LRD guides and handbook February 2014

TUPE - a guide to using the law for union reps

Chapter 6

Can a transferee rely on the transferor’s ETO reason?

[ch 6: pages 72-73]

No. A transferee is not allowed to rely on the transferor’s ETO reason. This was established by the Scottish Court of Sessions in Hynd v Armstrong [2007] CSIH 16. This rule makes it much harder for a business to dismiss staff before the transfer under pressure from the buyer. The Hynd case says that an employer is only allowed to justify dismissals for an economic, technical or organisational reason where the dismissing employer intends to continue the business as a going concern. There can be no ETO reason where an employer or administrator is carrying out the dismissals to get the business ready for sale to the new employer.

Instead, on the transfer date, employees of the transferor transfer automatically over to the new business. These employees join the workforce of the new employer, which must carry out any redundancies out of a pool made up of the combined workforce.

The 2014 Regulations dilute the practical effect of this rule in two important ways:

• changes to the wording of Regulation 7 of TUPE described on page 71 are likely to make it much easier for sellers to dismiss staff to prepare a business for sale where no transferee has been identified and the seller is getting the business ready for sale (see above); and

• new rules allowing for pre-transfer collective consultation with the transferor’s workforce, described on pages 44-46 will enable some buyers to carry out collective redundancy consultation before the transfer date. This opens the way for redundancy dismissals to be carried out by the new employer very soon after the transfer date, instead of engaging in collective redundancy consultation with the new combined workforce.