Hazel and Another v The Manchester College
| Jurisdiction | England & Wales |
| Judge | Lord Justice Underhill,Lord Justice Kitchin,Lord Justice Moore-Bick |
| Judgment Date | 05 February 2014 |
| Neutral Citation | [2014] EWCA Civ 72 |
| Docket Number | Case No: A2/2012/1923 |
| Court | Court of Appeal (Civil Division) |
| Date | 05 February 2014 |
[2014] EWCA Civ 72
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM The Employment Appeal Tribunal
HHJ McMullen and 2 lay members
UKEAT0642/11&0136/12
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
Lord Justice Kitchin
and
Lord Justice Underhill
Case No: A2/2012/1923
Mary O'Rourke QC (instructed by DWF LLP) for the Appellant
Declan O'Dempsey and Adam Ohringer (instructed by Dawson Hart Solicitors) for the Respondents
INTRODUCTION
The Appellant is a provider of further and higher education courses and vocational skills-based training. Among other things it provides offender learning in prisons. In 2009 it successfully bid for contracts to provide so-called "OLASS3" services in six regions of the Prison Service. It thereby took over, under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"), the employment contracts of about 1,500 staff, in addition to about 2,000 already employed in offender learning and about 3,000 in the rest of the organisation. Among the staff transferred were the Claimants (the Respondents in this appeal), Mrs Christine Hazel and Mrs Mandy Huggins: they both worked as lecturers at HMP Elmley in Kent. The transfers took effect in August 2009.
In January 2010 the Appellant's Board agreed to a package of proposals set out in two reports from its Principal for what were described as "staff restructuring and efficiency savings" and "contract change for Offender Learning and other related staff". The impetus for the proposals came from a number of factors. The general economic situation facing the further education sector was challenging and there had also been changes in the funding allocation machinery, but there were particular problems in Offender Learning, where hidden costs had been encountered following the recent bid. In addition, employees in Offender Learning were on very disparate terms and conditions of employment, as a result of the Appellant having built up this part of the business by absorbing a large number of different entities whose staff brought their previous terms with them: apparently they had to deal with no fewer than 37 sets of terms. Such a state of affairs was plainly very undesirable from the point of view both of effective management and of staff relations: there was no doubt also a risk of equal pay claims. The total costs saving which it was planned to achieve from all aspects of the package was £5m.
Against this background, the package had a number of different elements, including redundancies and other restructuring of roles, efficiency savings, and the proposed standardisation of contractual terms, including a single pay-scale, for all staff in Offender Learning. The number of potential redundancies notified to the DWP was 300. As regards the changes in terms and conditions, the plan was to ask staff to sign new contracts of employment; if they did not agree they would be dismissed and offered re-engagement on the new terms, following the procedure which has been recognised in such situations since at least the decision in Hollister v National Farmers Union [1979] ICR 542. Although no doubt analytically distinct, the various elements in the package were in practice inter-related. The Appellant made the point in the course of the process that the introduction of the standard terms and conditions which it was offering would produce costs savings which would reduce the number of redundancies required.
The process of implementation of the proposals was complex and required much negotiation and consultation both with the University and College Union and with individual employees. Both Claimants were initially warned that they were at risk of redundancy or a reduction in contractual hours, but in due course it became clear that they would retain their existing jobs. As for the contractual changes, on 15 June 2010 both were sent letters explaining the new terms being offered and enclosing contracts for their signature. It was explained that they were at risk of dismissal if they did not sign. The proposed salaries were 18.5% less than the current level for Mrs Hazel and 13.2% less for Mrs Huggins, though there would be a one-year period of protected pay. That was not acceptable to either of them. There was a period of further consultation, during which they in due course confirmed that they would agree to all the proposed changes except those affecting pay. Eventually on 30 September 2010 they were sent notices of dismissal with effect from 28 December; but on 20 October they accepted the new terms, albeit under protest and expressly "without prejudice". (The actual paperwork was confusingly expressed but it is common ground that that was its effect.) On that basis they continued to work for the Appellant after 28 December, but they were paid only at the reduced level.
Both Claimants then brought proceedings in the Employment Tribunal complaining that they had been unfairly dismissed. It may seem odd to the uninitiated that such a claim could be brought while they remained in employment; but it is in fact well-established that in these circumstances the termination of the existing contract gives rise to a dismissal within the meaning of the relevant statutory provisions notwithstanding the continuation of the employment relationship (see Hogg v Dover College [1990] ICR 39).
The claims were heard together by a Tribunal at Ashford chaired by Employment Judge Corrigan on 26 and 27 July 2011. The Claimants were unrepresented; the Appellant was represented by Mr Martin Barklem of counsel. Up to that point the case had apparently proceeded on the basis that the claim was one of "ordinary" unfair dismissal; but the Judge raised the question whether it fell within the terms of reg. 7 (1) of TUPE, which provides (so far as material):
"Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the [Employment Rights Act 1996] (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is —
(a) the transfer itself; or
(b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce."
What was suggested was that the Claimants' dismissals were for a reason connected to their transfer to the Appellant's employment in 2009. Mr Barklem at first disputed that analysis, but by the time of his closing submissions he had come to accept it (see para. 59 of the Tribunal's Reasons, which I set out below): his case was that the dismissals were for an economic technical or organisational reason entailing changes in the workforce (a so-called "ETO reason") and thus fell within the terms of the words of exception in reg. 7 (1) (b).
The Judgment of the Tribunal, with its written Reasons, which are fully and clearly set out, was sent to the parties on 16 September 2011. The majority held that the dismissal was not for an ETO reason, and thus that the dismissal was automatically unfair. The minority member believed that an ETO reason had been established and that accordingly the fairness of the dismissal fell to be determined in accordance with the ordinary test of reasonableness under sec. 98 (4) of the 1996 Act. I set out their respective reasoning at para. 18 below. The Tribunal went on to consider what the position would be if the minority member's view were correct. It concluded (unanimously) that it would have been (just) reasonable in the circumstances to impose this level of pay cuts but that the dismissals would have been procedurally unfair; however it also found that if a correct procedure had been followed it was likely that the dismissals would have proceeded.
There was a remedy hearing on 9 December 2011. The Claimants remained unrepresented. The Appellant was represented by Ms Mary O'Rourke QC. The Tribunal made a re-engagement order under sections 112 and 115 of the Employment Rights Act 1996, the effect of which was to preserve the Claimants' pre-dismissal rates of pay: I give further details at paras. 33–37 below.
The Appellant appealed against both the liability and the remedy decisions. The appeals were heard by the Employment Appeal Tribunal, Judge McMullen QC presiding, on 9 July 2012. The Appellant was again represented by Ms O'Rourke. The Claimants were represented by Mr Declan O'Dempsey of counsel. Both appeals were dismissed.
The Appellant appeals to this Court in relation to both the liability and the remedy decision. The appeal has been held up by a late application on the part of the Appellant to introduce a ground of appeal that the Employment Judge was, or may have been, a member of the same trade union as the Claimants. That led to an adjournment but the application was ultimately not pursued.
Ms O'Rourke has appeared for the Appellant and Mr O'Dempsey, with Mr Adam Ohringer, for the Claimants.
THE LIABILITY DECISION
THE LAW
The principal purpose of TUPE is, as the title reflects, to protect the interests of employees in the event of the transfer of ownership of the undertaking in which they work. That involves the protection of their contractual terms. I have already set out reg. 7 (1), which provides that the dismissal of a transferred employee for a reason connected with the transfer is automatically unfair unless it is for an ETO reason. But it is important to note also reg. 4. This provides, generally, that the contracts of employment...
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