Last reviewed 1 May 2019

Few issues in employment law worry employers more than dealing with the complex rules involved in the transfer of a business or service: the dreaded Transfer of Undertakings (Protection of Employment) Regulations — usually known as “TUPE”.

The TUPE rules

Employees have certain rights when the business or service they work for transfers to another employer, including protection from dismissal on the transfer. The regulations state that a dismissal will be automatically unfair if “the sole or principal reason” for the dismissal of an employee is the transfer itself, unless the employer has an economic, technical or organisational (ETO) reason (see below) for the dismissal entailing changes in the workforce.

A recent case (Hare Wines v Kaur) shows that if an employer takes the opportunity of a TUPE transfer to dismiss an employee with a conduct or performance issue, this can still be automatically unfair, as it is motivated by the transfer. It is a salutary lesson for any employer contemplating such action.

The facts of the case

Ms Kaur was a cashier working for H&W Wholesale Ltd (H&W).The firm got into financial difficulties and Hare Wines agreed to purchase it. The sale would be covered by the TUPE Regulations.

Ms Kaur had a strained relationship with a colleague who would become her manager after the transfer. The problems had been going on for a while and nothing was done about it until just before the transfer: Ms Kaur was dismissed before the employees and stock were transferred to Hare Wines under the TUPE Regulations. She was the only employee who did not transfer to Hare Wines.

She brought a claim against H & W and Hare Wines for redundancy pay, notice pay and, subsequently, for automatic unfair dismissal by reason of the TUPE transfer. The employer’s defence was that she had earlier objected to the transfer and so was not covered by the TUPE Regulations.

At the tribunal and Court of Appeal

The employment tribunal concluded that on the evidence it preferred Ms Kaur’s version of events. It rejected the argument that she had objected to the transfer and that the transferee had no liability for her dismissal. Her dismissal was motivated by the sale of the business to Hare Wines. She would have been employed immediately before the transfer but for her dismissal. The “sole or principal reason” for the dismissal was the transfer to Hare Wines. It was, therefore, automatically unfair

Hare Wines unsuccessfully appealed to the Employment Appeal Tribunal (EAT) and the Court of Appeal. Both courts rejected the employer’s contention that the reason for the dismissal was personal to the employee’s circumstances (the strained relationship with the colleague and future manager) and thus unrelated to the transfer.

Implications for the employer

  • Employers are not entitled to “cherry pick” who they wish to transfer under TUPE. They cannot insist that some employees may not transfer or dismiss them to avoid their transfer.

  • The Court of Appeal pointed out several substantial weaknesses in the employer’s argument in this case, not least that Ms Kaur’s dismissal had occurred on the day of the transfer. This poor relationship had existed for some time without the transferor (H&W) seeking to dismiss Ms Kaur. The fact that she was dismissed at the transferee’s (Hare Wine’s) request gave strong inference that the principal reason for the dismissal was the transfer — and not the relationship.

  • Caution should always be exercised when a dismissal (whether or not for an ETO reason) occurs close to the time of the transfer. Case law has established that an important factor in deciding the reason for the dismissal is the proximity of the transfer.

  • Further, there is no defence of “personal reasons” for TUPE-related dismissals, as put forward by Hare Wines. The case was lost because of a lack of consistency in its evidence and a poor paper trail of discussions about Ms Kaur’s poor relationship with a colleague. Employers should ensure that they follow the legal requirements of a TUPE transfer and keep proper records. In particular, keep a written record of anyone who does actually object to the transfer.

  • As mentioned above, a TUPE-related dismissal will not be automatically unfair if it is for an ETO reason entailing changes in the workforce or the dismissal is unrelated to the transfer (for example, the result of misconduct). There is no statutory definition of an “ETO” reason. The most obvious “organisational” reason will relate to the management or organisational structure of the employer’s business — usually a reorganisation leading to redundancies.

  • The requirement for “changes in the workforce “means that there must be changes in numbers and functions. Reorganisations and redundancies will satisfy this requirement.

  • An employer will still have to go on to show that the dismissal was reasonable in all the circumstances.