The muddy waters of Transfer of Undertakings Regulations have become a little clearer following a recent decision of Employment Appeal Tribunal.
These regulations, first enacted in 1981, broadly apply to give employees continuous employment rights when their employer changes. While the principle is simple, applying it in different circumstances has proved immensely complicated with employment tribunals sometimes coming to conflicting decisions.
One recent example of such conflict concerns whether if an employee was dismissed on a transfer of undertaking, the dismissal was automatically unfair under reg 8(1) or whether the employer could go on to argue under reg 8(2) that the dismissal was fair for an economic, technical or organisational reason (sometimes called the ETO defence). This is a matter of legal construction whether these two regulations must be read separately or conjunctively.
The Employment Appeal Tribunal has now ruled that the correct procedure is:
- to determine whether the dismissal is connected with the transfer of undertakings; and
- if so, to determine whether the dismissal is for an economic, technical or organisational reason.
The test case concerned a woman who worked for a small firm of insurance brokers in Tunbridge Wells. In 1997, the business ran into serious financial difficulties, exacerbated by three of its six employees finding other jobs. In March 1998, the woman left for a pre-arranged holiday. While on holiday, the proprietor managed to sell the business to a larger London-based firm. This was a rescue job, as the firm would otherwise have gone out of business on the following day. The London firm took on just one of the remaining staff, not even taking on the former proprietor.
When she returned from holiday she found a letter saying that her job no longer existed. She accepted temporary work in the London office helping with the rundown of the old business. At the end of the month, she was offered a permanent job working in the London office which she declined because she did not want to commute. The employment tribunal held that there had been a transfer of undertakings, but the London business denied that there had been a dismissal. Alternatively, if there was a dismissal, it was fair.
The tribunal held that she had been constructively dismissed because the relocation of work was reasonably unacceptable to her. Whether her dismissal was fair was remitted to a fresh tribunal for a further hearing.
Collins v John Ansell & Partners Ltd. EAT [2000]
[2000]