It is quite common for a prospective buyer of a business, who does not need all the transferring employees, to ask the seller to carry out the redundancies before the transfer takes place. It often seems to make sense – the seller knows the employees well and can explain better why they are not needed. And it seems less messy than waiting for the employees to become employed by a new company, which will only keep them for a brief period before getting rid of them.
What is more, redundancy is pretty well the only defence to what would otherwise be an automatically unfair TUPE related dismissal. So what's to lose?
Rather a lot, is the answer. There has long been a worry that, on a strict interpretation of the law, an employer cannot apply someone else's 'ETO' redundancy defence to escape automatically unfair dismissal on a TUPE transfer. Now, in the case of Hynd v Armstrong and others, the Scottish Court of Session has agreed. It held that the redundancy/ETO defence did not apply, as the reason for dismissal related solely to the future conduct of the business by the new owner after the transfer. For that defence to apply, the reason must be the employer's own and must relate to the future conduct of its business.
Of course, even if the seller willingly implements redundancies at the buyer's request, in blissful ignorance of this case, most buyers will ultimately not escape liability for them. That liability will generally end up with the buyer on transfer by normal operation of TUPE – unless the buyer is protected through indemnities. So it is something for both parties to be aware of. Pre-transfer redundancies may just not be worth it.
Hynd v Armstrong and others [2007] IRLR 338
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