2014/2 Dismissals shortly before a transfer were for an ETO reason even though the ultimate objective was the sale of the business (UK)
The administrator of a business in financial difficulties found a potential purchaser of its assets and in May 2010 the parties reached agreement on the sale of the assets subject to a certain condition being met. Three months later, in August 2010, the condition was satisfied and the business was sold. In the meantime, the business was experiencing such severe cash flow difficulties that in late May 2010, the administrator dismissed nearly all administrative staff. Claims were later brought by three of those employees that their dismissals were unfair under TUPE. Was there an economic, technical or organisational (‘ETO’) reason for the dismissals? The Court of Appeal, overturning the decision of the Employment Appeal Tribunal (‘EAT’), distinguished between the immediate reason for the dismissals (cash flow difficulties) and the administrator’s ultimate objective (sale of the business) and found that there was an ETO reason. This case highlights that even in the context of insolvency procedures, where decision-makers will often be focused on the sale of the business, an ETO reason for related dismissals can exist. However, a careful and detailed examination of the facts of each case will be essential.
Court of Appeal, 2013-11-13
