason for dismissal related to the claimant's role being redundant as a result of the restructure.  The employment judge went on to find that the dismissal by reason of redundancy was fair, that the conclusion that the claimant was in a pool of one was the correct one, that the consultation conducted by the Academy was adequate, and that it had (albeit unsuccessfully) looked for suitable alternative employment.  The claim for unfair dismissal was rejected.

On appeal to the EAT the EAT did not disturb this finding. In particular, the EAT (Simler J) took the opportunity to analyse the process in deciding whether, in TUPE transfer cases, the reason for the dismissal is the transfer, or an ETO reason entailing changes in the workforce.

First, she said, the onus is on the dismissing employer to establish the ETO reason.  According to Simler J "an "organisational reason" can include a reason relating to the management or organisational structure of the incoming business".  Secondly, the dismissing employer must show that the reason entails a change in the workforce.  "That is to say, the reason must necessarily entail changes in the workforce; if the employer's plan is to achieve such changes in the workforce and such changes are an objective of the plan that would suffice.  On the other hand it would be insufficient if such changes were merely a possible consequence of the employer's objective or plan".  According to Simler J: "So far as the meaning of "changes in the workforce" is concerned, this means that either changes in the numbers of the workforce overall or in the functions of members of that workforce.  Changes in the identity of the individuals who make up the workforce do not constitute changes in the workforce itself so long as the overall numbers and functions of the employees looked at as a whole remain unchanged".

The case illustrates that a genuine redundancy will be a paradigm case of an economic, technical or organisational reason for dismissal which entails a change in the workforce.

Cases on Transfer of Undertakings pending before the European Court

Opinions have been delivered in two pending cases before the CJEU concerning the EU Acquired Rights Directive.

In Unionen v Almega Tjänsteförbunden ISS Facility Services AB (Case C-336/15) the question was whether article 3(1) of the Acquired Rights Directive obliged a transferee to take into account service with a transferor when calculating notice periods for termination of employment, or whether such notice periods were only to be calculated by the reference to employment completed with the transferee.  The position was nuanced by the fact that Swedish law (taking advantage of a discretion afforded by article 3(3) of the ARD) only obliges transferees to comply with collective agreements binding transferors for one year from the date of the transfer.  In the present case the employees were given notice of termination from their employment after this period had elapsed.  Advocate General Tanchev, delivering his opinion, considered that the Directive requires a transferee to respect the service an employee has completed with the transferor in calculating the length of service relevant to a redundancy notice period.  This is so even if a year has elapsed from the date of the transfer.

In Asklepios Kliniken Langen-Seligenstadt GmbH & Asklepios Dienstleistungsgesellschaft mbH v Ivan Felja & Vittoria Graf (Case C-680/15 and Case C-681/15) Advocate General Bot considered once again (following the CJEU's prior decision in Alemo-Herron & others v Parkwood Leisure Ltd (Case C-426/11)) the survival of a collective bargaining clause in employees' employment contract following a transfer of an undertaking.  The Advocate General considered that when a contract of employment concluded between the transferor and the employee contains a clause referring to terms and conditions determined by a collective agreement, but neither the transferor nor the transferee may participate in the process of negotiating that agreement, the collective bargaining clause does not survive.

So a new employer is not bound by the terms of a collective agreement entered into after the transfer where the new employer was not a party to that agreement.  This fundamental principle is now enshrined in TUPE, via Reg 4(5B).

Opinions of Advocates General are not binding on the Court of Justice itself.  But they are usually followed.