TUPE and Unfair Dismissal

[Thanks to Nicholas Hill of Outer Temple Chambers for preparing this case summary]

The Court of Appeal has given Judgment in the case of Spaceright Europe Limited v Baillavoine, a case in which the Court of Appeal considered for the first time conflicting lines of authority that had developed at EAT level as to the correct construction of regulation 7(1) of TUPE 2006. The reasoning in Harrison Bowden v Bowden [1994] ICR 186 and Morris v John Grose Ltd [1998] ICR 655 was preferred over the reasoning in Ibex Trading v Walton [1994] ICR 907. The transfer does not need to be in contemplation at the time that the dismissal is effected in order for the dismissal to be caught by regulation 7(1).

Mr Baillavoine was the Managing Director of Ultralon Limited when it entered administration on 23 May 2008. The administrators, who intended to sell the business as a going concern, dismissed a number of employees including Mr Baillavoine. The business was subsequently purchased by Spaceright Europe Limited. The ET held that Mr Baillavoine's dismissal was automatically unfair because he had been dismissed for "a reason connected with the transfer" within the meaning of regulation 7(1). The fact that the dismissal took place in order to achieve a sale at a future date was sufficient for it to fall within regulation 7(1). The EAT upheld that reasoning as did the Court of Appeal.

The Court of Appeal held that the construction of regulation 7(1) adopted in Harrison Bowden and Morris was more consistent than the approach in Ibex with the purpose of the directive which the TUPE regulations implemented. Moreover, the reference to the transfer in regulation 7(1) rather than, for example, a transfer, created no difficulties. It is a common experience of life that an event (A) may sensibly be considered to be "connected with" a later event (B), even though it was not known, contemplated or foreseen at the time of event (A) that event (B) would happen.

In dismissing a further ground of appeal, the Court of Appeal held that the dismissal was not for an ETO reason. An ETO reason is not available in circumstances where an employee is dismissed in order to make the business of a company a more attractive proposition to prospective transferees of a going concern.