TUPE takeaways: changing working arrangements and constructive dismissal

The purpose of TUPE is to protect employees’ rights when the business in which they work changes hands. This could be, for example, on the sale of a business as a going concern or on the change of a service provider. TUPE gives employees a special right to resign if the transfer involves a substantial change in their working conditions to their material detriment.

Employees who resign over a material detriment are taken as having been constructively dismissed. Their dismissal will be automatically regarded as unfair unless:

• the real reason for the employee’s dismissal wasn’t the TUPE transfer; or
• the employer can show that they have a so-called ETO reason for the changes – in other words, an economic, technical or organisational reason entailing changes in the workforce. Caselaw has said ‘changes in the workforce’ can involve a change in function, change in numbers or change in location.

In this article, we look at a recent case which – like a game of ping-pong – went back and forth between the tribunals and appeal tribunal. The question in this case - did planned changes to working arrangements lead to an unfair constructive dismissal.

What happened here?

The claimant, Gary Lewis, worked as an operations technician at a heat and power plant. Dow Silicones purchased the plant, immediately outsourced operations and maintenance to a third party and then insourced it back a few years later, triggering TUPE both times.

On the insourcing, Dow Silicones sought to make changes to standby/call out arrangements and workplace safety rules. The changes would have meant employees working compulsory overtime. Mr Lewis felt that these changes would involve a substantial change in his working conditions to his material detriment. He resigned, saying he had been constructively dismissed, and brought a tribunal claim.

Did a change to standby and call out arrangements involve a material detriment under TUPE?

The first tribunal to look at this case said no, there was no substantial change in Mr Lewis’s working conditions to his material detriment. Dow Silicones had the contractual right to make changes to his employment terms and, in any case, Mr Lewis was already working additional hours by way of cover.

Mr Lewis appealed to the Employment Appeal Tribunal. Their verdict? The tribunal was wrong. Having a contractual right to make a change doesn’t mean there wasn’t actually a change, and the fact that Mr Lewis was volunteering for overtime was irrelevant. The changes would impact Mr Lewis’s domestic plans and he was entitled to see them as detrimental.

The Employment Appeal Tribunal substituted a decision that Mr Lewis was constructively dismissed, because he had resigned over the material detriment.

The case then went back to a different tribunal to consider whether the dismissal was fair or not.

It’s all about the reason…

The second tribunal thought the dismissal was fair.

Despite the changes happening very close to the transfer, the transfer wasn’t the reason for them. The changes were driven by the need to ensure the constant running of the plant and safety of the workers.

In addition, the tribunal found that there was an ETO reason. A decision to re-organise job functions could count as an organisational reason. The old system of voluntary overtime was no longer fit for purpose and there was a need for one set of safety operating rules. In a rather circular argument, the tribunal also decided that the organisational reason entailed changes in the workforce too – because there was a change in function. The ‘workforce’ here was the transferring body of employees, not the entire workforce. Introducing the changes meant the function of the employee changed, from one whose function was to cover set shifts only, to one whose function was to cover set shifts and do compulsory overtime.

Mr Lewis appealed (again). The Employment Appeal Tribunal verdict this time? The tribunal was wrong (again)! Where had the tribunal got their rationale from? Dow Silicones had not pleaded that safety was the reason for changing terms; nor had it mentioned it during the other hearings.

The Employment Appeal Tribunal emphasised that it was up to the employer to prove the reason for the changes, quoting a judge in an earlier case who said “An employer who dismisses an employee has a reason for doing so. He knows what it is. He must prove what it was.”

The sole or principal reason for Mr Lewis’s dismissal was the TUPE transfer; Dow Silicones had not established any other reason for the dismissal. The ETO defence was not properly pleaded and was not made out.

So, after all the back and forth between courts, the dismissal was ruled to be unfair.

TUPE takeaways

What can we take away from these judgments? Here are three practical takeaways:

• Plan ahead before the transfer as to what changes are necessary following a transfer and how you will position any changes. You’ll need to give a ‘measures’ letter to the current employer explaining the envisaged measures. This will form the basis of their consultation with the affected employees. Pre-empt the defence you would need to run if sued and build this rationale into your measures letter.
• If you are a pleading a defence to a tribunal claim about a TUPE-related dismissal, make sure you spell out the essential aspects of your argument. It may not be enough to say you have an ETO reason entailing changes in the workforce. Make it crystal clear what that reason is, and how it involves changes in the workforce.
• Having the contractual right to change an employee’s working hours is useful, but will be construed narrowly. It is the same with mobility clauses – the courts don’t construe those clauses as giving carte blanche to move people miles away on little notice.
  Even if a change is within the scope of a contractual flexibility clause, it doesn’t mean that the change is not substantial or detrimental and it won’t defeat a claim that it amounts to a material detriment under TUPE. The EAT decision is also a reminder that any detriment will be viewed subjectively.

Getting in a TUPE tangle? Contact our team for support. Our InBrief also has a more detailed discussion about changing terms and conditions post-transfer.

Lewis v Dow Silicones - download the full judgment here.