Staffing issues of expansion and crisis management – Anthony
Edwards
What’s involved

Pocket Farm – conversion from dairy to refrigeration plant for the Coriander business
(provided Pieter decides not to keep the cows!)

The Employment Tribunal looms – how costly is Pieter’s ‘dismiss first, investigate
later’ action going to be?

Distribute Fresh Limited – acquiring a business as a going concern.

Michael Westhuizen – is there anything to be done?
Pocket Farm

TUPE or not TUPE?
o
o
o
o

The Transfer of Undertakings (Protection of Employment) Regulations 2006 the perennial favourite with the acquisition of any business. The very first
question is to determine (and agree with the other party to the transaction)
whether it applies.
If it does, the existing terms and conditions of employment of the two
members of staff will automatically transfer to the Westhuizens.
The key here is that the transfer entails a change of use, from dairy to
refrigeration plant for the Coriander business. In TUPE language, it will not,
therefore, retain its ‘economic identity’ following the acquisition, a
prerequisite under TUPE. This means that TUPE does not apply and we can
disregard for the purpose of this transaction.
If, for any reason, Pieter’s love of cows was so strong that he subsequently
decided to keep the dairy as is, then that would amount to a classic TUPE
transaction and the two staff would automatically transfer across to the
Westhuizens.
Redundancy and offers of new employment
o
o
o
o
As TUPE does not apply, it means that the staff remain the sole liability of
the current employer.
As the current employer will not have a dairy business anymore, it means
that a redundancy situation (on the cessation of that business) arises.
The current owner might try and insist, as part of the deal, on the
Westhuizens taking on the two members of staff. If possible, I would advise
against that, even if that is Pieter’s intention anyway. It would be preferable
that the current owner undertakes the usual redundancy consultation with
his staff (they will need to be given notice and any statutory redundancy
payment) and, separately, the Westhuizens interview them both and decide
whether they consider them suitable candidates for what is going to be a
complete change of job role.
If they do appear suitable, then offer them the job and provide them with
suitable employment contracts on such terms as the Westhuizens consider
appropriate.
o
o
One key benefit of TUPE not applying is that, if offered new employment, the
staff will not be entitled to continuity of employment from their time as
employees on the dairy. That will afford the Westhuizens a large degree of
protection, as it means the two employees will not acquire unfair dismissal
rights for two years.
If, during those first two years (but more likely in the first few months), they
prove not to be suitable employees for the refrigeration plant, then the
process and cost of dismissing them is quick and cheap.
The Employment Tribunal Claims
Whilst some may be a little sympathetic of Pieter’s bold disregard for employee rights,
secretly desiring to return to the day when ‘the boss was the boss’ and employment rights
comprised of being ‘lucky to have a job’, the reality remains that, in the 21st Century,
Pieter’s actions have consequences!

Take a step back – what should Pieter have done?
o
o
o
o
o
o
An initial chat with Wilsons would have helped and indeed would have
avoided the Tribunal claims.
Why, just because they operate the accounts, does that make the Clerks
guilty without further consideration?
Would they really switch account numbers/sort codes in such a blatant
fashion (and still hang around the office waiting for the balloon to go up)?
Investigate (before any action is taken)! Speak to the clerks, notify them of
the altered bank transfers and missing money and hear what they have to say
initially.
It is likely that, even from those initial investigations, some doubt might arise
as to their guilt. They may, equally, be able to advise Pieter of Michael’s
involvement with those transfers.
At most, if Pieter could not get to the bottom of matters quickly and there
remained genuine doubt as to the guilt or otherwise of the clerks, they might
have been suspended pending further more detailed investigations. That
would, on the fact of it, have protected everyone’s position at that time.

Any defence to the claims?
o The claims are likely to amount to unfair dismissal (the primary claim for
those employees with at least two years’ service, which I have been advised
by Pieter they have) and wrongful dismissal (i.e. termination without notice)
o In a word, No! It is, to make use of an appropriate Americanism, a slam
dunk. My advice is that they should not even bother denying liability and
concentrate on how much it will cost.

Offer of reinstatement – will it help?
o Unlikely, given the manner in which Pieter sacked them, but worth a go.
o Main difficulty is that Pieter’s actions will have destroyed the underlying
basis of trust and confidence, which is an implied term in every employment
relationship.
o The Tribunal would undoubtedly accept an argument from the Clerks that
they simply had lost all trust and confidence in Pieter and could not accept
any offer or reinstatement.

What compensation is the family potentially looking at?
o I’m advised that they both earned about £25,000.
o They have a duty to mitigate their loss of earnings by finding alternative
employment, but how hard will that be (in an improving economy)?
o
o
o
A payment equal to their contractual notice period (or statutory notice
period if longer) will have to be made, in order to remedy the wrongful
dismissal claim.
Compensation for unfair dismissal is harder to assess accurately, as it
depends on their likely future loss of earnings (i.e. how long will it take them
to find comparable employment?)
The law is now more favourable to employers. Since July 2013, the potential
liability for unfair dismissal is the lower of either the statutory maximum
(currently £74,200) or one year’s gross basic salary. So, here, we are looking
at £25,000.

Settlement
o The clerks will no doubt argue that they will struggle to find comparable
employment. They are likely to want up to a year’s salary I would suggest.
Overall, if I can get the Westhuizens out of these claims on the basis of a
payment in lieu of notice plus up to a further three months gross salary, we
will have done pretty well.

Speak to the employment lawyer first!
o It’s an obvious point, but can truly save a lot of time and money
Distribute Fresh Limited

Acquisition as a going concern – so TUPE applies
o This is, therefore, the precise opposite of Pocket Farm.
o It is the transfer of an ‘economic entity as a going concern’.
o The economic entity retains the same identity before and after the
acquisition, thereby triggering TUPE.

No employment contracts – is that a concern?
o The terms and conditions of employment of all the staff will automatically
transfer to the Westhuizens. This means that all rights and liabilities under
their terms of employment come across.
o Appropriate due diligence is required prior to completion and, if necessary,
certain warranties and indemnities from the current owners will be requested
(which, by the sound of the Coopers, could be interesting).
o The fact that there are no written contracts does not alter the TUPE position,
but it will be important to obtain full written details of the current terms and
conditions for each member of staff, including details of any pension
arrangements and any grievances or disciplinary action in the last couple of
years.
o Continuity of employment is preserved, so time accumulated to date with the
current employer will be added to employment with the Westhuizens.

Can the Westhuizens impose new terms and conditions of employment?
o The short answer is no (or, at least, it’s very difficult), unless we need to
make more wholesale changes to staffing structures. The whole purpose of
TUPE is to protect the employment status, as well as existing individual
terms and conditions, of transferring staff.

What if not all the staff are required – can we terminate and, if so, when?
o This is where TUPE does provide some room for manoeuvre.
o When looking at the staffing levels pre-completion, the Westhuizens need to
give careful consideration to whether all the staff will actually be needed
post transfer.
o DFL do have some other clients (minor compared to the Westhuizens) who
will have to instruct alternative distributors.
o
o
o
o
o
The Westhuizens may come to the conclusion that not all the drivers and/or
admin staff will be required post transfer (and there is a hint that JP, at
least, may obtain his HGV licence).
If there is to be any reduction in staff, the Cooper family need to be made
aware of this, as part of the legal obligation under TUPE to inform and
consult with all affected staff.
TUPE does entitle the Westhuizens (as the transferee) to terminate the
employment of transferring employees on ‘economic, technical or
organisational’ grounds.
Any such dismissal should only take place after the completion of the
transaction, once the staff have transferred and subject to a fair termination
process.
The Westhuizens will then be liable for any notice and redundancy payments.
Michael Westhuizen – Is there anything to be done?

A family affair
o This is a family affair and I would suggest that the Westhuizens are likely to
prefer to deal with it as such, strictly in-house.

Gross misconduct/theft
o Michael is (or was) an employee, so the full range of legal rights could be
brought to bare if necessary. His actions would undoubtedly constitute gross
misconduct (summary dismissal) and theft (criminal proceedings).
o I suspect the family would wish to avoid that.

Has he resigned?
o Not unequivocally, but disappearing to South Africa, on what appears to be a
permanent basis, may constitute his resignation.

He is a Partner
o He remains a partner in the business and that position would be dealt with
under partnership law, which goes beyond my brief today.
Summing up

Proceed with consideration to:
o The desired outcome
o Commerciality
o Legality
Anthony Edwards
Partner
T: 01722 427 714
E: [email protected]
The contents of these notes are intended as a guide for readers. They can be no substitute for specific advice.
Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent
changes in the law.