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Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

In this month’s E-News, we look at whether a dismissal carried out by an administrator amounted to an economic, technical or organisational reason pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006. We also look at whether obesity could amount to a disability within the meaning of the Equality Act. Finally, we look at the developments in relation to the employee shareholder employment status scheme.

Whether the dismissal of employees by an administrator was automatically unfair

In the case of Kavanagh and Others v Crystal Palace FC (2000) Limited and Others, the Employment Appeal Tribunal (EAT) considered whether the dismissals of employees carried out by an administrator before the sale of an insolvent business was automatically unfair under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Under TUPE, if an employee is dismissed, and where the principle reason for the dismissal is:

  • the transfer; or
  • a reason connected with the transfer;
  • and it is not an economic, technical or organisational reason entailing changes in the workforce (an ETO reason),

then the dismissal would be deemed to be automatically unfair.

In this case, some of the employees of Crystal Palace FC (2000), were dismissed by the administrator before the business was sold. It was the administrator’s plan to sell the club as a going concern and the only way it could be sold as a going concern was to dismiss some of he employees.

The dismissed employees alleged that they were automatically unfairly dismissed pursuant to the TUPE regulations, and that liability for their claims passed to the transferee.

The Tribunal held that the reason why the administrator dismissed the Claimants was that it could no longer afford to pay them. Furthermore, at the date of the dismissal, the sale of the business remained a possibility but no more than that. It was held by the Employment Tribunal that the reason for the dismissal was not the transfer itself, but was a reason connected with the transfer. The Employment Tribunal also stated that the reason for the dismissal was to reduce the wage bill in order to continue running the business. This was an ETO reason and therefore the dismissal was not automatically unfair.

The Claimants appealed to the Employment Appeal Tribunal, arguing that there had been no ETO reason for the dismissal. The Employment Appeal Tribunal held that the dismissal was not for an ETO reason, but was simply to preserve the business so that it could be sold and therefore, that the dismissals were unfair.

This case suggests that where an administrator is seeking to sell the business as a going concern, any dismissals which are carried out pre-transfer will potentially be automatically unfair regardless of whether a dismissal was necessary to keep the company in administration afloat.

Whether an obese employee is disabled under the Equality Act

In the case of Walker v CT Information Networking Computer Limited UK EAT, the Employment Appeal Tribunal considered whether an obese employee, who suffered from a variety of conditions, was protected by the disability discrimination legislation.

The Equality Act 2010 provides that a person has a disability if they have a “physical or mental impairment which has a substantial and long-term effect on their ability to carry out normal day-to-day activities”.

The Claimant had numerous physical and mental conditions including asthma, chronic fatigue syndrome, knee problems, bowel problems, anxiety and depression. These conditions understandably caused him difficulties in his day-to-day life. These conditions stemmed from the fact that he was obese. The Employment Tribunal, when considering whether the Claimant was disabled, held that he was not disabled for the purposes of the Equality Act 2010. In making this decision, the Judge considered the advice provided by the Occupational Health specialist, which suggested that the Claimant’s symptoms were plagued by a “functional/behavioural component” and had not been able to identify a “physical or organic cause” for his conditions other than his obesity.

The Claimant appealed to the Employment Appeal Tribunal, who allowed the Claimant’s appeal. The EAT held that when considering whether an individual is disabled, the Tribunal must concentrate on whether they have a physical or mental impairment and not what had caused the impairments. It was clear that the Claimant had been substantially impaired by both physical and mental impairments for a long time and this was the only conclusion available to the Judge.

The case is a useful reminder when considering whether an employee is disabled for the purposes of the Equality legislation. Whilst obesity does not itself render a Claimant disabled, it might make it more likely that a person is disabled if the symptoms have a substantial affect on the person’s normal day-to-day activities. Therefore when considering whether an individual is disabled, it is the impairment that should be considered rather than the cause, even if the cause of the impairment is excluded from the definition of disability.


There have been developments in relation to the new employee shareholder employment status scheme, under which an employee can agree to trade certain employment rights for shares in the company. This is now set to come into force on 1st September 2013.

There will be a new section 205A inserted into the Employment Rights Act 1996; which will provide:

(1) An individual who is or becomes an employee of a company is an “employee shareholder” if –

(a) the company and the individual agree that the individual is to be an employee shareholder,

(b) in consideration of that agreement, the company issues or allots to the individual fully paid up shares in the company, or procedures the issue or allotment to the individual of fully paid up shares in its parent undertaking, which have a value, on the day of issue or allotment, of no less than £2,000, and

(c) the individual gives no consideration other than by entering into the agreement.

An employee shareholder has fewer employment rights than a normal employee. An employee shareholder does not have:

unfair dismissal rights (except for automatically unfair reasons for dismissal and on the grounds of discrimination);

the right to a statutory redundancy payment;

the right to request flexible working (except that an employee shareholder has a statutory right to request flexible working within 2 weeks of returning from parental leave);

the right to make an application to request time off for training.

In addition

An offer of employee shareholder status must include a statement explaining the employment rights that would be sacrificed and the rights attaching to the shares.

The individual must receive advice about the offer from an independent solicitor, barrister, legal executive, union official or advice centre.

The employer must meet reasonable costs incurred in receiving this advice, regardless of whether the offer is accepted. The government plans to rule out an income tax charge on the benefit of this advice.

Individuals agreeing to the offer will be entitled to a seven-day “cooling off” period from the day legal advice is received.

If you have any questions in relation to this E-News, then please do not hesitate to contact us.


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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