It is a fact of life that whatever goes up will normally come back down (but not necessarily vice versa). Nowhere is this more keenly felt than in the world of British football, where those clubs that just about stay in the Premier League reap riches that would be the envy of Plutus, Ancient Greek god of wealth, and those that drop out face a desperate chase for money simply to stay afloat.
So enter stage left Crystal Palace FC, whose case was recently before the Court of Appeal. At the end of the 2009/2010 season Crystal Palace was in serious financial difficulty, having left the Premier League some years earlier. The Club was placed into administration in January 2010 whilst efforts were made to find a buyer.
Due to a number of complications, this search did not progress smoothly or quickly, but the Club remained in contact with the single serious prospective purchaser. By May 2010 the Club was in increasing financial difficulties, and the Administrator made the decision to summarily dismiss all those employees he believed could be made redundant whilst still permitting the Club’s core functions to continue in the hope that it would still eventually be sold, the “mothballing” referred to in the title. Those dismissals duly took place, and the Club was sold shortly afterwards.
The Court indicated that it was clear that the dismissals were connected with the TUPE transfer, as the dismissals had been a direct consequence of the decision to mothball the Club until it could be sold. The real question was whether these dismissals were for economic, technical or organisational (ETO) reasons entailing changes in the workplace or not. If they were ETO dismissals, then liability would rest with the Club, which was in administration. If they were not, then liability for the dismissals would pass onto the purchaser.
As a rule, if employees are dismissed to make a business more attractive to a prospective purchaser, that would not be an ETO dismissal. If, however, the dismissals had come about to enable the business to continue in existence at all pending a sale, it would be an ETO reason.
In this case, the Court of Appeal agreed that the dismissals had come about to enable the Club to continue long enough to be sold, and accordingly that this was an ETO reason. The Court went on to state that although the ultimate objective may well have been to sell the Club, that was not the reason for the dismissals themselves.
This case has therefore brought some clarity and reassurance for employment and insolvency practitioners and it does not appear that this approach will be changed as a direct result of the new TUPE Regulations which will take effect early in 2014. As always, notes and minutes of the employer’s thinking in effecting the dismissals may be telling as to motives – if you wish liability for them to stay behind, make sure that the documentation refers clearly and repeatedly to the survival of the business being the driver, not the actual or anticipated preferences or demands of a/the buyer.
Finally, readers will obviously be delighted that Crystal Palace is now back in the Premier League – but with scarcely more points than Appeal Court Judges, for how long is anyone’s guess…