F&G Cleaners Ltd v Saddington and others EAT/0140/11
TUPE | unfair dismissal | employment status
The Employment Appeal Tribunal (EAT) has held that two claimants did not fail to mitigate their losses when they refused to accept self-employed terms offered by a transferee that refused to recognise the continuation of their employment under TUPE.
Implications for employers
- Where a transferee to has doubts regarding the accuracy of the information provided by the transferor during a TUPE process, it should do everything possible to resolve the issue before the transfer date.
- If a transferee genuinely considers that a particular employee should not transfer under TUPE, it should confirm its position to the transferor and employee prior to the transfer date, and not act inconsistently with this view - for example, it should not allow the employee to work for it before telling him or her to stop coming in.
- Transferees should not seek to re-engage transferring employees on self-employed terms as an attempt to circumvent TUPE. Any such attempt will result in an automatically unfair dismissal.
Mr Oliver and Mr Saddington, the claimants, were employed by Actual Support Services Ltd as window cleaners, carrying out work under a contract between the company and the London Borough of Redbridge. The contract was retendered and tenderers, including F&G Cleaners Ltd, were told that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE) might apply if they won the contract.
F&G’s tender was successful, and the anticipated handover date for the contract was 1 August 2008. The tribunal later found that Actual had informed both claimants that they would cease working for it on 31 July 2008 and would thereafter be employed by F&G. On 8 August 2008, F&G, in response to an enquiry from Mrs Oliver about her husband’s employment status, stated in a fax to Mr Oliver that:
"...Stephen Oliver does not work at F&G Cleaners Ltd and never has done previously."
On 12 August 2008, F&G met the claimants to discuss its proposal that they should work for it on a self-employed basis. On 13 August, F&G wrote to Actual stating that it was:
"...unable to offer a TUPE based transfer, as we consider that the information supplied by Actual [during the retendering process] was sparse and misleading in certain areas...We are hoping to achieve a mutually agreeable decision on a different contract of employment with Mr Saddington and [Mr] Oliver."
On 14 August 2008, F&G wrote to the claimants. It reiterated what it had said to Actual, and said that it “may be in a position to offer [the claimants] employment...at the beginning of September”. Each claimant’s offer of “employment” was on a self-employed basis, for a daily paid rate and subject to review after a month’s trial. The claimants did not accept F&G’s offer, and claimed unfair dismissal.
The tribunal held that there had been a TUPE transfer, and that the claimants had been automatically unfairly dismissed by F&G’s refusal to continue their employment on the same terms as prior to the transfer. The tribunal found that the claimants were entitled, under TUPE, to a continuation of their employment by F&G, which had refused to accept this. F&G’s proposals were materially different than their terms and conditions under Actual, the main difference being that they were to be treated as self-employed contractors. Given that this would have been a new working relationship, their previous service would not have been carried over, and that would have necessarily resulted in the loss of statutory rights dependent on service, including the right not to be unfairly dismissed. The tribunal found that, although the transfer was completed on 3 September 2008, the contracts between Redbridge and F&G had been backdated to 1 August 2008.
The tribunal rejected F&G’s argument that, by declining its offer of self-employed status, the claimants had failed to mitigate their losses. The tribunal held that F&G’s offer would have involved the claimants giving up “valuable statutory rights”. Further, the claimants would not be on PAYE terms, which was profitable to F&G but, in the long term, a disadvantage for the claimants. The tribunal did not accept that “it is reasonable to abandon legal rights”.
F&G appealed to the EAT on the issue of mitigation. It argued that the claimants had been dismissed before the offer of self-employed work had been made, with the result that, by accepting that offer, the claimants would not have been abandoning any statutory rights that had not already been lost and could not have been regained.
The EAT stated that the tribunal may well have erred if it had decided the mitigation issue solely on the basis that the acceptance of F&G’s offer would have caused the claimants to lose their accrued statutory rights. The EAT, however, held that the tribunal judgment had to be "read and considered as a whole", and that the tribunal had considered not only the loss of accrued statutory rights but also the contrast between the terms on which the claimants had been employed by Actual and the terms that had been offered by F&G.
The EAT found that the tribunal had held - without saying so explicitly - that the transfer to F&G had involved a substantial change in working conditions to the material detriment of the claimants, who had been entitled (under reg.4(9) of TUPE) to treat their contracts has having been terminated, the terminations being treated as dismissals by F&G. The EAT held that the dismissals could not have occurred until after the offer of the conditions that were to the claimants’ material detriment had been made. As such, the claimants were under no duty to mitigate their losses by accepting the offers, because at the time of those offers, they had not yet been dismissed.
Case transcript of F&G Cleaners Ltd v Saddington and others (on the BAILII website)