Was a TUPE transfer the principal reason for a dismissal related to the employee's poor relationship with a manager?

Court of Appeal: TUPE transfer was principal reason for dismissal in the context of claimant's poor relationship with director of the transferee

A dismissal will be automatically unfair if the sole or principal reason for the dismissal is the TUPE transfer. A tribunal will consider what reason was operating on the mind of the employer when making the decision to dismiss. If the main reason was the transfer and there is no economic, technical or organisational (ETO) reason for the dismissal entailing changes in the workforce, such as a redundancy situation, the new employer will be liable for the dismissal under TUPE.

In the case below, the tribunal had to decide whether a dismissal was by sole or principal reason of the transfer where, on the facts, the reason was a difficult relationship between the claimant and a colleague who was going to be a director of the transferee company.

Case details: Hare Wines Ltd v Kaur

Mrs Kaur was employed by a wine wholesaler from 2002. She had a strained relationship with a colleague, Mr Chatha. This difficult relationship pre-dated the TUPE transfer which took place when the business transferred to Hare Wines Ltd on 9 December 2014. Mr Chatha was to become a director of the new employer. On the day of the transfer, Mrs Kaur was told in a meeting that her employment was being terminated as the business was ceasing to trade.

Mrs Kaur brought claims for statutory redundancy pay, notice pay and automatic unfair dismissal to an employment tribunal. The outgoing and incoming employers argued that she had objected to the TUPE transfer and so her employment had not transferred but had terminated by operation of law. The claimant gave evidence that her employer had told her that the new employer did not want her because Mr Chatha did not want to manage her and that she was dismissed on that basis.

The tribunal found that the claimant's evidence was more credible than that of the transferor and that she had not objected to the transfer. It found that her employment had transferred to Hare Wines Ltd and that the TUPE transfer was the sole or principal reason for the dismissal, which was therefore automatically unfair. It also found that Hare Wines Ltd was liable for her notice pay.

The EAT and Court of Appeal upheld the tribunal's decision. They confirmed that the tribunal was entitled to find that Mrs Kaur was dismissed because the transferee did not want to employ her; the reason for that being her poor relationship with its director. When considering whether the transfer was therefore the principal reason for the dismissal, the court commented that it was significant that the problems between Mrs Kaur and Mr Chatha had been going on for some time. Lord Justice Underhill commented that the employment judge had found that these problems had been tolerable before the transfer but would not be tolerable after the transfer; it was clear that it was the transfer which made the difference and triggered the dismissal.

What are the risks of dismissal before or after a TUPE transfer?

Employers should be aware that there is a risk of claims when employees are dismissed before or after a TUPE transfer. There is no "safe" period after which a dismissal will not be found to be by reason of the transfer. However, there is a greater risk of a successful claim where the dismissal takes place close to the transfer.

A dismissal will not be automatically unfair where there is another principal reason for the dismissal, for example a misconduct or capability issue.

Dismissals which are because of a TUPE transfer will not be automatically unfair if there is an ETO reason entailing changes in the workforce, such as a reduction in the number of employees (in other words a redundancy situation). It is important to note that the outgoing employer cannot rely upon the incoming employer's ETO reason and is unlikely to have their own ETO reason. Transferors should therefore be very cautious about dismissing employees before the transfer. Likewise, a transferee employer cannot rely on the ETO reason of a transferor. To put this more simply, employers must have their own redundancy situation to rely on this as a defence. A redundancy is unlikely to arise until after the transfer and could then involve the transferred staff along with anyone employed by the new employer who does the same type of work.

Liability for automatically unfair dismissal because of the transfer passes to the new employer under TUPE. However, outgoing employers should be aware that pre-transfer dismissals which are not because of the transfer, or which are because of the transfer but for an ETO reason, can still be found to be unfair where a fair procedure is not followed. Liability for such a procedurally unfair dismissal remains with the transferor. It is also important to note that both old and new employers are likely to be named in a claim and to incur legal costs regardless of where liability properly sits. An agreement between the old and new employers may apportion such liability and costs and/or provide for one employer to take control of the defence of claims.