Two new cases provide guidance on recent developments in TUPE transfers

22 December 2011

Was the CEO’s dismissal connected with the TUPE transfer? Spaceright Europe Ltd –v- Baillavoine [2011]

Baillavoine (“B”) was the CEO of a company which went into administration. He was dismissed by the administrators because he was considered to be an unnecessary expense and they expected that any transferee company would want to appoint its own CEO. The business was eventually sold to Spaceright Europe Limited.

B issued an Employment Tribunal (“ET”) claiming that the reason for his dismissal was "connected with the transfer", which would make it automatically unfair. The key issue was to decide what was the meaning of Regulation 7(1)(b), "... a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce." Did this section require a specific transfer to be in contemplation at the time of dismissal? B claimed that his dismissal was connected with the transfer even though no actual prospective transferee had been identified.

The Court of Appeal decided that as “... a matter of ordinary English and of plain common sense, a dismissal prior to the transfer could have been for a reason 'connected with the transfer', even though that particular transfer or transferee was not known, identified or contemplated at the date of dismissal”.

Comment

• This case highlights that transferees need to be particularly careful in checking whether they may inherit liabilities arising from dismissals made by an administrator, before the transfer date of a company that they purchase out of administration.
• It also shows that a TUPE transfer needs to be more than an uncertain possibility but is not required to be absolutely certain or the identity of a transferee known, to be “connected” under TUPE regulations.

TUPE transfer by way of service provision changes, and the "same client” - Hunter -v- McCarrick (2011)

McCarrick (“M”) was employed to manage a portfolio of properties, and worked for a series of contractors and clients, until his dismissal. He succeeded in his ET claim as it was decided that there had been TUPE transfers between his employers on the basis of a service provision change under TUPE Regulation 3(1)(b), despite there being different clients.

The EAT has overturned this concluding that the ET had wrongly adopted a “strained construction” of Regulation 3(1)(b) to decide that “the client” on behalf of whom activities are carried out does not have to be the same client before and after a change of contractor.

The EAT disagreed with the ET saying that the "client" referred to must be the same after the change of employment for the service change provisions to ensure a TUPE transfer occurs. The ET could not interpret TUPE Regulation 3(1)(b) to read “the client” in Regulation as “any client” or “clients”.

The ET was wrong to decide that there was a service provision change when there was not only a change of contractor but also a change of client.

Comment
The language of Regulation 3(1)(b) is clear. It only applies where the client is the same before and after the change of contractor.

Rob Coward
Partner
rob.coward@hilldickinson.com
+44 (0)151 600 8626