Nine teachers and nine support staff were made redundant when St Wilfrid's High, in Litherland, was shut earlier this year after Sefton Council decided to replace it, and a nearby community school, with a free school.
The council insisted its staff should automatically transfer to the free school.
But after consulting the Department for Education, the trustees of The Hawthornes said this does not apply because free schools are deemed to be "completely new" entities.
The council has now applied to take the case to the High Court for a final decision in what is believed to be a test case for this kind of dispute.