News & Insights

Sole or principal reason?

We explore when a TUPE transfer is considered the key reason for a dismissal.

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), a dismissal is automatically unfair if the transfer is the ‘sole or principal reason’ that the dismissal took place, unless it can show it had an economic, technical or organisational reason for the dismissal and it was procedurally fair.

In a recent case, the employer claimed that the main reason for dismissal was a poor working relationship between the employee and a director of the transferee company.  The Court of Appeal had to decide if instead the sole or principal reason for the dismissal was the TUPE transfer.

The case centred around Mrs Kaur, employed as a cashier for a wholesale wine business, H&W Wholesale. Over the course of her employment, H&W was run by several different corporate entities. In December 2014, the business once again transferred to a different entity, Hare Wines Limited. This was a TUPE transfer and all the employees, with the exception of Mrs Kaur, transferred across. Mrs Kaur’s employment terminated on the same day the transfer was due to take place.

Hare Wines argued that Mrs Kaur rejected the transfer due to a troubled working relationship with a colleague who was due to become a director. The Employment Tribunal and Employment Appeal Tribunal dismissed this and found that Mrs Kaur had been dismissed due to Hare Wines’ concern about anticipated ongoing issues with her colleague. Concluding that the sole or principal reason for the dismissal was due to the transfer. Therefore, the dismissal was automatically unfair.

Hare Wines appealed to the Court of Appeal, arguing that the earlier findings as to the real reason for dismissal was not a reason that was consequent on the transfer. The Court of Appeal rejected this argument.

Once it was found that Mrs Kaur had not objected to the transfer, the key question was whether she had been dismissed because of the relationship with her colleague and the proximity of the transfer was coincidental; or because Hare Wines did not want to employ her because she had a poor working relationship with the colleague.  The Court of Appeal found that she was dismissed because the transferee did not want her employment to transfer across and therefore the reason for the dismissal was the transfer and automatically unfair.  In addition, a personal reason for not wanting the employee to transfer could not be considered an economic, technical or organisational reason for the dismissal.

Employers should be mindful of the significance of the proximity of a dismissal to a transfer.  Even if other reasons for dismissal are present, employers should exercise care when dismissals are carried out so close to a transfer.  A potentially key factor in this case was that the poor relationship had endured for some time without the employer seeking to terminate her employment.  Employers should act to address poor working relationships and concerns such as conduct or performance when they arise so that they are not trying to resolve issues when a TUPE transfer is imminent.