The claimants were subject to a TUPE transfer. 6 months later the respondent began a process of cost savings which included a request for voluntary redundancies and wage cuts. The claimants did not volunteer for redundancy and they also received letters telling them that their jobs were safe from compulsory redundancy. They were then told that they should agree to new contracts and take a wage cut which they refused to do and they were dismissed, being re-engaged on the new contracts. The ET found, by a majority, that their dismissals were unfair in the TUPE sense and the ordinary sense. The reason for the dismissals was connected with the transfer and were for economic, technical or organisational reasons but they did not entail changes in the workforce. The time for achieving reduced numbers of staff had passed by the time of these dismissals. The change was to effect harmonisation. The Tribunal awarded re-engagement on the same salary as before the transfer, which was practicable. The respondent appealed the liability judgment in the TUPE sense and the remedy.

The EAT rejected both aspects of the appeal. The Tribunal was entitled to find that the redundancy issue had fortunately been resolved by the measures that had been taken in co-operation with the workers and the union by the time the letters were written to the claimants, and so they were told they were not at risk and were entitled to rely upon that.  By that chronology, the Employment Tribunal was entitled to divide the issue as between redundancies and harmonisation of terms and conditions.  It made no error. On the re-engagement issue the Tribunal rejected the submission that there would be worker discontent if the claimants were re-engaged on the same salary as before the transfer and indeed one the respondent’s witnesses had said that if they had to re-engage the claimants they would handle the situation.

_______________

Appeal Nos. UKEAT/0642/11/RN

UKEAT/0136/12/RN

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

At the Tribunal

On 9 July 2012

Before

HIS HONOUR JUDGE McMULLEN QC

MS K BILGAN

SIR ALISTAIR GRAHAM KBE

THE MANCHESTER COLLEGE (APPELLANT)

(1) MISS C HAZEL

(2) MRS M HUGGINS (RESPONDENTS)

Transcript of Proceedings

JUDGMENT

For the Appellant
MS MARY O'ROURKE (One of Her Majesty's Counsel)
Instructed by:
Messrs DWF LLP
Bridgewater Place
Water Lane
Leeds
LS11 5DY

For the Respondents
MR DECLAN O'DEMPSEY (of Counsel)
Instructed by:
Fulham Legal Advice Centre
679a Fulham Road
London
SW6 5PZ

UNFAIR DISMISSAL

Automatically unfair reasons

Reinstatement/re-engagement

TRANSFER OF UNDERTAKINGS – Economic technical or organizational reason

Six months after a TUPE transfer the Respondent began a process of cost savings which included a request for voluntary redundancies and wage cuts. The Claimants were told during this that their jobs were safe. They would not sign new contracts with up to 18 per cent wage cuts and were dismissed. They then agreed new contracts and continued in employment and sued for unfair dismissal. The Employment Tribunal held the reason for the dismissals was connected with the transfer and was for an ETO but it did not entail changes in the workforce. The time for achieving reduced numbers of staff had passed by the time of these dismissals. The change was to effect harmonisation. It also found the dismissals unfair on procedural grounds. It awarded re engagement, which was practicable. These were permissible findings and the employer's appeals were dismissed.

1. This case is about unfair dismissal following a breach of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). This is the Judgment of the court to which all members appointed by statute for their diverse specialist experience have contributed. We make this point because the lay members have considerable recent experience of transfers, reorganisation and harmonisation of conditions. We were asked by both counsel to look at the reality and practical aspects of the case. We will refer to the parties as the Claimants, whose circumstances are similar, and the Respondent.

1. These are appeals by the Respondent in those proceedings against the majority Judgment of an Employment Tribunal under the chairmanship of Employment Judge Corrigan sent with Reasons on 16 September 2011. This led to a unanimous Judgment on remedies for which Reasons were sent on 14 December 2011. The Claimants were self represented but today have the advantage to be represented by Mr Declan O'Dempsey of counsel; the Respondents were represented at the liability hearing by junior counsel but at the remedy hearing by Ms Mary O'Rourke QC, as before us, and we will correct the remedy Judgment to ensure that is noted.

1. The Claimants claimed unfair dismissal in the ordinary sense and in the specialist sense arising out of a TUPE transfer. The Respondent contended it dismissed the Claimants fairly and re engaged them on a new contract after a fair procedure, thus denying liability.

1. The Claimants joined the Respondent following a TUPE transfer in August 2009. The essential issues were agreed in relation to their dismissal in 2010:

"3.1 Whether the Claimants were dismissed for a reason connected with the transfer that is an economic, technical or organisational reason entailing changes in the workforce (ETO Defence)?

3.2 If so, whether dismissal for that reason was reasonable in all the circumstances? In particular, whether the Respondent was reasonable in relation to warning and consultation with the Claimants and whether the decision to dismiss the Claimants was within the range of reasonable responses open to the Respondent."

"ETO" means an economic, technical or organisational reason.

1. The Tribunal decided in favour of the Claimants on the TUPE point –– and also that there was unfairness in the ordinary sense. The remedy was re engagement. The Respondent appeals against both the TUPE liability Judgment and the remedy Judgment; it does not appeal the finding of ordinary dismissal, presumably for the pragmatic reason that the Employment Tribunal would have awarded the Claimants no compensation. But the arguments before us do dilate upon a larger approach, and we will consider an attack upon the ordinary unfair dismissal Judgment because remedy is affected by it. Directions sending these appeals to a full hearing were given in chambers by HHJ Peter Clark; an attempt to cross appeal and to raise other issues by the Claimants was dismissed.

1. The relevant provisions of the legislation are related but arise in separate statutes. The Employment Rights Act 1996 (ERA) section 98, deals with unfair dismissal and provides that a potentially fair reason for dismissal is redundancy or some other substantial reason – the latter is the reason argued her. Fairness is dealt with by section 98(4), which provides as follows:

"... the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)—

(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case."

1. Knitted into those provisions is Regulation 7 of TUPE, which provides as follows:

"(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is –

(a) the transfer itself; or

(b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce."

1. Power is given to an Employment Tribunal to consider three remedies in a sequence of hierarchy: reinstatement, re engagement, and compensation. Section 114 provides for reinstatement and means what it says, and section 115 provides for re engagement. Re engagement is, so far as is reasonably practicable, to have the same effect as reinstatement, but there is specific reference in section 115 to a range of different terms and conditions, as one would expect where reinsertion into the employment precisely as it was is no longer practicable. When the Tribunal is considering which order to make, although this is often forgotten, the sequence is this (section 116):

"(1) In exercising its discretion under section 113 the tribunal shall first consider whether to make an order for reinstatement and in so doing shall take into account—

(a) whether the complainant wishes to be reinstated,

(b) whether it is practicable for the employer to comply with an order for reinstatement, and

(c) where the complainant caused or contributed to some extent to the dismissal, whether it would be just to order his reinstatement.

(2) If the tribunal decides not to make an order for reinstatement it shall then consider whether to make an order for re-engagement and, if so, on what terms.

(3) In so doing the tribunal shall take into account—

(a) any wish expressed by the complainant as to the nature of the order to be made,

(b) whether it is practicable for the employer (or a successor or an associated employer) to comply with an order for re-engagement, and

(c) where the complainant caused or contributed to some extent to the dismissal, whether it would be just to order his re-engagement and (if so) on what terms.

(4) Except in a case where the tribunal takes into account contributory fault under subsection (3)(c) it shall, if it orders re-engagement, do so on terms which are, so far as is reasonably practicable, as favourable as an order for reinstatement."

1. There is a second opportunity for an employer who resists the claim on practicability grounds, under section 117(4):

"Subsection (3)(b) does not apply where the employer satisfies the tribunal that it was not practicable to comply with the order."

Mr O'Dempsey describes this as the employer's second bite at the practicability cherry.

1. Compensation is dealt with by sections 122-3. A Tribunal shall award such an amount as it considers just and equitable, but there are specific provisions dealing with a reduction for contributory conduct or conduct occurring leading to the dismissal. Some of that is replicated in the reinstatement and re engagement orders, so that, broadly speaking, it would not be proper for a Tribunal to award reinstatement or re engagement where there has been substantial contributory fault by the Claimant. Otherwise, the matter is at large within the discretion of the Tribunal.

1. The Employment Tribunal introduced the parties to us in the following way:

"5. Mrs Hazel's continuous employment commenced on 1 February 2001 and Mrs Huggins' continuous employment commenced on 23 June 2005. In August 2009 their contracts of employment transferred to the Respondent when the Respondent successfully bid for Offender Learning contracts in six regions including the South East (referred to as OLASS3 contracts). They both worked throughout their employment as academic staff at HMP Elmley.

6. The Respondent is a further education provider and has a core college based in Manchester and now delivers offender learning at 78 different establishments over 6 different regions. Following the transfer of the Offender Learning contracts in August 2009 the Respondent employed about 3,500 staff overall within offender learning and about 3,000 in the remainder of the organisation (according to the form HR1 on page 13a). 1500 members of staff had transferred to the organisation in August 2009 (11f).

7. There was a review in the first quarter of the OLASS3 contracts as a result of which it was discovered that there were hidden costs which were not appreciated in the due diligence exercise prior to the transfer. The Respondent served notice to the Learning and Skills Council (LSC) on the contracts in the South East and the North East. There followed negotiation with the LSC, which agreed there had been some hidden costs after an independent review, although they disagreed the amount. The LSC offered a one off payment of £1.9 million to assist, which was accepted by the Respondent and the Respondent continued to operate the contracts (page 10).

8. Following this the Respondent's Principal made a proposal to the Board for staff restructuring and efficiency savings (pages 11a - 11g, dated 15- January 2010). This proposal was made in the context of the economic situation facing the further education sector now and in the future and Machinery of Government changes which were affecting funding allocation. The proposal went through a number of areas for review (page 11c) which included a review of conditions of service. There was particular reference to the need for savings in Offender Learning following the negotiations with the LSC. It was identified that £5 million savings were required in that service. One of the proposals was to serve an HR1 notice to make 300 staff redundant. There was a second report from the Principal to the Board of the same date entitled 'proposed contract change for Offender Learning and other related staff' (11e). This was to ensure future operational viability by achieving the required annual saving of £5 million. Paragraph 2.2 on 11 g states that- 'in order to achieve the necessary efficiency savings along with a reduction in staffing numbers' a number of matters were being considered including structural reviews. In paragraph 3 under a sub heading entitled 'Review of conditions of Service' it states

'One of the key areas of work that needs to be undertaken is to review the Conditions of Service and contracts of all staff in the service across all areas. In excess of 37 different contracts and related Terms and Conditions operate in this area which needs to be addressed. The overall aim being to determine on the basis of the funding available, the most appropriate Terms and Conditions for the service to ensure a sustainable future for the service'."

1. A very substantial degree of negotiation ensued with their union UCU, and some compromises were made. The outcome was this:

"23. On 27 May 2010 the Respondent wrote to Mrs Hazel to confirm that she was offered a suitable alternative role as a 0.8 Tutor and was therefore no longer at risk of redundancy. She was told her salary would remain as she currently enjoyed and her terms and conditions would be offered in accordance with the new contracts which were currently under consultation (page 122a). We had no information in relation to the outcome of Mrs Huggins' situation save that her post remained a full time post and she was not reduced to a 0.8 post as her letter had proposed.

24. In the event sufficient staff volunteered for redundancy that it was not necessary to make anyone redundant on a compulsory basis, saved for a small minority who had volunteered but requested, for personal reasons, that they be made redundant on a compulsory basis."

1. Individual letters were therefore sent on 15 June 2010, including some questionnaires. The effect of the changes in terms and conditions on the Claimants was summarised in the following way:

"28. Mrs Huggins received an almost identical letter informing her that her salary on the point 37 scale would be £27,450 as she is full time. Mrs Hazel's current salary was confirmed to be £26,849 and Mrs Huggins current salary was confirmed to be £31,629. Mrs Hazel was therefore being asked to agree to an 18.5% reduction of £4,889 per year. Mrs Huggins was being asked to accept £4,179 per year reduction amounting to 13.2%. Both strongly objected to the proposed pay cut and both sent letters to the Respondent explaining that they could not afford to agree to it (pages 137 – 138) giving their personal circumstances in each case."

1. That is a watershed in the findings of the Tribunal, for what happened thereafter appeared to be to the Tribunal in a different realm. A briefing note was sent on 6 July 2010, of which the gist is this:

"31. In delivering the necessary changes that need to be made, our aim is to ensure we are able to maximise efficiency, minimise redundancy and have a stable yet flexible workforce that is able to respond to different learner needs."

"Where members of staff have-been at risk of redundancy, we have made every effort to redeploy them. This has resulted in a reduction of working hours on occasion, although we have implemented a pay compensation to take account of loss of income. The aim of this contract change process is to remove any inequalities currently in existence for Offender Learning and to mitigate the need for more redundancies. Of the c.3,500 staff working in Offender Learning, it is anticipated that c200 jobs may be lost as a result of the restructure process. This would a significantly higher number if the contract change process had not been proposed...

…We are engaging with staff on an individual basis to implement the new contracts. Within the Core College, of the 791 teaching staff involved, 768 have signed the new contract, including nine of the 14 union representatives.

The process of contract issue within Offender Learning is around a month behind that of the Care College. Contracts have now been issued to 1,182 staff and currently over 75% have agreed."

1. The Claimants never did agree to the wage cuts, and so on 30 July 2010 the Respondent wrote to them to say that because of their continuing objections to the new contract it had no alternative but to terminate the contracts. In due course the Claimants did agree to the wage cuts and continued to work for the Respondent. The Tribunal found the reason for dismissal was their continued objection to the proposed change and the Respondent's desire to impose new terms irrespective of the Claimant's disagreements (see paragraph 58); this was common ground.

1. The Tribunal then went on to decide whether or not this was a reason connected with the transfer pursuant to Regulation 7, and it concluded as follows:

"60. We find that there were a number of reasons the Respondent wanted to impose the new salary scale. The Respondent had inherited funding problems due to the transfer of 1500 staff, including the Claimants, following the signing of the LSC OLASS3 contracts and wanted to rationalise the 37 different contracts and terms and conditions they had inherited from the transfer, including those of the Claimants. The Respondent also considered that the Claimants were on a comparatively generous salary due to having worked for previous employers and then transferred to the Respondent with consequent inequality. These reasons for the proposed salary scale were connected to the transfer and therefore we do find that the reason was a reason connected to the transfer. However we find that there was another factor motivating the Respondent which was the challenging economic climate which was affecting other parts of the Respondent's business as well including the core college."

1. The Tribunal found in favour of the Claimants at least in part – that is, that the dismissals were connected with the transfer - but were for an economic, technical or organisational reason. Then it said the main issue was whether the imposed change in the salary scale entailed changes in the workforce. It adopted the submission of the Respondent that mere harmonisation of terms and conditions would not be a change in the workforce. Where there were both harmonisation and redundancies the Respondent argued that that did qualify under Regulation 7(1) to give it a defence. While the Respondent conceded that a change in numbers or a change in functions was required, a change in the numbers was the critical feature of the case; see paragraph 62 of the Judgment.

1. Following those directions, which thus far had not been criticised, the Employment Tribunal divided, Employment Judge Corrigan and Mr Brown in the majority and Mrs Sharp in the minority. The majority decision, which has been much considered by counsel before us, is worth repeating, for it says this:

"65. Dealing first with the Respondent's Representative's view of the law the majority consider that the case law does not suggest that all that is required to be able to rely on the ETO defence in dismissing the Claimants for failing to agree to new terms is that the Respondent make some other employees redundant alongside the harmonisation process affecting the Claimants and other remaining employees. It is the reason for dismissal of a particular employee that must entail a change in the workforce of either number or functions. From the cases above, where harmonisation is the reason for dismissal of a particular employee, it is not a reason entailing changes to the workforce. In our view the fact that others are dismissed for the reason of redundancy (a change in number of the workforce) does not alter the fact that the particular employee has been dismissed for the reason of harmonisation (not a change in the workforce).

66. The majority consider that the Respondent had two elements to a cost saving strategy.

67. One was to make redundancies, which the Respondent resolved in the main by having a number of volunteers for redundancy. A very small minority of those were made redundant on a compulsory basis albeit for personal reasons and at their request following their having volunteered for redundancy.

68. Although both of these Claimants received at risk letters in some form, neither were made redundant. We note the letter to Mrs Hazel taking her off risk from redundancy and confirming her continuing pay at the same level as her current salary on 27th May (paragraph 23). We therefore find that the redundancy issues had been resolved at around that time through volunteers coming forward.

69. The second aspect of the cost saving strategy was the need to harmonise terms and conditions including imposing a new pay scale. The Respondent initially proposed that this would be done via pay protection for those, including the two Claimants, who would be disadvantaged by the new pay scale. The pay protection was then sacrificed in negotiation with the unions because of the unions' unwillingness to agree to other aspects of the proposed new terms such as annual leave and hours of work, leading to concessions by the Respondent in those areas."

**

1. The Tribunal concluded that the reason for dismissal was their refusal to accept the change. The minority was persuaded by the Respondent's contention that harmonisation plus redundancies would amount to an ETO.

1. Because the Tribunal was divided on the central issue of automatic unfair dismissal, the obvious consequence of a breach of TUPE, the Tribunal went on to consider reasonableness. There is no challenge to its directions; the decision is unanimous. The Claimants were unfairly dismissed, but the reason for that was procedural. That therefore let in under section 98(4) the doctrine in Polkey v A E Dayton Services Ltd [1988] ICR 142 HL. The Tribunal concluded that the decision of the Respondent was harsh but not substantively unreasonable:

"78. We have therefore found the dismissal procedurally unfair but consider that it would be unlikely to have made a difference to the final decision."

1. When the Tribunal next met, several months later, it decided the remedy. It recorded again that the Claimants' dismissals were because they would not agree to the new terms and conditions. The Tribunal set out passages from the relevant provisions of the Act to which we have referred, and it did go through the sequence that the statute provides, first, to look at reinstatement. It decided against that; it would not be practicable. It then went on to decide on re engagement, and it said this:

"11. We find that it is practicable for the Respondent to comply with an order for re-engagement on the new terms and conditions freely signed by the Claimants at pages 229-237 and pages 238-245 of the original bundle, but on their former salaries of £26,849.03 in the case of Ms Hazel and £31,629.00 in the case of Ms Huggins, to be frozen at that amount, without cost of living increases or incremental increases until the new pay scale catches up with their salaries (as was proposed by the Respondent during the harmonisation process at page 69 of the original bundle).

12. We find that this is practicable as Ms Davidson-Green's evidence was that this would just take an instruction to pay role. Whilst we accept the Respondent's assertion that other staff or the union may be discontented by this we find this can be managed by the Respondent in the same way as the Respondent has already managed what was a very difficult process. The Respondent's employees all had the option of whether they signed to agree to the new terms and conditions and new pay scale or not and if they were unhappy they could have pursued the same path as the Claimants. Ms Davidson-Green's own evidence was that if the Respondent 'had to handle it, [they] would handle it'."

1. In relation to one aspect of practicability put before it by the Respondent – that is, discontent by the remainder of the workforce or the trade union – it noted that there was a comparatively short life in this contract, because the Tribunal had been told at the outset (see paragraph 1 of the Reasons) that these terms and conditions would expire on 31 July 2012.

1. On behalf of the Respondent it is contended that the Tribunal introduced a distinction into the provisions of TUPE and did not consider holistically what was going on at the Respondent's establishment, which was both to effect redundancies and to make changes in the terms and conditions. All the employees were treated in the same way, and it was wrong for the Tribunal to cut up in time and personality the Respondent's approach to the problems. The redundancy issue that it had started with had not been resolved with the deal effected on 15 June 2010 but was still in place when the briefing note of 6 July was sent out identifying that there may be further problems. The issue was not simply one of harmonisation to make the terms and conditions look neat but was part of a larger process of effecting change caused by economic necessities.

1. The remedy Judgment was perverse for the Tribunal on the one hand found it impracticable to order reinstatement and yet so ordered in respect of re engagement; that too was impracticable, and the Tribunal should not have exercised its discretion in favour of re engagement in the light of the arguments about, for example, co employee discontent. Ms O'Rourke QC, in her reply to Mr O'Dempsey, first argued that the reason for dismissal was not the refusal to sign the contract; it was that they did not sign the new contract as part of the process. The reason was the failure to sign during the overall process, which involves changes in the workforce and of course therefore changes in the numbers affected by redundancy; she adds those additional words to the finding of the Tribunal. The briefing paper post dates the decision on the Claimants but indicates a dynamic process.

1. On behalf of the Claimants it is argued that the finding as to the reason for dismissal was one of fact that was available to the Employment Tribunal on cogent evidence; the reason was their refusal to sign the new contracts, and the Tribunal was entitled to uphold that evidence. The only term they had stood out on was salary, other terms having been accepted, but the change was substantial. The decision as to the meaning of entailing changes in the workforce was correct in the light of the authorities, to which we will turn. As a matter of timing the Claimants had been assured that their jobs were safe in May 2010, and the Respondent changed the position thereafter but without changes in the workforce. The analysis of the relationship between TUPE and Part X of the ERA necessarily starts with the invocation of an individual claim of unfair dismissal set in the context of economic, technical and organisational reasons entailing changes in the workforce as a whole, and that is the statutory question to be answered. Re engagement was an option open to the Employment Tribunal, and its discretion to order that in the light of the material put before it could not be challenged. The Tribunal had looked at the single issue of practicability put to it and had decided against the Respondent.

1. The legal principles to be applied in this case emerge from the following authorities. Lord Bridge in his speech in West Midlands Co operative Society Limited v Tipton [1986] 1 All ER 513, said:

"....there are three questions which must be answered in determining whether a dismissal was fair or unfair: (1) What was the reason (or principal reason) for the dismissal? ...

As to question (1), Cairns L.J. in Abernethy v. Mott, Hay and Anderson [1974] ICR 323, in a passage approved by Viscount Dilhorne in the Devis case, said, at p. 330:

'A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee. If at the time of his dismissal the employer gives a reason for it, that is no doubt evidence, at any rate as against him, as to the real reason, but it does not necessarily constitute the real reason. He may knowingly give a reason different from the real reason out of kindness...'

The reason shown by the employer in answer to question (1) may, therefore, be aptly termed the real reason. ..."

1. The determination for the purposes of what is now TUPE Regulation 7(1) of what is a reason entailing changes in the workforce was set out in Berriman v Delabole Slate Ltd [1984] ICR 546; broadly speaking, there should be a change in the numbers involved or in the functions. In [Meter U Ltd v Ackroyd and Ors ]()UKEAT/0206/11, Slade J and members considered that the numbers of the workforce and their functions was not a closed box, although there were no other categories set out before that EAT division and it did not need to decide them.

1. Reassuringly, counsel in our case do not dispute the assessment of the law that I gave on behalf of the EAT in [Smith and Ors v Trustees of Brooklands College ]()UKEAT/0128/11, Ms O'Rourke contending that it could be distinguished from the present case and Mr O'Dempsey relying upon it, but neither saying it is wrong. By this route it is convenient for us to set out the law covering the eight authorities that are there mentioned. I said the following:

"20. The legal principles to be applied in this case as I have indicated are not in dispute. In London Metropolitan University giving the Judgment of the EAT I said the following:

"22. We reject the contention that the tribunal has ignored relevant evidence. Its findings are a detailed exegesis of the circumstances from which these dismissals arose. The tribunal knew exactly what it was to determine: whether there was a connection; and if the connection was the principal reason between the dismissal and the transfer. The tribunal held that the reason was harmonisation.

23. We reject the submission that the harmonisation is not related to the transfer. Again that is a matter of fact for a tribunal to establish and it has done here. The chronology is telling. From the outset, notwithstanding the blip of the Vice Chancellors' representation, the intention was to place all of the academic staff on UNL terms. Thus when it was actually implemented two years later it did not in any way lose its connection or its relationship to the merger. In our judgment the tribunal was entitled to make that finding and it did so for reasons which are cogent see paragraph 20.2 of its reasons.

24. This kind of appeal truly does raise a question of fact and in our view there is no question of law associated with it. The tribunal criticises the material which was put before it by the Respondent in that no other decision maker was a witness and there was a distinct absence of relevant minutes. On that basis it had to make findings and draw influences from its primary findings and the inferences which it draws were entirely permissible."

21. In that case the finding by the Tribunal was that the reason for the variation was harmonisation. The start of this jurisdiction is the Judgment of the European Court of Justice, in what is known as Daddy's Dance Hall [1988] IRLR 315, where the court said this:

"15. It follows that the workers concerned do not have the option to waive the rights conferred on them by the Directive and that it is not permissible to diminish these rights, even with their consent. This interpretation is notwithstanding the fact that, as in the instant case, the worker, to offset disadvantages arising for him from a change in his employment relationship, obtains new advantages so that he is not, overall, left in a worse position than he was before.

[…]

17. The Directive does not aim at setting up a uniform level of protection for the whole of the Community based on common criteria. The benefit of the Directive can, therefore, only be invoked to ensure that the worker concerned is protected in his relations with the second lessee in the same way as he was in his relations with the first lessee, pursuant to the legal provisions of the Member State concerned.

18. Consequently, insofar as national law allows, apart from the assumption of a transfer of undertaking, to alter the employment relationship in a way which is unfavourable to the workers, in particular as regards their protection against dismissal, such alteration is not excluded purely because the undertaking has in the meantime been the subject of a transfer and that as a consequence the agreement has been made with the new proprietor of the undertaking. As the second lessee has been in fact substituted for the first lessee pursuant to Article 3(1) of the Directive in respect of rights and obligations arising from the employment relationship, this relationship may be altered with regard to the second lessee within the same limits as for the first lessee, on the understanding that in no case the transfer of the undertaking itself can constitute the reason for this alternation.

19. For these reasons, the answer to the second question must be that a worker cannot waive the rights conferred upon him by the mandatory provisions of Directive 77/187, even if the disadvantages for him of such a course of action are offset by advantages so that, overall, he is not left in a worse position. Nevertheless, the Directive does not preclude an alteration in the working relationship agreed with the new proprietor of the undertaking insofar as such an alteration is permitted by the applicable national law in cases other than transfers of undertakings."

22. Those principles were followed in a UK context in Wilson v St Helen's Borough Council [1996] IRLR 320, where Mummery J (President, as he then was) of the EAT said this:

"(7) It is also an error on the part of the tribunal to conclude that the affirmation of the contract by the subsequent conduct of the parties avoids the mandatory effect of reg. 5(1), interpreted in accordance with the Daddy's Dance Hall [1988] IRLR 315 decision. The variations in the contract terms, said to have been affirmed by the subsequent conduct of the applicants, relate back to the time of the transfer when the variations were made and accepted by reason of the transfer and were therefore prohibited. What happened subsequently was confirmation by conduct of what had already happened on, and by reason, of the transfer. It is true that there may be cases where an effective variation of the terms of employment does take place subsequently either by express agreement or by agreement inferred from conduct. Whether there is such a variation depends on the facts of each case. The reason for the variation depends on the facts of the case. The law, surprising though it may be to English legal tradition, is clear. If the operative reason for the variation is the transfer of the undertaking, then the variation will be ineffective. In this case there was no evidence before the tribunal that the reason for the variation, which took place at the time of the transfer, was anything other than the transfer itself. The 'economic, technical or organisational reason entailing changes in the workforce' did not alter the fact that the variations took place by reason of the transfer at the time of the transfer. There was no subsequent separate agreement varying the terms of employment after the transfer. The subsequent conduct relied on as affirmation was conduct consistent with variations made at the time of and by reason of the transfer. If, as Daddy's Dance Hall [1988] IRLR 315 holds, there can be no agreement to vary terms and conditions by reason of the transfer, there cannot be any subsequent effective affirmation of that variation. It remains prohibited by the regulations."

23. That aspect of the Judgment was not affected by the Judgment of the House of Lords in the same case, [1998] IRLR 706, where Lord Slynn said this:

"The question as to whether and in what situations, where there has been a transfer and employees have accepted the dismissal, claimed compensation based on it and worked for a long period after the transfer, there can be a valid variation by conduct is not an easy one. I do not accept the argument that the variation is only invalid if it is agreed on or as a part of the transfer itself. The variation may still be due to the transfer and for no other reason even if it comes later. However, it seems that there must, or at least may, come a time when the link with the transfer is broken or can be treated as no longer effective. If the appeal turned on this question I would find it necessary to refer a question to the European Court under Article 177 of the Treaty both in the case of Mr Meade and in the case of Mr Baxendale. Since in my view the dismissal was effective, so that no question of variations falls to be considered, it is not necessary for your Lordships to decide the matter or to refer a question to the European Court."

24. A similar situation to ours, it might be said, arose before the European Court in Martin v South Bank University [2004] IRLR 74, where workers had been transferred from the NHS to the university sector and were required on their emergence into education to join the educational pension scheme. The European Court said this:

"44. In circumstances such as those in the main proceedings, the alteration of the employment relationship is nevertheless connected to the transfer. It is clear from the file that SBU wished merely to bring the terms upon which it offered early retirement to employees of Redwood College into line with those offered until that time to its other employees and, in such circumstances, an alteration of the employment relationship must be regarded as connected to the transfer. That the situation in the main proceedings is of that type is confirmed by the fact that, immediately after the transfer, SBU offered the employees from Redwood College a contract of employment on its terms, which the applicants nevertheless refused. It should, however, be stated that the mere fact that the applicants had joined the higher education retirement scheme has no bearing on this analysis: that factor concerns their retirement rights per se, which are the subject of the derogations under Article 3(3) of the Directive, and not the terms of early retirement.

45. Since the transfer of undertaking is indeed the reason for the unfavourable alteration of the terms of early retirement offered to the employees of that entity, any consent given by some of those employees to such an alteration is invalid in principle."

25. It will be noted in the above that the change to the pension scheme from one to the other was the sole reason. All of these cases stem from what probably is the first emanation of these principles, in Delabole Slate Ltd v Berriman [1985] IRLR 305 CA, where Browne Wilkinson LJ, dealing with a dismissal case under what was then TUPE regulation 8, but is for all intents and purposes applicable in our case, said this:

"9. Applying those provisions to the present case, the first question was whether Mr Berriman was constructively dismissed by the company's attempt to impose on him a lower guaranteed wage. The Industrial Tribunal held that he was constructively dismissed and the company did not challenge this finding in the EAT. The next question was whether the company's reason for dismissing Mr Berriman was the transfer of the undertaking to the company or a reason connected with it so as to bring the case within regulation 8(1). The Industrial Tribunal held that it was and that accordingly the dismissal was rendered unfair by regulation 8(1). The next question was whether the case was taken out of the automatic unfairness provided for by regulation 8(1) in that the company's reason or principal reason for dismissing Mr Berriman was an 'economic, technical or organisational reason entailing changes in the workforce'. The Industrial Tribunal held that the company's reason for dismissal was such a reason, but the EAT reversed them on this point holding that, although the reason for dismissal was an economic, technical or organisational reason, such reason did not 'entail changes in the workforce'. Finally, the Industrial Tribunal decided that the dismissal of Mr Berriman was fair within the meaning s57(3). That finding was challenged before the EAT who did not decide the point: there is no respondent's notice raising the point before us."

26. The approach to these questions is essentially one of fact; see Thompson v SCS Consulting Ltd & Ors [2001] IRLR 808 EAT at paragraphs 34, 36 and 37(2) per Mr Recorder Burke QC (as he then was). The approach to what is a reason and the ability to overturn it is regulated by the Judgment of the Court of Appeal in Hounslow London Borough Council v Klusova [2008] ICR 396, where Mummery LJ said the following:

"65. On the issue of 'some other substantial reason' for dismissal, I agree with the appeal tribunal. The employment tribunal erred in law in finding that the council did not genuinely believe that the continued employment of Ms Klusova would contravene statutory restrictions. I am mindful, of course, of the high threshold already mentioned to justify interference on the ground of perversity, even with an inference drawn by an employment tribunal from the primary findings of fact.

66. The employment tribunal singled out two aspects of the evidence when dealing with the issue of genuine belief. The first was the council's failure to notify or consult with Ms Klusova about its concerns on the continued lawfulness of her employment, so that her solicitor could seek the necessary clarification from the Home Office. The second was that the council had considered the guidance in the Code of Practice issued by the Secretary of State.

67. The genuineness or otherwise of the council's relevant belief is a matter of inference from admitted or established primary facts. In my judgment, no inference of an absence of genuine belief could reasonably have been drawn by the tribunal from the two particular facts expressly singled out. At most these facts are evidence of a lack of due regard by the council for the procedure for a dismissal decision which it did not believe applied. They are not, in my judgment, evidence of a lack of genuine belief in the unlawfulness of Ms Klusova's continued employment."

27. With those principles in mind I have come to the opinion that the Judge's decision cannot be interfered with. He saw a fine line between the submissions and a difficult case. Nevertheless he reached a clear conclusion. The first issue is, what was he deciding? In my judgment the decision was his as to what the facts were. The assessment of the facts as against a legal standard falls within Serco Limited (Respondents) v Lawson (Appellant) [2006] UKHL 3 in Lord Hoffman's speech where he asked the question, fact or law? Determining the facts of what occurred is a matter for the Judge; a legal assessment then has to be made under the relevant statute, here regulation 4(4).

28. It is common ground that this is not a "but for" jurisdiction; the answer to that is obvious: "but for" the four employees coming within the bailiwick of Ms Hopkins at Brooklands, she would not have sought to reduce their pay. But that is not the test. The question is, what was the reason? What caused her to do it? It was her view that they were overpaid by reason of a mistake. The mistake was in awarding these Claimants the pay they were on."

1. As to remedies, there is a paucity of cases, because, as Ms O'Rourke says, without objection from Mr O'Dempsey, re engagement and reinstatement orders every year fall into the single figures. It is right that there are two opportunities for an employer to challenge an order or a would be order of re engagement; see Port of London Authority v Payne [1994] ICR 555.

1. We prefer the arguments of Mr O'Dempsey and have decided to dismiss both appeals. We start first with the reason for dismissal. This is, as Lord Bridge pointed out, a question of fact for the Tribunal to determine, and it determined that it was the Claimants' refusal to accept the new terms and conditions. This finding is plainly exigible from the Respondent's material; see, for example, the individual letters written to the Claimants on 15 June 2010 and the difficulty faced by Ms Cooper. This was plainly a decision that it could reach on the evidence. Ms O'Rourke attempted at several stages in her argument to introduce perversity arguments; this is all it could be. It cannot survive; it is a finding of fact that was plainly open to the Tribunal.

1. The next question is whether this was saved by TUPE. The very narrow issue that had emerged at the end of the liability hearing was answered correctly, in our judgment. The Tribunal was asked to consider unfair dismissal in the context of a transfer, and it is axiomatic that where there has been a transfer of an undertaking with substantial numbers of contracts of employment being transferred there is bound to be what we might describe as a collective problem. It is resolved by TUPE, so as to provide protection for the employees, as the eponymous Regulations make clear, deriving as they do from the safeguarding of employees in the title to the directive from which it emerges. So, when a Tribunal in a transfer situation is considering unfair dismissal, it will, when arguments are advanced by a Respondent, consider the transfer itself. This will generally involve a collective problem. Next it will consider whether the reason for the Claimant's dismissal, and hers alone, for it is a case arising under Part X of the 1996 Act, was connected with the transfer. In this case, the Claimants got over that hurdle; it was connected with the transfer, and the issue then was whether it was an economic, technical or organisational reason. That second phrase presented a problem to the Respondent that it was able to resolve in that the Tribunal upheld that finding.

1. Focussing therefore on "entailing changes in the workforce", given the concession that there were no changes in the functions, the issue was whether there was a change in the numbers. No alternative case was put to the Employment Tribunal, thus we are in the same position as Slade J and her members were in Ackroyd. There is not a closed category of changes in the workforce involving only numbers or functions, but we have yet to see any other practical example. The Tribunal's finding here was separated in time; it is clear that once the Claimants were told that they were not at risk of redundancy and the redundancy process had ended what was next on the agenda was harmonisation of conditions, and that is what the Tribunal found.

1. In our judgment, the findings in relation to timing are ones of fact for the Tribunal. It was required to look into the mind of the actors in this drama and decide what it was caused the dismissal of the Claimants. At the stage when they were given their notice and were dismissed it was because they refused to accede to the new terms; new terms is not a change in the workforce, and so the Employment Tribunal majority was correct in its construction of TUPE. Its application following the findings of fact that it made was open to it. That means the dismissals were automatically unfair; they do not therefore have to be dealt with under section 98(4).

1. Nevertheless, we are grateful to the Tribunal for going on to decide ordinary unfair dismissal. It did so on the basis of the majority decision, which was perfectly well set out and easily understandable. The majority decision itself does pay careful attention to the Respondent's arguments about the background of many redundancies. As it happens, there were no compulsory redundancies, or at least no compulsory redundancies except those perhaps for personal reasons that individuals invited upon themselves. The Tribunal was entitled to find as a matter of time that redundancy issues – that is, quite properly, a change in the workforce – had been resolved because volunteers had come forward.

1. The lay members of this Tribunal see much force in that watershed being decided by the Tribunal. There are statutory consequences, because form HR1 notifying the government authority and the trade union has to be completed. Notwithstanding that there was in the briefing note a suggestion of further redundancies, no HR1 forms were completed and there was no evidence, as far as we can tell, of talks about this. The Tribunal was entitled to find that the redundancy issue had fortunately been resolved by the measures that had been taken in co operation with the workers and the union by the time the letters were written to the Claimants, and so they were told they were not at risk and were entitled to rely upon that. By that chronology, the Employment Tribunal was entitled to divide the issue as between redundancies – changes in the workforce – and harmonisation of terms and conditions - not so. It made no error.

1. When it turned to ordinary unfair dismissal, the finding was that the Claimants would have been dismissed if the procedural defects on consultation and so on that it identified had not occurred. There is no live appeal before us against that. The practical effect, applying Polkey, which is what both counsel say the Tribunal was doing here (see paragraph 78, although not in terms) is that they would receive no compensation pursuant to what is just and equitable. The Tribunal decided that they should be re engaged. If this is a case of automatic unfair dismissal, to give effect to the European derived right to an effective remedy, their pay should be made up. One way in which it is done in the UK is by an order for re engagement.

1. Unusually, and perhaps uniquely, where there has been no order for interim relief preserving the relationship pending a hearing, the Claimants are seeking re engagement to a contract where they are already working on the new terms. One of the consequences of this is of course that the scope for an argument on practicability is considerably lessened. Arguments about loss of trust and confidence, passage of time, water under the bridge are not available; the Claimants continued working and have the trust and confidence of the Respondent.

1. In applying the sequence of orders under section 116 reinstatement includes the Claimant's wishes and what is practicable, and whether there has been some contribution. If there is no order for reinstatement, the Tribunal then considers re engagement; in turn it has to consider whether it is practicable to comply with an order for re engagement, and there is the same issue about contribution. We do not accept the criticism of Ms O'Rourke that there is a perverse inconsistency in a finding for the Respondent on reinstatement and against it on re engagement. This is because the match of terms and conditions, functions, position and so on is much closer – indeed, it must be reinstatement into the same position for the purposes of an order under section 114 – whereas section 115 contains a range of different matters that must be considered by the Employment Tribunal. One can see that there can be practical difficulties for reinstatement but not for re engagement, so there is no perversity in the Tribunal's Judgment. The statute itself allows for that progression of remedies.

1. Ms O'Rourke contends that the Tribunal was wrong in law to order re engagement. The basis for this argument has to be the worker discontent noted by the Tribunal. The Tribunal does not see it as a reason for not ordering re engagement on the grounds of lack of practicability and indeed notes some mitigation of the position because it will be short lived. That also involves the finding by the Tribunal on the evidence of the Respondent's witness that if they had to, they would handle it. Let us put this into perspective: two out of the thousands of employees will by this order be employed on the same salary as they were before the transfer. The Tribunal was entitled to accept the Respondent's evidence it could handle it. That, it seems to us as we were invited to do, is a very practical solution to this problem and we see no error in it. No other specific practical problems identified at the Employment Tribunal have been raised with us, and so the finding by the Tribunal that it was practicable is upheld.

1. Ms O'Rourke in oral argument before us sought to develop a new submission based upon what can only be derived from section 123; that is, where a finding under Polkey is made it is not just and equitable to order re engagement. We consider this to be misconceived. The compensatory award is affected by the jurisprudence following Polkey. It says nothing about when a re engagement award is made. The argument has to be that it is not just and equitable to award re engagement in circumstances where compensation would not be awarded. However, sections 115-6 on re engagement are quite specific as to the matters which the Tribunal must consider in its discretion. These include the complainant's wishes, and whether it is practicable. The only crossover from section 123 is on contribution, which is not relevant here. Parliament decided that it would not be just and equitable to award re engagement where there has been, let us say, substantial contribution as determined by section 123. There has been no adjustment to that section in the light of Polkey, although there have been amendments to Part X, particularly dealing with what is known as the reverse Polkey under section 98A as it stood for five years. We therefore hold that a Tribunal is required to exercise its discretion as a whole but is not required by Polkey somehow to reduce or refuse or disapply a re engagement order. It is not clear to us how application of Polkey principles make re-engagement impracticable.

1. If we are wrong about that, we nevertheless hold that the Tribunal was entitled on the material before it on practicability to decide that there should be re engagement. This would, in our judgment, be the only way of recognising the breach of TUPE that has occurred here, and in any event on ordinary unfair dismissal terms outside of TUPE it is an order that is available to it.

1. In those circumstances, we hold the Tribunal committed no error in its award of re engagement, and we will dismiss both appeals. In doing so, we would like to thank both counsel for their very careful submissions. Appeal dismissed, application for permission to appeal refused [for reasons not transcribed].