The Employment Appeal Tribunal ("EAT") in Nationwide Building Society v Benn and ors has held that employees who resigned in response to their jobs being downgraded and their bonus entitlements being reduced following a TUPE transfer were constructively dismissed. The dismissals were not automatically unfair for being connected to the transfer, as the tribunal had been entitled to find that the dismissals were for a valid ‘economic, technical or organisational reason entailing changes in the workforce’ under Reg 7(2) of TUPE 2006. In so holding, the EAT decides that ‘entailing changes in the workforce’ in this regard does not mean that the whole workforce must be affected.

Several employees resigned and brought claims of unfair dismissal following a transfer of the undertaking in which they were employed from PBS to NBS, both building societies, in August 2007. They cited various fundamental breaches of contract and other detriments as reasons for their resignations. These included a diminution in skills and responsibilities of their jobs when they were assimilated into NBS, breach of the implied term of mutual trust and confidence in the assimilation process, and the application to them of a substantially less beneficial bonus scheme. They argued that they had been constructively and unfairly dismissed for reasons related to a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

An employment tribunal found that the claimants had been constructively dismissed. Alternatively, they had been dismissed by operation of Reg 4(9), which treats a resignation in response to a substantial and materially detrimental change in working conditions as a dismissal. The tribunal went on to decide that the dismissals were not automatically unfair under TUPE. While the dismissals were ‘connected with the transfer’, there was an organisational reason for them, which entailed changes in the workforce. This reason was that NBS did not have the same product range as PBS, which would have enabled the transferred employees to continue to function at the level that they had previously. The dismissals were therefore potentially fair in substance under Reg 7(2) and (3). However, the dismissals were procedurally unfair. In so holding, the tribunal treated as relevant the fact that NBS had failed to comply with Reg 13(6) of TUPE, which requires the employer to consult over measures it envisages taking in connection with the transfer. NBS appealed against the findings of dismissal and the conclusion that there was unfairness. The employees cross-appealed against the tribunal’s finding on the ETO reason for dismissal.

The EAT held that the tribunal had been entitled to find that the employees were dismissed constructively and by operation of Reg 4(9). The tribunal did not simply reason that, because they had found NBS to be in breach of contract, Reg 4(9) must be satisfied. The downgrading of the claimants’ jobs and the reduction in earnings capacity under the new bonus scheme rightly led the tribunal to the conclusion that Reg 4(9) was engaged. The EAT accordingly rejected this ground of appeal. However, it allowed an appeal against the tribunal’s reliance on Reg 13(6) in finding that the dismissals were unfair. No claim for breach of Reg 13(6) had been made and the tribunal had not raised it as an issue before making findings. In any event, individual claimants do not usually have standing to bring a complaint of breach of Reg 13(6). The EAT noted that it is open to the tribunal to have regard to the extent of collective and individual consultation undertaken when considering fairness of dismissal, but Reg 13(6) is not relevant to that issue where no breach has been established by a successful claim. The fairness issue would be remitted to the tribunal.

The EAT rejected the cross-appeal challenging the tribunal’s conclusion that the ETO reason behind the dismissals entailed ‘changes in the workforce’. The employees had argued that Reg 7(2) requires an ETO reason to entail changes to the workforce as a whole and that, since the changes at issue affected only the transferring employees, Reg 7(2) was not satisfied. The EAT rejected this intepretation of Reg 7(2), holding that there is no need for an ETO reason to entail changes in the entirety of the workforce. The tribunal’s conclusion that there was an ETO reason for dismissal was therefore sound.

Click here for the transcript of this case: http://www.bailii.org/uk/cases/UKEAT/2010/0273_09_2707.html