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Dismissals before sale of football club were for ETO reason
In Crystal Palace FC (2000) Limited and another v Kavanagh and others, the Court of Appeal has upheld the Tribunal decision that the dismissal of some of the football club’s staff in order to reduce the wage bill to keep the club operating was indeed for an ETO reason in a TUPE transfer. It held that this decision was separate to the longer term objective of ensuring the club’s subsequent sale. Therefore the liability for the dismissal did not transfer under TUPE. It held that the statement in Spaceright Europe Limited v Baillavione and another, that an ETO reason cannot be used where an employee is dismissed to make a business more attractive to potential purchasers, should be seen in context.
CPFC went into administration in January 2010 but an agreement for sale was reached by May. This was held in escrow pending a separate agreement for the sale and purchase of the stadium, which was not owned by CPFC. By the end of May the club had severe cash flow problems and administrator decided to mothball it over the close season in the hope of being able to sell it at a future date. All bar the core staff were dismissed at the end of May. The Tribunal found that the dismissals had taken place to keep the club alive as a gowing concern and then considered whether this reason was connected to the transfer, requiring a distinction between the reason for the dismissals and the administrator’s ultimate objective. The Tribunal concluded that reducing the wage bill to continue the business was an economic reason separate from the longer term objective of selling the business and that, as such, liability for the dismissals remained with CPFC. The EAT had allowed the appeal by the employees but this was overturned by the Court of Appeal who reinstated the Tribunal decision.
This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.
For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.
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