Introduction

Nationwide Building Society v. Benn & Ors ([2010] IRLR 922) is a pivotal case adjudicated by the United Kingdom Employment Appeal Tribunal (EAT) on July 27, 2010. The dispute centers around claims of unfair dismissal by former employees following the transfer of undertakings governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

The Claimants, Mr. Bonnett and Mr. Smith-Galer, contended that their resignations constituted constructive dismissals due to fundamental breaches of their employment contracts by Nationwide Building Society (NBS) following the transfer of their roles from Portman Building Society (PBS). Key issues revolved around changes in job roles, bonus schemes, and alleged breaches of TUPE regulation 13(6) concerning collective consultation.

Summary of the Judgment

The Employment Tribunal (ET) initially found in favor of the Claimants, determining that their dismissals were either constructive or by operation of TUPE regulation 4(9). The ET held that these dismissals were not automatically unfair as they were connected to economic, technical, or organizational (ETO) reasons entailing changes in the workforce as defined by TUPE regulation 7(2).

However, the ET also concluded that NBS breached TUPE regulation 13(6) by failing to engage in meaningful consultation with employee representatives regarding changes in job roles and bonus schemes. This breach led the ET to find the dismissals unfair under the Employment Rights Act 1996 (ERA) section 98(4), primarily due to procedural deficiencies.

Upon appeal, the EAT scrutinized whether the ET properly relied on regulation 13(6) without the Claimants having raised such issues during the initial proceedings. The EAT concluded that the ET had indeed erred by relying on a regulatory breach that was neither pleaded nor substantiated with opportunities for the parties to present evidence or arguments.

Consequently, the EAT allowed the appeal, set aside the ET's findings regarding unfair dismissal, and remitted the case back to the ET for reassessment, excluding references to regulation 13(6).

Analysis

Precedents Cited

The judgment extensively referenced prior cases to contextualize the decision:

• Berriman v Delabole Slate Ltd [1985] ICR 546: Clarified that for an ETO reason to entail changes in the workforce, there must be a change in job functions or the number of employees, excluding mere standardization of pay rates.
• Institution of Professional Civil Servants v. Secretary of State for Defence [1987] IRLR 373: Distinguished between measures intending to reduce manpower and mere projections, arguing that the former constitutes a "measure" under TUPE.
• Chapman v Simon [1994] IRLR 124: Highlighted the necessity for employers to allow parties to address any issues that may adversely affect their case, emphasizing procedural fairness.
• Tarbuck v Sainsbury's Supermarkets Ltd [2006] IRLR 664: Reiterated the principle that parties must be given the opportunity to make submissions on any issue that may influence the tribunal's decision.
• Mercy v Northgate HR Ltd [2008] ICR 411: Addressed the standing of employees to bring claims under collective consultation provisions.
• Howard v Millrise Ltd [2005] IRLR 84: Demonstrated that affected employees have the right to bring claims under TUPE when specific regulatory conditions are met.
• Tapere v South London and Maudsley NHS Trust [2009] IRLR 972: Affirmed that changes in "working conditions" can encompass more than just contractual terms, including broader aspects of employment.

Legal Reasoning

The EAT's primary legal reasoning centered on procedural fairness and the proper application of TUPE regulations:

• Regulation 13(6) TUPE: Mandates that employers consult with appropriate employee representatives before making measures related to the transfer that affect employees. The ET's reliance on an alleged breach was problematic as the Claimants did not raise this issue, nor was it part of the agreed-upon matters for determination.
• Regulation 7(2) TUPE: Defines what constitutes an ETO reason that can justify dismissals, specifically changes involving job functions or workforce numbers.
• Employment Rights Act 1996 (ERA) Section 98: Governs the fairness of dismissals, requiring that any potentially fair reason for dismissal still undergo a fairness assessment.

The EAT found that:

• The ET improperly incorporated an unchallenged breach of regulation 13(6) into its fairness assessment without allowing the parties to address it.
• The fundamental breaches of contract related to changes in job roles and bonus schemes were valid grounds for dismissal under regulation 4(9) TUPE, independent of any procedural breaches.
• The dismissal was fairly assessed based on actual changes in employment conditions, not procedural shortcomings.

Impact

This judgment underscores the critical importance of procedural fairness in employment tribunal proceedings, especially concerning TUPE-related claims. Key impacts include:

• Tribunal Conduct: Employment Tribunals must adhere strictly to the issues raised by the parties and not introduce new grounds without allowing parties the opportunity to respond.
• Regulation 13(6) Application: Employers and tribunals must ensure that any claims or regulatory issues are properly pleaded and substantiated, preserving the rights of all parties to a fair hearing.
• Claims Remission: Decisions influenced by unchallenged regulatory breaches may be overturned, necessitating re-examination of claims without such influences.
• Employee Representation: The case reinforces the necessity for meaningful consultation with employee representatives during transfers to avoid procedural injustices.

Future cases will reference this judgment to ensure that tribunals maintain procedural integrity and that employers comply comprehensively with TUPE regulations during business transfers.

Complex Concepts Simplified

Conclusion

The Nationwide Building Society v. Benn & Ors case serves as a crucial reminder of the paramount importance of procedural fairness in employment law, particularly within the framework of TUPE regulations. The EAT's decision to allow the appeal highlighted the judiciary's commitment to ensuring that tribunals do not overstep by introducing unchallenged regulatory breaches into their determinations.

For employers, the case emphasizes the necessity of thorough and transparent consultation processes with employee representatives during business transfers to avoid potential claims of unfair dismissal. For employees and their representatives, it reinforces the importance of actively participating in the consultation process and ensuring that all pertinent issues are duly raised and addressed.

Overall, this judgment contributes to the broader legal landscape by strengthening the mechanisms that safeguard employees' rights during transfers of undertakings, ensuring that both substantive and procedural aspects are meticulously observed.