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Preston and others v Wolverhampton Healthcare NHS Trust and others

Employment – Employee – Part-time employees – Equal pay and treatment – Pensions – Right to equal access to pension schemes – Equal Pay Act 1970, ss 1, 2 – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794, regs 5, 12 – Article 141 (EC).

The appeal tribunal ruled:

(1) TUPE provided for the contract of employment to continue under the new employer. Since 1981, in every transfer of undertaking where the employees enjoyed pension rights, their contracts of employment had been transferred notwithstanding their being denuded of pension rights by that transfer. As a matter of construction of the limitation provision in s 2 of the 1970 Act, and reg 12, the contract of employment continued, albeit shorn of pension rights, so that a claim against the transferor might be maintained for as long as the employer remained within the transferee’s employment, plus six months. In the court’s view, the fiction, which was created by reg 5 so as to deem employment with the transferor to have been always with the transferee, extended the limitation period against the transferor more or less indefinitely. ‘Employment’ meant employment under the contract, which was deemed to continue. The equality clause in relation to pensions, said to have been breached, remained actionable throughout the period of employment (with the transferee) plus six months.

(2) A breach of the 1970 Act occurred while there was exclusion of part time employees from a scheme whose membership was obligatory for full-time employees.

(3) The regulations did not deem voluntary membership to be less favourable than obligatory membership of a pension scheme. There was nothing that indicated that the European Court of Justice regarded it being less favourable treatment, and thus that the employers would be in breach of art 141, or for that matter of the domestic equal pay regime, when an employee was offered voluntary membership of a pension scheme. Such a choice offered the possibility of membership where it was advantageous, without the burden of membership where it was disadvantageous.

(4) If recruits were not informed of their rights to join the pension scheme, discrimination could not be inferred unless (a) disparate impact between genders was shown; and (b) it was proven as a matter of law that the failure to inform a female employee she could join the pension scheme constituted unequal pay at a time when she was in fact entitled to join the pension scheme on equal terms with a man. The first of the inferences required there to be some form of practice or policy in place: a one off mistake by an officer in an individual’s case would not suffice. For the purposes of the (indirect) discrimination, the law was concerned with a discriminatory regime or policy or practice.

King and others v Skillbase Services Ltd

Employment – Transfer of undertakings – Continuity of employment – Assignment – Tribunal finding employee not assigned – Correctness of decision.

In the course of subsequent proceedings in the employment tribunal, having reviewed the evidence, the tribunal found that the employee was not wholly or mainly assigned to the undertaking which was the subject of the transfer. The employer appealed.

The issue, in essence, was whether the tribunal had been entitled to find that the employee had not been assigned to the authority.

The appeal would be dismissed.

The decision of the tribunal below would not be interfered with.

In the circumstances of the case, the tribunal had approached the matter correctly, and the decision which it had reached was one which it had been entitled to reach on the facts before it, and could not be categorised as perverse.

Peterson v British Nursing Co-operations Ltd and another

Employment – Transfer of undertakings – Unfair dismissal – Reason for dismissal – Economic, technical or organisational reason – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794.

The appeal would be allowed in part.

(1) In reaching its conclusion that there had been a transfer of undertakings the tribunal erred in law and its decision could not stand.

The matters upon which the tribunal based its conclusion could not either individually or collectively have been regarded as establishing a transfer of undertakings without the tribunal removing from those factors the elements of control which were acquired by the share transfer; and without considering the position in relation to the second employer’s other assets. The tribunal failed to appreciate that the share transfer enabled the second employer to control the operation of the first without a transfer of the undertakings. It also failed to separate the effects of the share transfer. The tribunal further erred in failing to direct itself to the relevant guidance and to consider all the relevant factors. Accordingly, the matter would be remitted to a new tribunal.

Cheesman v R Brewer Contracts Ltd [2000] All ER (D) 2047 considered.

(2) The tribunal’s conclusion in respect of the unfair dismissal did not require reconsideration.

The facts had been comprehensively examined and assessed. None of the facts required reconsideration in the light of the decision on the transfer issue nor would they require reconsideration if the new tribunal concluded that there had not been a transfer.

McChrystal and others v Wimpey Homes Holdings Ltd

Employment – Continuity of employment – Transfer of undertakings – Change of employer – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1974.

The employer managed its business in a number of different entities with different names. It sought to effect a re-organisation which led to some apparent redundancies.

Complaints were brought in the employment tribunal as a result of the reorganisation. The issue arose as to whether there had been a transfer of undertakings for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1974. At the conclusion of their decision, the tribunal held that the employer at all times was the respondent, even though the various employees were assigned to different divisions within the group on a permanent basis. The employees appealed.

The employees contended that the tribunal had misdirected itself in so far as it should first have asked the question whether or not there were identifiable economic entities within the group capable of being transferred which, thereafter, happened as a matter of fact within the re-organisation. The employer contended that the 1981 regulations could not arise in any circumstances where there was no change of employer.

The appeal would be dismissed.

There had not been any transfer to which the 1981 regulations could apply.

The regulations applied to a transfer from one person to another. They could not apply where, as in the instant case, the employer remained the same person both before and after.

Donaldson and others v Perth & Kinross Council and others

Employment – Continuity – Transfer of undertakings – Effect of relevant EEC directive on undertakings transferred in insolvency situations – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1974 – Council Directive (EEC) 77/187.

The broad issue was whether or not, when a European Directive was implemented by subsidiary legislation of the United Kingdom Parliament, under s 2 of the Treaty of Rome 1972, could the relevant intra vires if the effect of those Regulations was to widen the scope of the directive which it was seeking to implement.

The appeal would be allowed.

The appeal succeeded on all three grounds.

Whatever was the position of a liquidator with regard to the sale of the business as a going concern, when it came to irretrievable insolvency and cessation of business, the EAT was satisfied that European jurisprudence did not admit the application of the ARD directive, since that would be going beyond the scope of the directive and would be ultra vires. Further, it could not be contemplated that an operation which depended for its existence on day to day effective handout of work to which it was not contractually entitled, such as could be terminated or ceased at any time, should be determined as a stable entity. Furthermore, there was nothing left to transfer to the council at the time of the cessation of the business.

Cook v Emcor Facilities Services Ltd

Employment – Transfer of undertakings – Contract of employment – Benefits – Share option scheme – Employment tribunal finding that scheme not part of contract and not passing on transfer – Correctness of decision.

The appeal would be allowed in part.

Fuller reasons had to be given before the decision could stand.

The tribunal had failed to make findings of fact and explain its reasoning, particularly in relation to the circumstances and features of the scheme which were impossible to replicate. Accordingly, the matter would be remitted to the tribunal to set out findings of fact upon which conclusions could be based.

Alderson and others v Secretary of State for Trade and Industry

Employment – Transfer of undertakings – Relevant transfer – Transfer from local authority to private law company – Refuse collection – Refuse collection in nature of commercial venture – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1974 – Council Directive (EEC) 77/187, art 1.

The claimant was a refuse collector, employed by a local authority. The local authority transferred its refuse collection service to a commercial company which operated for a profit. The company offered employment to some, but not all, of those who had been employed by the authority. The terms and conditions offered by the company were less favourable than those enjoyed by the employees whilst working for the authority. The claimant accepted employment by the company on those terms. Council Directive (EEC) 77/197 was designed to safeguard the rights of employees when the undertaking in which they were employed was transferred from one employer to another, in essence requiring the new employer to continue to employ the employees on the same terms they had enjoyed before the transfer. Article 1 of the directive stated that it applied to ‘the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger’. The directive contained no definition of ‘undertaking’ or ‘business’. The United Kingdom attempted to give effect to the directive by the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1974 (TUPE), which included the following definition of ‘undertaking': ‘Undertaking includes any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture’.

The claimant, who was treated as a representative claimant, and others commenced proceedings against the defendant, alleging that by the terms of the definition of ‘undertaking’ in TUPE, the UK had erroneously excluded the transfer of the authority’s refuse service from the protection required by the directive. They claimed damages to compensate them for the prejudice they had been caused as a result of that error. The judge held that the authority’s refuse collection service was ‘an undertaking, business or part of a business’ within the meaning the meaning of the directive; that it had been transferred from the authority to the company; and that it was ‘in the nature of a commercial venture’. He held, accordingly, that the claimant was within the protection of TUPE and had no claim for damages against the Secretary of State. The claimant appealed.

The appeal would be dismissed.

The judge had been correct in dismissing the claimant’s claim for damages.

The court was under an obligation, in so far as the language of TUPE permitted, to construe TUPE in a manner which accorded with the directive. Where an undertaking after a transfer was a commercial venture, and the undertaking before transfer had had all the characteristics which it had after transfer, save that it was not operated for profit, the undertaking before transfer would normally be capable of being described as ‘in the nature of’ a commercial venture. That was so in the instant case. The elastic phrase ‘in the nature of’ bridged the gap between before and after and enabled the provisions of TUPE to be read in a manner which accorded with the directive.

UK Waste Control v Wren [1995] ICR 974 considered.

Decision of Newman J [2003] All ER (D) 208 (Mar) affirmed.

Article 1 of Council Directive (EEC) 77/197 stated that it applied to ‘the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger’.

The Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1974 included the following definition of ‘undertaking': ‘Undertaking includes any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture’.

MacKenzie and another v Telenor Business Solutions Ltd (formerly Nextra Ltd)

Employment – Transfer of undertakings – Relevant transfer – New sub-contractor refusing to recognise transfer of employee – Identification of employee’s unit as an economic entity – Tribunal findingtransfer of undertakings occurring – Correctness of decision.

The decision was one which the tribunal was entitled to make.

Although the tribunal had only concentrated on two aspects of the matter in determining the existence of an identifiable economic entity, the existence of such an entity was a conclusion that they were entitled to reach. The question which mattered was whether the identifiable entity found to exist prior to the transfer, was mirrored in the work of the transferee after the transfer. It should not have been conclusive that the work was being done differently by the new sub-contractor.

Suzen v Zehnacker Gebaudereinigung GmbH Krankenhausservice (Case C-13/95) [1997] All ER (EC) 289, RCO Support Services Ltd v Unison [2002] All ER (D) 50 (Apr) and Compass Services UK Ltd v Patrick (28 March 2000, unreported) considered.

McNeish and others v Blue Diamond Services Ltd

Employment – Transfer of undertakings – Continuity of employment – Unfair dismissal – Failure to consult – Conflicting decisions of Employment Appeal Tribunal – Transfer of Undertakings(Protection of Employment) Regulations 1981, reg 10.

The appeal would be allowed.

A proposal would be made to consider whether the matter should in due course be listed before the President as a matter of considerable importance, but in any event, permission would be given for it to go through to a full hearing.

It was plain that the instant case was one where TUPE should have operated to protect the individual worker who was disadvantaged by a transfer of the nature that had taken place. It might be that sooner rather than later a case of that nature would have to go to the Court of Appeal, if the EAT were to follow one of the decisions and not the other, leaving that other in existence as an authority. In such a situation, the only tribunal which could resolve the difficulty would be the Court of Appeal.

Brown v First Security (Guards) Ltd

Employment – Employment tribunal – Complaint – Amendment to include new claim – Time limit – Tribunal ruling employee’s complaint out of time – Correctness of decision.

The claimant (the employee) was originally employed by Rentokil in 1995. His contract of employment was transferred to CS under the provisions of the Transfer of Undertaking (Protection of Employment) Regulations 1981 (TUPE). That contract was subsequently transferred to the respondent (the employer).

There had been no error on the part of the tribunal.

It was clear that neither of the two letters purported to be an originating application and neither asked to be treated as such. In the circumstances of the case, the tribunal had not fallen into error in concluding that, as neither letter could have amounted to an originating application, the employee’s application had been out of time and that, accordingly, it had no jurisdiction to hear the complaint.

Alex Munro (Butchers) Ltd v Nicol [1988] IRLR 49 applied.

Abler and others v Sodexho MM Catering Betriebsgesellschaft mbH (Case C-340/01)

European Communities – The Court of Justice – Reference from national court – Reference for preliminary ruling – Interpretation of directive – Transfer of undertakings – Safeguarding of workers’ rights – Council Directive (EEC) 77/187.

European Communities – Employment – Transfer of undertakings – Safeguarding of workers’ rights – Interpretation of directive – Definition of transfer – Council Directive (EEC) 77/187.

The management authority of a hospital concluded an agreement with S, under which s took over the management of catering services within the hospital. Disagreements subsequently arose between the management authority and S, leading s to refuse to provide the contracted services for two months. During that time, the respondent firm provided the catering services in the hospital. The management company terminated its contract with S, and informed it that the contract would be awarded to the applicant. s contended that that constituted a transfer of the undertaking, although as the respondent had refused to take over S’s materials, stock and employees, s reduced stocks so that there was nothing left and terminated the employment contracts of its employees.

The applicants, who were amongst those employees, brought an action against the respondent seeking a declaration that their employment relationship continued with the respondent on the basis of provisions of national law on transfers of undertakings. The action was dismissed on the basis that the requirements of a transfer of an undertaking had not been met as there had been no transfer of staff. The applicants’ appealed against that decision. The higher court allowed that appeal, having found that a transfer had taken place since, in essence, an economic entity which retained its identity had been transferred. The respondent appealed against that decision. The court stayed proceedings and referred to the Court of Justice of the European Communities for a preliminary ruling the question whether art 1 of Council Directive (EEC) 77/187 (on the approximation of the laws of the member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings,businesses or parts of businesses) had to be interpreted as applying to a situation in which a contracting authority which had awarded the contract for the management of catering services in a hospital to one contractor terminated that contract and concluded a contract for the supply of the same services with a second contractor, where the second contractor, on the one hand, used substantial parts of the tangible assets previously used by the first contractor and subsequently made available to it by the contracting authority and, on the other hand, refused to take on the employees of the first contractor.

The Court ruled:

Article 1 of the directive had to be interpreted as applying to a situation in which a contracting authority which had awarded the contract for the management of the catering services in a hospital to one contractor terminated that contract and concluded a contract for the supply of the same services with a second contractor, where the second contractor used substantial parts of the tangible assets previously used by the first contractor and subsequently made available to it by the contracting authority, even where the second contractor had expressed the intention not to take on the employees of the first contractor.

The aim of the directive was to ensure continuity of employment relationships within an economic entity, irrespective of any change of ownership. The decisive criterion for establishing the existence of a transfer within the meaning of the directive was whether the entity in question retained its identity, as indicated by the fact, inter alia, that its operation was actually continued or resumed. It was clear from the wording of art 1 of the directive that it was applicable whenever in the context of contractual relations, there was a change in the legal or natural person who was responsible for the carrying on of the business and who, by virtue of that fact incurred the obligations of an employer in respect of the employees of the undertaking, regardless of whether or not ownership of the tangible assets was transferred. The fact that the tangible assets taken over by the new contractor did not belong to its predecessor but were provided by the contracting authority could not preclude the existence of a transfer within the meaning of the directive.