Pitfalls for employers: dismissals and TUPE transfers

The recent Court of Appeal case of Hare Wines Ltd v Kaur is a reminder of the caution that should be exercised by employers when carrying out dismissals either before or after a TUPE transfer. In this case, an employer attempted to argue that the dismissal in question was carried out for “purely personal reasons” unrelated to the TUPE transfer, an argument which was dismissed by the Court of Appeal.

Background

The Claimant was employed as a cashier in H&W Wholesale Ltd (H&W), a wine wholesale business. When H&W began to suffer financial difficulties, its directors decided that it would cease trading and that Hare Wines Ltd (Hare Wines) (a company whose sole director was also one of the two directors of H&W) would take on the business and employees i.e. a TUPE transfer would take effect. Meetings were held with each of the employees in which they were informed that their employment was going to transfer to Hare Wines. The meeting with the Claimant, however, resulted in the termination of her employment.

Employment Tribunal

The Claimant brought a claim of automatic unfair dismissal by reason of the TUPE transfer in the Employment Tribunal (ET) against both H&W and Hare Wines. Under the TUPE Regulations, where an employee is dismissed either before or after a TUPE transfer, that dismissal will be automatically unfair if the sole or principal reason for their dismissal is the transfer. The parties in this case were in disagreement over the reason for the Claimant’s dismissal and there was a direct conflict of evidence on this point. What had been discussed in the termination meeting with the Claimant was therefore crucial in determining the reason for the Claimant’s dismissal.

Of particular relevance to the dispute was the fact that the Claimant had a strained working relationship with a colleague, Mr C, which led to a sort of “chicken or egg” argument. The Claimant claimed that she was told that she was being dismissed because of the impending transfer and that Hare Wines did not want her due to the difficult working relationship she had with Mr C. The Respondents denied this version of events and asserted that the Claimant was not dismissed, but rather she had said she did not want to transfer, the reason for this being her difficulties with Mr C.

There was no contemporaneous documentation of the meeting, but a letter sent by H&W to the Claimant after the meeting supported her account. The letter confirmed the termination of the Claimant’s employment due to the business ceasing to trade and made no reference to the transfer of the business or the Claimant’s objection to transfer with it.

It was held on the evidence that the Claimant did not object to the transfer and that the reason for the dismissal was that Hare Wines anticipated that there would be ongoing difficulties in the relationship between the Claimant and Mr C and therefore decided it did not want her to transfer. This led the ET to hold that the reason for the dismissal was the transfer and as such, the dismissal was automatically unfair.

Court of Appeal

Having unsuccessfully appealed to the Employment Appeal Tribunal, Hare Wines appealed to the Court of Appeal and argued that as the ET judge had made a finding that the reasons for the dismissal were personal to the Claimant and existed independently of the transfer, it was not possible for the ET judge to conclude that the principal reason for the dismissal was the transfer.

In dismissing the appeal, the Court of Appeal highlighted the areas where the Appellant’s argument had fallen down:

1. The fact that the Claimant was dismissed on the day of the transfer: The Court emphasised that although proximity to the transfer is not conclusive, it is often strong evidence in the employee’s favour.
2. The fact that the poor relationship between the Claimant and Mr C had been going on for some time and that H&W only sought to terminate her employment at the request of Hare Wines immediately before the transfer: this led the Court to infer that the transfer (rather than the poor relationship itself) was the reason or principal reason for dismissal.

What was the sole or principal reason for the Claimant’s dismissal?

This was the central question which the Court of Appeal had to determine in order to rule on whether the dismissal was automatically unfair. It did so by posing the following two questions:

1. Was the Claimant dismissed because she got on badly with Mr C (who was about to become a director of the business) and the proximity of the transfer was coincidental?
2. Or was she dismissed because the transferee did not want her, the reason being that she got on badly with Mr C, so the transfer itself was the reason for dismissal?

The Court held that this was a question of fact and that the ET judge was entitled to prefer the second option. The Court was of the view that the ET judge had found that Hare Wines (the transferee company) anticipated that there would be ongoing difficulties in the working relationship between the Claimant and Mr C and it therefore decided that it did not wish for her to transfer to them and communicated that wish to H&W (the transferor). The reason for the dismissal was therefore the transfer. Put another way, it was the transfer that made the difference between the poor working relationship being treated as a cause for dismissal and not.   

Key takeaways for employers

1. Employers should exercise caution when effecting dismissals in close proximity to a TUPE transfer, even where the employer believes the dismissal is not transfer-related. Employees enjoy enhanced protection against unfair dismissal on a TUPE transfer and as a result an employer’s ability to dismiss employees fairly when there is a TUPE transfer is limited.
2. “Personal reasons” are not necessarily an exception to the automatic unfair dismissal rule. This case is a good illustration of how an employer could mistakenly believe a dismissal was not transfer-related.
3. Dismissals can still occur before or after a TUPE transfer and be held to be fair where the reason for the dismissal is an economic, technical or organisational (“ETO”) reason. The Appellant in this case did not attempt to argue that the Claimant was dismissed for an ETO reason, instead it tried to rely on “purely personal reasons”.