Transfer Reason

Hynd v Armstrong and ors

Regulation 8(2) of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) allows both transferors and transferees to dismiss an employee if they can show it was for an economic, technical or organisational (ETO) reason entailing changes in the workforce.

In Hynd v Armstrong and ors (2007, IRLR 338), the Court of Session has made clear that the regulation only applies to the transferor if the ETO reason relates to their own workforce and not that of the transferee.

Basic facts

Mr Hynd started working for Morison Bishop as a corporate law solicitor in 1999. In 2002 the Edinburgh-based partners resigned to form a new company. The remaining partners decided to form another company in Glasgow, called Bishops, with effect from 1 August 2002. As the partners did not intend doing as much corporate work, Mr Hynd was made redundant.

He claimed that his dismissal was automatically unfair under regulation 8(1) of TUPE; the company argued that regulation 8(2) applied.

The law

Regulation 8 (1) states that if an employee of either the transferor or transferee is dismissed before or after a relevant transfer, they will have been unfairly dismissed if they can show that the reason was connected with the transfer.

However, regulation 8 (2) says that if either the transferor or transferee can show they had an ETO reason entailing changes in the workforce, then regulation 8(1) does not apply and the employer can justify the dismissal.

Tribunal decision

The tribunal decided in favour of the employer. It relied on the case of Whitehouse v Charles A Blatchford & Sons Ltd, in which the Court of Appeal emphasised that the words “economic, technical and organisational reason ... entailing changes in the workforce” clearly meant that the reason must be connected with the future conduct of the business. That being so, the tribunal said that regulation 8(2) must apply.

Although in the Whitehouse case the employee was made redundant following the transfer (unlike this case), the tribunal said that did not matter. The important point was that the claimants in both cases were not “required for the future conduct of the transferee's business after the transfer”.

An appeal to the Employment Appeal Tribunal was refused.

Arguments on appeal to Court of Session

Mr Hynd argued that the transferor's reason for dismissing him did not relate to the future conduct of its business, as he was not surplus to the future requirements of Morison Bishop which ceased to exist.

Nor did the transferor's reason entail changes in the workforce of the transferee, as it did not have a workforce at the time of his dismissal. To rely on that reason, he said that the transferee had to be in existence when he was dismissed.

Bishops pointed out that if they had dismissed him after the transfer, it would clearly have fallen within regulation 8(2). Why should it make any difference if he was dismissed by Morison Bishop, before Bishops came into existence, if it was for the same reason?

Decision of the Court of Session

The Court of Season (the Scottish equivalent of the Court of Appeal) said that when an employee is dismissed prior to the transfer, then the transferor has to come up with the reason for dismissal. Likewise, when an employee is dismissed after the transfer, it is up to the transferee.

If, as in this case, the transferor dismisses the employee but has no economic interest in the business subsequent to the transfer, they cannot rely on an ETO reason for the dismissal.

Otherwise, as the House of Lords pointed out in Litster v Forth Dry Dock & Engineering Co Ltd the whole point of the regulations would be undermined, as the transferee could just arrange with the transferor for everyone to be dismissed before the transfer to avoid the consequences of dismissing them themselves.

It concluded therefore that regulation 8(2) only applied when the employer dismissed the employee for a reason entailing a change in their own workforce.