TUPE and dismissals: traps for the unwary
The Court of Appeal has reminded employers of the potential pitfalls of dismissing employees shortly before a TUPE transfer takes place.
Under TUPE, a dismissal will be automatically unfair (i.e. incapable of being defended), if the intended TUPE transfer is the sole or principal reason for the dismissal. It is commonly the case that the Vendor in a sale process will want to undertake some ‘house-keeping’ to smooth the sale process and maximise the potential sale proceeds, including clearing out problem employees or those who might be regarded as past their sell-by-date.
Hare Wines Limited v Kaur is a salutary tale of an employer (H&W Wholesale) who attempted to argue that the dismissal of Ms Kaur, prior to the TUPE transfer to Hare Wines, was carried out for purely personal reasons, which were unrelated to the TUPE transfer.
Ms Kaur had been employed as a cashier by H&W. The decision was taken to transfer the H&W business and assets to a new entity, Hare Wines Limited, when the business started to face severe financial difficulties. Meetings were held with all the employees who it was intended would transfer. The meeting with Ms Kaur resulted in the termination of her employment purportedly because of performance concerns regarding her working relationship with a colleague who had become a Director of Hare Wines.
The Tribunal in this case undertook a detailed factual exercise in determining the real reason for the dismissal. Had it been the personality clash or was it because Hare Wines did not want her and therefore was because of the transfer? Ultimately, the Tribunal found that it was Hare Wines’ concerns about the ongoing working relationship which led to the dismissal and that the reason for the dismissal was sufficiently connected to the transfer to make it automatically unfair.
Material factors which resulted in this finding included:
- The proximity of the timing of the dismissal to the transfer was a strong indicator in support of Ms Kaur argument – Ms Kaur was dismissed on the day of the transfer
- There was no note of the meeting at which Ms Kaur’s employment had been terminated which made Hare Wines’ ability to assert that the reason for dismissal was performance-related more difficult
- No action had been taken by H&W to address the poor working relationship before the transfer – it was, therefore, difficult for both H&W and Hare Wines to refute the inference that it was transfer-related.
There are a number of key learning points for employers to come out of this case:
- Exercise caution when effecting dismissals shortly before a TUPE transfer, even where there is seemingly a fair reason for the dismissal which is unrelated to the transfer;
- Remember to document meetings at which key decisions are taken and, most importantly of all, clearly specify the reason for dismissal to the employee in person and in writing after the event;
- It is possible to terminate someone’s employment close to a TUPE transfer (whether before or after) where the reason for dismissal is an economic, technical or organisational (“ETO”) reason connected to the transfer e.g. redundancy. Any such dismissal will still need to be handled carefully and in accordance with good employment practice but will not be automatically unfair.
If you have any questions regarding TUPE transfers, or any other employment issue, please get in touch.