A key element of the TUPE Regulations provides that, where either the new or previous owner of a business dismisses an employee for a reason connected with its sale or transfer, then that dismissal will be automatically unfair. The only way the employer can avoid that result is if he can show that the dismissal is for an “economic, technical or organisation reason involving changes in the workforce”.
So far, so good. However, the owner of a business is quite likely to “tidy it up” with a view to putting it up for sale, and this might include dismissing an employee some time before the business is actually transferred – perhaps, indeed, before a new owner has even been identified. In that situation, is the dismissal really for a reason connected with the transfer and is the employee still protected? It appears that the EAT’s definitive answer to that question is now “yes”.
Two different – and conflicting – lines of authority have previously existed. One required an actual transfer to be in existence (albeit not yet actually taken place) before TUPE’s protection could arise; the other considered that a prospective transferee need not even be in place yet. In Spaceright Europe Ltd v Baillavoine & Anor, (EAT 1 February 2011) the EAT has ruled that the second – more generous – line of authority is the one that should be followed.
A Mr Baillavoine was Chief Executive Officer of Ultralon Holdings Ltd (UHL). Various consultants were appointed over time and reviews of the companies’ viability carried out. In due course, on 23 May 2008, UHL and its subsidiary Ultralon Ltd (UL) went into administration: Mr Baillavoine was dismissed by the administrator. On 25 June 2008 the businesses of UHL & UL were sold to Spaceright – a TUPE transfer. Spaceright was run and owned by those same consultants.
Mr Baillavoine had lost his job, and shares he had in UHL were worthless. He was understandably suspicious, and claimed unfair dismissal. An employment tribunal ruled in favour of Mr Baillavoine. It concluded that he had been dismissed so as to enable a purchaser of the business to acquire the business and assets without his continued employment (his salary of £120,000 might also have presented a problem for a prospective purchaser of the business). His dismissal was therefore automatically unfair unless it could be shown to have been for an “economic, technical or organisation reason involving changes in the workforce” – which it couldn’t.
Spaceright appealed to the EAT but lost. Faced with the conflicting authorities mentioned above, the EAT clearly preferred the latter. It agreed with the original tribunal that TUPE applied even though at the time of Mr Baillavoine’s dismissal the sale of the business which eventually took place had not been agreed. As there was no “economic, technical or organisation reason involving changes in the workforce” for dismissing Mr Baillavoine it therefore followed that his dismissal was automatically unfair.