| Date | 20 June 1996 |
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| Judgment | BSG Property Service -v- Tuck and Others 19 January 1996 [1996] IRLR 134 |
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| The Issue | Effect of dismissal of employees by notice given prior to a transfer of undertaking. |
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| Implication |
Reasons for dismissal of an employee will be analysed at the date of giving notice, even though responsibility for unfair dismissal may later transfer to another party. |
printThe TUPE regulations provide that dismissal of an employee will be deemed unfair if the principal reason for dismissal arises as a consequence of a 'transfer of undertaking'. This does not apply however if the dismissal can be shown to arise from an 'economic, technical or organisational' reason (an ETO reason). Some further background may help. On 14 February 1977 the Council of the European Communities issued Directive No. 77/187 (the Acquired Rights Directive). Its purpose was to provide for the protection of employees in the event of a change of employer and, as part of the preamble, it states in particular "....to ensure their rights are safeguarded". It was a consequence of this Directive that the TUPE regulations were enacted in 1981. The two most important parts are regulations 5 and 8. Regulation 5 provides that the employment of any person carries over a transfer of undertaking and a transferee stands in the shoes of the original employer. Regulation 8 deals with unfair dismissal. 8(1) provides: "Where either before or after a relevant transfer any employee of the transferor or transferee is dismissed, that employee shall be treated ...... as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal". Paragraph 8(2) then disapplies paragraph (1) where the reason or principal reason for dismissal is an 'ETO' reason. Thus where an economic, technical or organisational reason entailing changes in the work force of either the transferor or transferee is the reason or principal reason for dismissing an employee, unfair dismissal will not be assumed under paragraph 8(1) of the TUPE regulations. These provisions were recently examined in the case of BSG Property Services -v- Tuck and Others. Mr Tuck and thirteen other applicants were employed by Mid-Bedfordshire District Council in the housing maintenance direct services organisation. The DSO decided to terminate the contract for housing maintenance and on 12 February 1993 the Council gave notice of termination to the employees terminating their contracts on 15 May, to coincide with the 'contracting out' of the maintenance work. On 14 May the Council concluded a contract with BSG for the provision of housing maintenance services. The work previously done by the applicants was now to be undertaken by self-employed tradesmen in BSG's work force and BSG had tendered on that basis. Both the Council and BSG believed that there was no transfer of an undertaking and none of the employees in the DSO were engaged by BSG. The applicants claimed that they were unfairly dismissed. The case was heard in the industrial tribunal where it was decided in two parts. In the first decision the tribunal found there was a transfer within the meaning of the regulations and that the dismissal of the applicants was in connection with that transfer. At a second hearing the tribunal decided that the applicants were not unfairly dismissed. It held that there was an economic or organisational reason within regulation 8(2)(b) and that BSG had not acted unreasonably in treating redundancy as the reason for dismissal. Both decisions were appealed to the Employment Appeal Tribunal. The EAT agreed with the industrial tribunal concerning the first decision. They found the activities of the Council's DSO constituted an undertaking capable of being transferred for the purpose of TUPE and that the tribunal had correctly followed the approach laid down by the Court of Appeal in Dines -v- Initial Health Care Services. The fact that there had been no transfer of people, plant or equipment did not alter this view. The tribunal was entitled to conclude that the undertaking or economic entity of the Council retained its identity in the hands of BSG. The real question of course was whether the industrial tribunal had correctly decided the second point, namely that the dismissal had been fair. On this point the EAT had no difficulty in deciding that the industrial tribunal had erred in law. On the facts of this case the DSO had terminated the contract of employment with a period of notice which expired after the date of transfer to BSG. It was therefore the transferor (the DSO) who had dismissed the employees and it was therefore their reason for the dismissal which would be relevant, even though liability in connection with the notice to terminate would be ultimately transferred to BSG. In effect the date for determining the reason for dismissal was the date when notice of termination was given rather than the date of termination itself. Whilst BSG had successfully argued that the dismissal was as a consequence of an ETO reason, no such argument could properly be made by the DSO. Their reason for dismissing the applicants was more properly because they had not believed that TUPE applied. The consequence of all of this is that BSG itself did not actually dismiss the applicants for any reasons of its own. The Council had dismissed the applicants, and this was to be held as an unfair dismissal under regulation 8(1) in view of the earlier finding that a transfer of an undertaking had occurred. However, the deeming effect of the regulations was to make BSG legally responsible for what the Council had done. The case was therefore remitted to the industrial tribunal to assess compensation to be payable by BSG.
CJ-9623
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