Re-engagement Order Defeats Employer’s Attempt to Harmonise Terms and Conditions

The EAT has upheld a tribunal’s decision that two employees who refused to agree changes to their terms and conditions had been automatically unfairly dismissed and should be re-engaged on their old terms.

In The Manchester College v Hazel, the claimants TUPE transferred to the College in August 2009.  The College needed to make cost and efficiency savings and in January 2010 drew up plans to make 300 redundancies and to change the terms and conditions of the remaining staff, which included a reduction in pay.

Union negotiations followed.  Although both claimants were initially at risk of redundancy, neither was made redundant.  The tribunal found that redundancy issues had been resolved by 27 May 2010.  The College then sought to agree changes to terms and condition of employment in order to harmonise terms and avoid the need for any further redundancies.  The claimants refused to agree the changes and were dismissed.  However, they were offered and accepted new contracts containing the revised terms.

The claimants then brought unfair dismissal claims which were upheld by the employment tribunal.    The tribunal found that they had been dismissed for refusing to agree the new terms, that this was a reason connected with the TUPE transfer and was automatically unfair.  There was no ETO reason for the dismissals as harmonisation of terms did not entail changes in the numbers or functions of employees.  The fact that other employees had been dismissed for redundancy did not help, as it was necessary to show that the claimants’ dismissals entailed a change in workforce numbers or functions.   

The tribunal then went on to consider remedy.  It decided to order re-engagement of the claimants on their new terms and conditions, but with their salaries restored to their previous level and frozen until those who had agreed the changes caught up.   Re-engagement was practicable as all it involved was an instruction to payroll and although there would inevitably be some discontent amongst other staff this could be managed by the College. 

The College appealed unsuccessfully to the EAT.   It rejected the College’s argument that the tribunal should have looked at the bigger picture and considered the claimants’ refusal to agree new terms and conditions within the context of needing to effect change due to economic necessities.  The tribunal had found that at the time the claimants were offered new terms, the redundancy issue had been resolved and the claimants had been told that they were no longer at risk.  The redundancy and harmonisation issues were therefore separated in time and the tribunal had been entitled to conclude that the dismissals were automatically unfair. 

On the question of re-engagement, the EAT noted that since the claimants were already working for the College on new terms, there was less scope for arguing that re-engagement was not practicable.  It rejected the College’s argument that re-engagement should not have been ordered because of worker discontent – there were thousands of employees, only two of whom would be employed on more beneficial terms and only then for a limited time. 

There are two points of interest for employers arising from this case.  The first is the question of whether there was an ETO reason for the dismissals which entailed changes in the workforce.  The tribunal was clear that it is necessary to consider whether the reason for dismissal of a particular employee entailed a change in workforce numbers and where harmonisation is the reason for dismissal it does not.  The fact that other employees were being made redundant (as part of a cost cutting drive) so that overall there were changes in workforce numbers did not provide an ETO reason for the claimants’ dismissals. The tribunal placed great emphasis on the fact that the redundancy exercise had concluded by the time the new terms were offered, implying that perhaps the result might have been different had the redundancies been taking place at exactly the same time. However, an employer arguing this will still be faced with the problem that harmonisation of terms does not entail, i.e. inevitably lead to, changes in workforce numbers. 

The second point is one of more general interest to employers seeking to change terms and conditions of employment.   Where employees refuse to agree changes, employers will often terminate employment and offer a new employment contract containing the new terms.  Whilst employers have always been aware that they may face unfair dismissal claims, even from employees who accept the offer of new employment on revised terms,  it has perhaps not occurred to them that re-engagement might be ordered as a remedy.  Although a re-engagement order is rare, where employees are already working for the employer they will be more prepared to ask for it and the employer will find it difficult to argue that re-engagement is not practicable.  The tribunal was unsympathetic to arguments that re-engagement would lead to discontent amongst the rest of the workforce, pointing out that they too could have refused to agree the changes and acted as the claimants had done!