Reg 4(9): Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.

This is usually seen as easier for an employee to show than constructive dismissal, which of course was a remedy available to employees under the pre-2006 regulations if it could be shown that the new employer was failing, or would fail, to keep to an essential term of the contract of employment.  Within 4(9) however, it is simply enough to show that working conditions would change substantially such as to cause material detriment. This need not involve any contractual breach at all. Naturally there is a great deal of overlap.

In Tapere v South London & Maudsley NHS Trust [2009] UKEAT the employee’s employment was transferred from one NHS Trust to another. The transferee made it clear that following the transfer it would wish her to move from her old offices in Camberwell to the Bethlem Hospital in Beckenham. She wasn’t happy:

[The Claimant] was reluctant to move to work at the Bethlem in Beckenham as she believed that it would increase the journey time. She is a single mother and has to collect her child from school and be available till 8 a.m. when her child would be collected for school by taxi. She gave evidence that if she travelled via her old route of the A13 the journey time to Beckenham would be significantly longer – an additional 10 miles.

The transferee sought to instigate this change under a mobility clause. She resigned and claimed both constructive dismissal, on the basis that the mobility clause did not actually permit the change in location, and reg. 4(9), in that the change was a substantial change in working practices to her material detriment.

The Employment Tribunal found against her on both counts. I shan’t go into the discussion of the mobility clause here, of which there is much, but it is worth a read. Of interest however is the construction of “substantial change” and “material detriment”. The Tribunal had given rather scarce consideration to the terms, but had stated that it had looked at the matter objectively.

The EAT ruled that that the correct interpretation of detriment was that found in the discrimination caselaw. The EAT noted Shamoon v Royal Ulster Constabulary [2003] IRLR 285, in which Lord Scott followed the key decision of Chief Constable of the West Yorkshire Police v Khan [2001] IRLR 830. Lord Scott, at para 105:

‘a detriment exists if a reasonable worker would or might take the view that the [treatment] was in all the circumstances to his detriment’, must be applied by considering the issue from the point of view of the victim. If the victim’s opinion that the treatment was to his or her detriment is a reasonable one to hold, that ought, in my opinion, to suffice. In Khan the complainant, desiring to apply for a new job, wanted a reference to be given by his employers. His employers refused to give one. It was clear that if they had given one it would have been an unfavourable one. It might be said that a reasonable worker would not want an unfavourable reference. But the complainant wanted to be treated like all other employees and to be given a reference. The House concluded that this was a reasonable attitude for him to adopt and that the refusal to give him a reference, constituted ‘detriment’. He was being deprived of something that he reasonably wanted to have. And while an unjustified sense of grievance about an allegedly discriminatory decision cannot constitute ‘detriment’, a justified and reasonable sense of grievance about the decision may well do so.

So the correct approach is to consider whether the Claimant holds the view that he has been subjected to a detriment, then consider if he holds that view reasonable. The test is thus subjective, as one looks at the employee in particular. The consequences of this case is that the bar for reg. 4(9) dismissal remains low. I will review the law on mobility clauses in a later post.

This case demonstrates well the ‘purposive’ approach taken in construing regulations designed to implement European law. First, “working conditions” in TUPE does not mean “the conditions under which one works” but is to be interpreted far more widely. Second, the word material in this case does not connote physical materiality, it simply reinforces that the detriment must not be trivial or fanciful, which is of course usually dealt with by the word ‘substantial’.

Finally it should be noted that the successful Appellent was represented by James Medhurst, who blogs about the case himself and has been kind enough to comment on this blog on occasion.

The 2003 Enterprise Act was designed to make going into administration easier, quicker and cheaper with the aim to help companies and save jobs. But BBC File On 4 has heard claims that it is now easier for failing companies to dump their debts leaving thousands of creditors and suppliers owed millions of pounds they may never recoup. Julian O’Halloran asks if UK insolvency law could deepen the economic downturn instead of bringing about a recovery.

The programme is available through iPlayer and as an mp3 podcast download for the next week.

By way of reminder, the event that triggers a transfer under the service provision change provisions is when:

activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person on the client’s behalf

In this case the activities weren’t outsourced to just one successor, but two. So what happens to the jobs? The employment tribunal at first instance performed a strange exercise where they divided the contract between the two transferees.

In truth, a ‘split’ transfer is a very similar problem to that quoted by opponents to service provision change transfers in the professional arena – sure, I do 70% for client A, but if I transfer to him then is it 70% of my job or 100% that goes? The only answer on a reading of the regulations can by that 100% goes, and Lady Smith applies the same principle to split transfers. The tribunal must analyse the facts to determine which of the transferees had received the majority of the activities to which the employees were assigned. That transferee is therefore the recipient of the employee’s principal activities and is thus the sole transferee.

The EAT also makes the valid point that this present case shouldn’t have caused so much of a headache, there is a line of authority deriving from ‘conventional’ transfers that some work performed for a third party won’t preclude an employee from belonging to the entity that transfers.

For some mad reason the Post Office don’t ever seem to have considered the possibility – rather than start consultation on a transfer they simply wrote to offer a choice between voluntary redundancy or redeployment to another site. The unions are now bringing a claim based on failure to consult (easy money, 13 weeks’ pay per employee) that could cost them as much as £2,000,000. And all for failure to consult. Such is the elementary nature of the TUPE claim ene could cynically imagine that the possibility occurred to the Post Office yet they decided on a commercial basis not to proceed with consultation. But that would indeed be cynical.

Company goes into administration, administrator has no money for wages so sacks all the staff, then duly sells business back to original owner. Is dismissal for a reason connected with the transfer, thus giving TUPE protection? No. The dismissal’s because the administrator didn’t have any money. The allegation that this is exactly what was planned by the owner all along isn’t relevant once you establish the motivation and mind of the actual dismissing officer.

This is a real kick in the balls for employees in this situation. Although I think the decision’s probably correct, the morals of it are amply spelled out by the court:

As counsel have identified, the critical question is whose decision was it? Once the answer is that it was the administrator’s decision, then nothing done by Craig Smith before that decision was taken nor after it could have any bearing on the reasons why Mr Rutherford acted as he did. The facts may give rise to the inevitable conclusion that Craig Smith cynically manipulated the insolvency of Friction, saw the opportunity of the August holidays as the best time to place the company in administration and did so not simply with a hope but with every expectation that by reason of Realty’s close association with Dynamex, Dynamex itself would soon fall into his palm. That is what happened. It is not an attractive story. It brings no credit to Craig Smith. But Craig Smith did not decide to dismiss the employees even though he knew that would happen and wanted it to happen. Mr Rutherford dismissed them. He did so for economic reasons.

Having decided as it seems to be to me inevitable that the reasons have to be discerned from the actions of the administrator whose actions were unsullied by Smith’s scheming, then there is only one conclusion for any tribunal to reach: the reason for dismissal was an economic one. As Mr Ralls recognised, if the focus is on Mr Rutherford’s state of mind, then he is “a shot fox”. Unsporting as shooting a fox may be and as lacking in fair play as Craig Smith’s machinations were, I am compelled to allow the appeal and restore the decision of the Shrewsbury Employment Tribunal.

This is not an uncommon situation, and there may well be some argument for legislation providing for extra accountability by those who purchase a business they owned until a few weeks before. Will this happen though? No.