In this round up of recent cases we consider a European Court of Justice (ECJ) decision on whether a change of service provider amounted to a transfer under the Acquired Rights Directive; an employment tribunal decision that a change in location alone cannot amount to an economic, technical or organisational (ETO) reason justifying dismissal under TUPE; an Employment Appeal Tribunal (EAT) decision that part-time employees who were excluded from a pension scheme were not entitled to any compensation, as they had suffered no loss; and a decision of the Upper Tax tribunal concerning tax and redundancy payments.

ECJ rules a change of service provider is not a TUPE transfer

The ECJ has handed down its decision in the case of CLECE SA v Maria Socorro Martin Valor and another, establishing that, for the purposes of the Acquired Rights Directive, a mere change of service provider is not sufficient for a transfer of undertaking.  When a Spanish local authority terminated a cleaning contract, bringing the service back in house, it declined to hire the contractor's staff, and hired its own new employees to do the work.  When challenged, the ECJ held that as no assets had transferred from the transferor to the transferee, and no staff were taken on by the transferee, the Directive did not apply.

At first blush this decision may appear to be an invitation to employers to avoid TUPE in an outsourcing, when there is no transfer of assets, by simply refusing to take on the staff.  However, had this case arisen in the UK, TUPE would have applied as it goes further than the Directive, providing explicitly that a service provision change alone can trigger a TUPE transfer under UK law.

Change in location alone is not an ETO reason entailing changes in the workforce

The Employment Tribunal (ET) has held, in the case of Tapere v South London and Maudsley NHS Trust, that a change of workplace location following a TUPE transfer, which does not involve any change in the number or job functions of the employees, could not amount to an ETO reason justifying dismissal.

Ms Tapere had objected to the transfer of her workplace location from Camberwell to Beckenham following the transfer of her employment under TUPE.  Whilst the two locations were equidistant from her home, the new location posed difficulties for her childcare arrangements.  She resigned and claimed constructive dismissal, and automatically unfair dismissal contrary to Regulation 4(9) of TUPE.  The EAT held that the change in location was substantial enough, in those particular circumstances, so as to amount to a breach of contract, entitling her to resign and claim constructive dismissal.  The case was remitted back to the Tribunal to determine whether her dismissal had been for redundancy, and whether or not it was fair.

The employment tribunal held that Ms Tapere's dismissal had been for redundancy, as there had been a cessation of work in Camberwell.  The offer of the job in Beckenham was an offer of suitable alternative employment and Ms Tapere had not been unreasonable in refusing this job, and so was entitled to a redundancy payment.  Further, as there had been a dismissal following a TUPE transfer, this was automatically unfair unless there was an ETO reason.  The employment tribunal observed that, whilst there were good economic and organisational reasons for the relocation of the staff, as those reasons didn't entail a change in the workforce – because the whole team of staff transferred intact and unchanged – it could not amount to an ETO reason.  Ms Tapere's dismissal was therefore automatically unfair.

No compensation for part-time workers denied access to occupational pension scheme

The EAT has held, in the case of Coppell and others v Littlewoods plc and others, that part-time workers who were excluded from joining an occupational pension scheme on the basis of their part-time worker status were not entitled to compensation, as they would never have joined the scheme, even if they had been eligible.

The Claimants argued that even if they would not have joined the scheme, they should still be entitled to a remedy, as the ECJ authorities did not require claimants to show they had suffered a loss.  This argument was rejected by the EAT.  As membership of the pension scheme was voluntary for full-timers during the period covered by the claim, and the part timers would not have joined even if they had been eligible to do so, they had suffered no loss and so there was no loss to be compensated.

Three Claimants who could prove that they would have joined the scheme had they been eligible were entitled to a declaration of retrospective access, to cover the period when their part time hours excluded them from joining.

Tax and redundancy payments

In 1997, following the renegotiation of the contractual redundancy scheme offered by his employer, Mr Colquhoun had received a "buy-out" payment in return for giving up his rights under the scheme.  £30,000 of the payment was made tax-free under the termination payment exemption set out in section 148 ICTA (now sections 401 to 403 ITEPA).  In 2005, Mr Colquhoun was made redundant and he tried to set off the £30,000 termination payment exemption against the contractual redundancy payment paid to him on his dismissal.  The Upper Tribunal (Tax and Chancery Division) held that, as the £30,000 exemption had been set against the earlier buy-out payment, it was therefore not available in respect of the subsequent redundancy payment.  Both payments were connected with termination of employment because of redundancy.

The decision confirms that a payment for agreeing to a change in a contractual redundancy scheme is taxable under sections 401 to 403 of ITEPA and will benefit from the £30,000 tax exemption.  However, if an actual redundancy payment is made at a later date, that payment cannot benefit from all or part of the £30,000 exemption unless either the exemption was not applied at all to the buy-out payment or the buy-out payment was less than £30,000.  In the latter case, the balance of the £30,000 exempt amount would still be available for the employee to use.  (HMRC v Colquhoun).

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