The Court of Appeal has held in the recent case of Spaceright Europe Ltd v Baillavoine and another (2011) that a dismissal can be for "a reason connected with the transfer" under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") even if there is no particular transfer or transferee in existence or contemplation at the time of the dismissal.
In the case Mr Baillavoine, the Chief Executive of Ultralon Holdings Ltd ("Ultralon"), was dismissed on the day Ultralon was placed into administration. The administrators then obtained bank funding in order to continue to trade while undertaking a marketing exercise for the business. A month later, the business and assets of Ultralon were sold as a going concern to Spaceright Europe Ltd. Mr Baillavoine claimed unfair dismissal.
The Court of Appeal upheld the decision of the EAT that Mr Baillavoine had been unfairly dismissed by Ultralon on the basis that the sole or principal reason for the dismissal was connected with the relevant transfer to Spaceright Europe Ltd and was not for an economic, technical or organisational ("ETO") reason entailing changes in the workforce. Mr Baillavoine was dismissed with the purpose of giving the best prospect of the business being sold as a going concern without the continued employment of its CEO at an annual salary of £120,000.
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The Court of Appeal has held in the recent case of Spaceright Europe Ltd v Baillavoine and another (2011) that a dismissal can be for "a reason connected with the transfer" under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") even if there is no particular transfer or transferee in existence or contemplation at the time of the dismissal.
In the case Mr Baillavoine, the Chief Executive of Ultralon Holdings Ltd ("Ultralon"), was dismissed on the day Ultralon was placed into administration. The administrators then obtained bank funding in order to continue to trade while undertaking a marketing exercise for the business. A month later, the business and assets of Ultralon were sold as a going concern to Spaceright Europe Ltd. Mr Baillavoine claimed unfair dismissal.
The Court of Appeal upheld the decision of the EAT that Mr Baillavoine had been unfairly dismissed by Ultralon on the basis that the sole or principal reason for the dismissal was connected with the relevant transfer to Spaceright Europe Ltd and was not for an economic, technical or organisational ("ETO") reason entailing changes in the workforce. Mr Baillavoine was dismissed with the purpose of giving the best prospect of the business being sold as a going concern without the continued employment of its CEO at an annual salary of £120,000.
The Court of Appeal emphasised that the natural and ordinary meaning of the language of regulation 7(1) of TUPE did not require a particular transfer or transferee to be in existence or in contemplation at the time of the dismissal. Regulation 7(1) provides that a dismissal is automatically unfair where the sole or principle reason for it is the relevant transfer or a reason connected with the transfer that is not an ETO reason entailing changes in the workforce. Therefore, if there is a dismissal, which is claimed to be automatically unfair, and a transfer, it is for the employment tribunal to carry out an objective assessment of the evidence to determine the reason for the dismissal and whether it was 'connected with' the transfer.
In this case the court relied on the decision in Harrison Bowden Ltd v Bowden (1994) where a dismissal of employees at a time when a liquidator was looking to find a transferee, but without any particular transferee having been identified, was found nonetheless to be connected with the TUPE transfer. The Court of Appeal did not support the contention that the reason was a financial reason unconnected with any transfer of the business, or that Mr Baillavoine was dismissed for an ETO reason. In order for an ETO reason to be available there had to be an intention to change the workforce and to continue to conduct the business, as distinct from the purpose of selling it. Such a reason was not available when the administrators had dismissed an employee to make the business more appealing to a prospective buyer.
The Court of Appeal's decision in this case that a pre-transfer dismissal can be connected with the transfer for the purposes of a finding of automatic unfair dismissal, regardless of whether a transferee has been identified, is in line with the majority of EAT on this point. The Court of Appeal preferred the reasoning in Harrison Bowden to that in the case of Ibex Trading Co Ltd v Walton (1994) where the EAT held that dismissal could not be connected with the relevant transfer unless that specific transfer was in contemplation when the dismissals were carried out.
It should be noted that the 'Call for evidence: Effectiveness of Transfer of Undertakings (Protection of Employment) Regulations 2006' published by BIS on 23 November 2011 is seeking views on the effectiveness of the TUPE insolvency provisions. The closing date for responses is 31 January 2012, after which the government will decide whether to propose changes to the TUPE. A formal process of consultation on any proposed changes will take place during 2012.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 19/12/2011.
