• Unexpected rises in payroll costs due to a larger eligible workforce.

• Higher administrative workload tracking absences from day one.

• Employee dissatisfaction if policies aren’t applied consistently.

This case highlights the risks of leaving employees on less favourable terms following a TUPE transfer. A group of 80 cleaners of BAME background transferred to the hospital when cleaning services were brought in-house. After the transfer, they remained on their original contractual terms, which were significantly inferior to those of directly employed staff, including differences in pay, sick pay, annual leave, and pension benefits.

These disparities continued for over a year. The employees brought claims for indirect race discrimination, arguing that the differences in terms disproportionately affected a racially diverse group. The Employment Tribunal agreed, and this was upheld by the Employment Appeal Tribunal.

The employer argued that harmonising terms was not feasible due to cost and economic uncertainty. However, the EAT confirmed that maintaining inferior terms amounted to a discriminatory provision, criterion, or practice (PCP) that could not be justified. Importantly, the tribunal made clear that intention is irrelevant—liability arises from the impact of the disparity, not the employer’s motive.

The claimants were successful, reinforcing that TUPE does not provide a defence to ongoing inequality in terms and conditions.

Practical takeaways for employers:

This case highlights the importance of ensuring that the reason for dismissal aligns with the evidence relied upon. Ms Chand, an employee with 16 years’ service and a clean disciplinary record, was investigated in relation to four incidents involving customer accounts. These were treated collectively as allegations of fraudulent conduct.

During the disciplinary process, she accepted that mistakes had been made but denied any dishonesty. Despite this, she was dismissed for gross misconduct on the basis of fraud. The Employment Tribunal found there were no reasonable grounds to conclude fraud had occurred, but still held the dismissal to be fair based on a separate policy breach.

The Employment Appeal Tribunal disagreed and found the dismissal to be unfair. It confirmed that the fairness of a dismissal must be assessed based on the reason the employer actually relied upon at the time. Once fraud was no longer a reasonable conclusion, the employer could not rely on it as the basis for dismissal, nor could the tribunal substitute an alternative justification.

The case reinforces that even where another potentially fair reason for dismissal exists, this will not cure a flawed decision if it was not the reason relied upon. The claim succeeded.

Practical takeaways for employers: