Case of the week: Nationwide Building Society v Benn and others

Nationwide Building Society v Benn and others

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FACTS

Mr Benn and 17 colleagues were employed by the Portman Building Society (PBS) until their employment was transferred to the Nationwide Building Society (Nationwide) in August 2007. The transfer occurred under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

The claimants considered that Nationwide had altered their terms and conditions of employment to their detriment after the transfer. The claimants’ view was that their job roles and responsibilities were downgraded when they were assimilated into Nationwide roles. The claimants’ roles were to be mapped across. A job mapping process was undertaken prior to the transfer, but no discussion took place with the claimants.

The claimants argued that there was a significant difference between the pre- and post-transfer roles and the assimilation process transferring them was itself a breach of mutual trust and confidence.

The claimants also argued that the Nationwide bonus scheme was less generous than the old PBS scheme. The claimants’ gross bonus payments prior to the transfer averaged £5,000 per month. In the first month that the new scheme was introduced, the claimants’ bonus earnings were £1,000 per month.

They resigned and brought claims of unfair constructive dismissal at the employment tribunal. The tribunal handled two of the claimants’ cases as a test case.

DECISION

The employment tribunal determined that the claimants had been constructively dismissed either under:

(a) the specific provision in TUPE that provides that an employee who resigns is treated as having been dismissed where a “relevant transfer involves or would involve a substantial change in working conditions to [his or her] material detriment”, but the reason for dismissal was an economic, technical or organisational reason meaning the dismissal was not automatically unfair; or

(b) the standard unfair dismissal provisions under the Employment Rights Act 1996, with the dismissal being for “some other substantial reason”, but unfair because Nationwide had failed adequately to consult employee representatives (in breach of TUPE).

On appeal, the Employment Appeal Tribunal held that the tribunal was correct in holding that the claimants had been dismissed constructively. The tribunal was right to find that the dismissals were for an organisational reason entailing changes in the workforce. Although the changes affected a section of the workforce – the transferred employees – they did not have to affect the whole of the workforce.

However, the EAT determined that the employment tribunal had wrongly taken into account a perceived breach of the consultation requirements of TUPE in determining that the dismissals were unfair. No complaint of such a breach had been made by the claimants, nor were they legally entitled to bring such a complaint. It was not raised in the course of the hearing and the tribunal did not invite submissions on the issue. On that basis, the case was remitted to the same tribunal for consideration of whether or not the dismissals were fair.

IMPLICATIONS

This case raises significant legal issues as it makes it clear that a tribunal cannot consider an issue that has not been pleaded by the parties or upon which the parties have not been given the chance to give evidence.

In addition, the EAT has made it clear that an individual employee has no standing to bring a claim for a failure to consult in a case in which employee representatives have been elected but the consultation with those representatives is said to have been inadequate. Such a claim can be brought only by the elected representatives.

On a practical note, transferees should think carefully about any changes to be made to transferring employees’ positions after the transfer. They should try to understand fully the pre-transfer roles and, where any changes are to be made, consider thoroughly whether or not the definition of an economic, technical or organisational reason entailing changes in the workforce (an “ETO reason”) can be met. The case shows that it is not necessary for the entire workforce to be affected by the changes. It is sufficient for the changes to affect the transferred employees only.

However, even if a claim for constructive dismissal under TUPE can be defended on the basis of an ETO reason, transferees should be cautious about the potential of a claim for constructive unfair dismissal under the standard provisions in the Employment Rights Act 1996 and ensure that the extent of consultation, whether collective or individual, is sufficient to justify changes to terms and conditions.

Frances Strickley, Associate, Thomas Eggar

Practical guidance from XpertHR on TUPE

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