TUPE: ETO reason need not affect whole workforce
Employees from the Portman Building Society
(PBS) transferred to Nationwide Building Society (NBS) under the
Transfer of Undertakings (Protection of Employment) Regulations
2006 (TUPE). A group of the managers from PBS resigned, arguing a
breach of contract by NBS because their job roles and
responsibilities were downgraded when they moved to NBS, and their
bonuses were significantly less. They claimed they had been
constructively dismissed or dismissed under TUPE because of a
substantial detrimental change to their working conditions, and
that it was automatically unfair.
The Employment Tribunal agreed that NBS was in
fundamental breach of contract which entitled the employees to
resign, and that the detrimental change to their working conditions
also amounted to a dismissal under TUPE. A dismissal connected to a
transfer, as this was, is automatically unfair unless it is for an
"economic, technical or organisational reason entailing changes in
the workforce" (known as an ETO reason). For this there needs to be
a change in job functions or numbers of the workforce
(standardisation of pay does not count). As the NBS product range
was so limited compared with PBS, there was a change in the
managers' job functions and so the dismissals were for an ETO
reason. However, whilst this made the dismissals potentially fair,
the ET held they were procedurally unfair because there
had not been the proper consultation required under the TUPE
regulations.
On appeal the Employment Appeal Tribunal (EAT)
agreed that there was an ETO reason. It rejected the managers'
argument that an ETO reason had to entail changes in the whole
workforce. Changes in a section of the workforce are enough.
Interestingly the EAT did not accept the ET's
decision about procedural fairness. Lack of consultation under the
TUPE regulations had not been raised as a claim by the employees
and so could not be used as a reason by the ET. Nor could the
employees have brought such a claim, because under TUPE it is
employee representatives who must bring the claim. Therefore the
case was sent back to the ET to decide the issue of procedural
fairness.
