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Clifton Middle School & Ors v Askew [1999] EWCA Civ 1892 (20 July 1999)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1999/1892.html
Cite as:
[2000] ICR 286,
[1999] Ed CR 800,
(2000) 2 LGLR 313,
[2000] BLGR 97,
[1999] ELR 425,
[1999] IRLR 708,
[1999] EWCA Civ 1892
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IN
THE SUPREME COURT OF JUDICATURE
No
EATRF 1998/0841/3
IN
THE COURT OF APPEAL (CIVIL DIVISION)
ON
APPEAL FROM ORDERS OF THE
EMPLOYMENT
APPEAL TRIBUNAL
Royal
Courts of Justice
Strand
London
WC2
Tuesday,
20th July 1999
B
e f o r e:
LORD
JUSTICE PETER GIBSON
LORD
JUSTICE WARD
LORD
JUSTICE CHADWICK
GOVERNING
BODY OF CLIFTON MIDDLE SCHOOL and Others
-
v -
ASKEW
Handed
down judgment
Smith
Bernal Reporting Limited, 180 Fleet Street,
London
EC4A 2HD
Tel:
0171 421 4040
Official
Shorthand Writers to the Court)
MR
T LINDEN
(Instructed by Graham Clayton of London) appeared on behalf of the Appellant
MR
P OLDHAM
(Instructed by Richard Polson of London) appeared on behalf of the Respondent
J
U D G M E N T
(As
Approved by the Court
)
(Crown
Copyright)
LORD
JUSTICE PETER GIBSON: The Applicant, Christopher Askew, is a teacher. The
Third Respondents, the London Borough of Ealing (“the Council”),
are the local education authority (“LEA”) in Ealing and were his
employers. In the early 1990s the Council operated a three-tier structure of
schools, viz. First Schools for children aged between 4 and 7, Middle Schools
for children aged between 8 and 12 and Secondary Schools for children aged 13
upwards. All those schools were maintained county schools within the meaning
of the Acts then in force, the Education Act 1980 (“the 1980 Act”)
and the
Education Reform Act 1988 (“the 1988 Act”). Each school
had its own Governing Body, its own head teacher and its own staff of teachers.
The teachers at each school were the employees of the Council but were
appointed by the Council on the nomination of the Governing Body of the school.
Mr. Askew was employed by the Council from January 1988 to teach solely in
Clifton Middle School, the Governing Body of which (“the Old Governing
Body”) are the First Respondents. Mr. Askew taught French to year 7
pupils (aged 11 to 12) though he could be required under his contract to teach
other year pupils in the Middle School and other subjects.
The
Council in 1993, with the approval of the Secretary of State, reorganised their
schools. There was to be a two-tier structure, First Schools and Middle
Schools being replaced by Primary Schools, save that children in year 7 would
go to Secondary Schools. The reorganisation was effected in accordance with
s.
12 of the 1980 Act. This provides, so far as relevant, that where a LEA intend
to cease to maintain any county school they should publish their proposals and
follow a prescribed procedure, and if the proposals are approved by the
Secretary of State, it is the LEA’s duty to implement them. The Council
duly complied with
s. 12 and obtained that approval in relation to the cesser
of maintenance of Clifton First School and Clifton Middle School on 31 August
1993. They were to be replaced on 1 September 1993 by a new Primary School,
Clifton Primary School, the governing body of which (“the New Governing
Body”) are the Second Respondents. Before the new Primary School was
opened, it had a temporary governing body, whose functions included
interviewing teachers for the new Primary School.
S.
44(3) of the 1988 Act provides that the appointment and dismissal of staff at a
county school with a delegated budget are to be subject to Sch. 3 of that Act.
Both Clifton Middle School and Clifton Primary School are such schools. By
para. 8 of Sch. 3 to the 1988 Act, where the governing body of a school
determine that any person employed to work at the school should cease to work
there, they must notify the LEA, and if that person is employed to work solely
at the school and does not resign, the LEA must terminate that person’s
contract of employment. The Old Governing Body made a determination that Mr.
Askew should cease to work at Clifton Middle School and the Council gave him
notice in May 1993 that his employment with the Council was terminated with
effect from 31 August 1993 on the ground of redundancy because of the closure
of that school. Mr. Askew exercised a right of appeal to the Old Governing
Body , but the appeal failed.
Mr.
Askew applied to work at Clifton Primary School. By para. 2 of Sch. 3 to the
1988 Act it is for the governing body of a school to interview applicants for
a vacant post at the school and, where they consider it appropriate to do so,
to recommend to the LEA for appointment an interviewed applicant, whereupon the
LEA is obliged to appoint the person so recommended unless he does not meet any
staff qualification requirements. By para. 4(2) of Sch. 4 to the 1988 Act the
provisions of
s. 44 and Sch. 3 apply in the case of a new school for the
purposes of the appointment of staff at the school, and in the case of a new
school which has a temporary governing body, that body have the functions of
the governing body of the school. Mr. Askew was interviewed by the temporary
governing body of Clifton Primary School, but they did not recommend him for
appointment.
Mr.
Askew obtained another job with the Council as a teacher, but a temporary one
only. He applied to an Industrial Tribunal, complaining of unfair dismissal.
He sought neither reinstatement nor compensation but only a declaration that he
was unfairly dismissed. He joined the Old Governing Body, the New Governing
Body and the Council as respondents to that application. He contended that it
was wrong to say that Clifton Middle School had closed when it continued to
exist for all practical purposes within a larger unit under a new name. In the
alternative he advanced an argument that he had been dismissed unfairly by
reason of a transfer contrary to the Transfer of Undertakings (Protection of
Employment) Regulations 1981 (“TUPE”) and the Acquired Rights
Directive 77/187/EEC (“the Directive”). His application was
resisted by the Respondents on a number of grounds, including that he had been
fairly dismissed for redundancy and that TUPE and the Directive could not apply
as there has been no transfer of an undertaking from one employer to another.
By
Art. 3 of the Education (Modification of Enactments Relating to Employment)
Order 1989 (“the 1989 Order”), since replaced in substantially
similar terms, Part V of the Employment Protection (Consolidation) Act 1978
(“the 1978 Act”), now replaced by the
Employment Rights Act 1996,
which relates to unfair dismissal, in its application to governing bodies with
delegated budgets is to have effect as if
“(a)
any reference .... to an employer .... included a reference to the governing
body acting in the exercise of their employment powers and as if that governing
body has at all material times been such an employer ....;
(b)
in relation to the exercise of the governing body’s employment powers,
employment by the [LEA] at a school .... were employment by the governing body
of that school ....;
(c)
references to employees were references to employees at the school .... in
question;
(d)
references to dismissal by an employer governing body included references to
dismissal by the [LEA] following notification of a determination by a governing
body under paragraph 8(1) of Schedule 3 to .... [the 1988 Act].”
The
term “employment powers” was defined to include powers as to
appointment and dismissal of staff conferred by
s. 44 of and Sch. 3 and para. 4
of Sch. 4 to the 1988 Act.
By
Article 4:
“Without
prejudice to the generality of article 3, where an employee at a school ....
with a governing body with a delegated budget is dismissed by the [LEA]
following notification of such a determination as is mentioned in article
3(1)(d) above -
....
(b)
Part V of [the 1978 Act] shall have effect in relation to the dismissal as if
the governing body had dismissed him, and the reason or principal reasons for
which the governing body did so had been the reason or principal reason for
which they made their determination.”
Art.
6 relates to applications to industrial tribunals. By Art. 6(2) the
application is to be made and the proceedings are to be carried on against the
governing body, though by Art. 6(3) the orders made (other than for
reinstatement or reengagement) are to have effect as if made against the LEA.
The
Directive is by Art. 1(1) expressed to apply to “the transfer of an
undertaking, business or part of a business to another employer as a result of
a legal transfer or merger”. By Art. 2(a) “transferor” is
defined as meaning any natural or legal person who, by reason of a transfer
within Art. 1(1), ceases to be the employer in respect of the undertaking,
business or part of the business, and “transferee” is defined
correspondingly. Art. 3(1) provides that the transferor’s rights and
obligations arising from a contract of employment or from an employment
relationship shall by means of the transfer be transferred to the transferee.
Art. 4(1) provides that the transfer of an undertaking, business or part of a
business shall not in itself constitute grounds for dismissal by the transferor
or the transferee, but that that provision shall not stand in the way of
dismissals that may take place “for economic, technical or organizational
reasons entailing changes in the work-force”. There are other references
in Art. 3(1) and Art. 4(2) to an employment relationship in the alternative to
a contract of employment.
By
TUPE the United Kingdom implemented the Directive. By Reg. 2(1) of TUPE:
“
‘contract of employment’ means any agreement between an employee
and his
employer
determining the terms and conditions of his employment;
‘employee’
means any individual who works for another person whether under
a
contract of service or apprenticeship or otherwise but does not include
anyone
who provides services under a contract for services and references to a
person’s
employer shall be construed accordingly”.
Reg.
3(1) provides that TUPE applies to “a transfer from one person to another
of an undertaking”. The term “undertaking” by Reg. 2(1)
includes any trade or business. By Reg. 5(1) a relevant transfer is not to
operate so as to terminate the contract of employment of any person employed by
the transferor in the undertaking or part transferred, but any such contract
which would otherwise have been terminated by the transfer shall have effect
after the transfer as if originally made between the person so employed and the
transferee. Reg. 5(2)(a) provides that on the completion of a relevant
transfer all the transferor’s rights, powers, duties and liabilities
under or in connection with any such contract shall be transferred to the
transferee. By Reg. 5(2)(b) anything done before the transfer is completed by
or in relation to the transfer in respect of that contract or a person employed
in that undertaking or part shall be deemed to have been done by or in relation
to the transferee. Reg. 8(1) provides that where either before or after a
relevant transfer, any employee of the transferor or transferee is dismissed,
that employee shall be treated for the purposes of Part V of the 1978 Act as
unfairly dismissed if the transfer or a reason connected with it is the reason
or principal reason for his dismissal. Where an economic, technical or
organisational reason entailing changes in the work-force of either the
transferor or the transferee before or after a relevant transfer is the reason
or principal reason for dismissing an employee Reg. 8(1) is not to apply to his
dismissal, but the dismissal is to be regarded for the purposes of
s. 57(1)(b)
of the 1978 Act (requiring the employer to show that the reason for dismissal
was substantial and of a kind to justify the dismissal) as having been for a
substantial reason of a kind such as to justify dismissal.
Before
the Industrial Tribunal it was accepted by Mr. Askew that if the Old Governing
Body was the proper body to deal with redundancy they had done so fairly. But
it was submitted for Mr. Askew that in reality what occurred was an
amalgamation of the First and Middle Schools coupled with the removal of the
top year group of the Middle School. This was accepted by the Tribunal which
said that there was no closure of the Middle School, the amalgamation was not a
ground for dismissal and the correct procedures were not operated because the
New Governing Body should have decided whether there was a redundancy and they
should have selected for redundancy. The Tribunal said that it was not
satisfied that there was a reduced requirement for teachers in Clifton Primary
School. It therefore held that the dismissal was unfair and so declared on 12
July 1995.
The
Respondents appealed and on 11 February 1997 their appeal was allowed by the
Employment Appeal Tribunal, Kirkwood J. presiding. It held that there was a
closure of Clifton Middle School, the Old Governing Body ceasing to exist after
31 August 1993, and the New Governing Body, including the temporary governing
body for Clifton Primary School, having no power to decide questions of
redundancy in Clifton Middle School. It also held that the Tribunal
misdirected itself in importing the term “amalgamation”. It held
that Mr. Askew was correctly dismissed by reason of redundancy by the Old
Governing Body and that the dismissal was fair.
Mr.
Askew had taken a further point under TUPE which the Appeal Tribunal noted in
its judgment but said that it had insufficient time to hear the argument on the
point and further that a possibly relevant decision of the European Court of
Justice was then awaited. That part of the appeal was adjourned and came
before a differently constituted Appeal Tribunal, His Honour Judge Peter Clark
presiding. Although this point had not been determined by the Industrial
Tribunal, the second Appeal Tribunal allowed it to be argued. It held that
there was no relevant transfer such as to give rise to a potentially unfair
dismissal under Regulation 8 of TUPE. That made it unnecessary for it to rule
on a further argument by the Respondents that Mr Askew was dismissed for an
economic, technical or organisational reason. It therefore dismissed Mr.
Askew’s complaint of unfair dismissal.
Leave
for Mr. Askew to appeal was refused by the Appeal Tribunal and by Beldam L.J.
on paper. But on a renewed application leave was given by Nourse and Aldous
L.JJ. Before us Mr. Linden for Mr. Askew submitted that one or other of two
analyses must be right: either there was continuity as to the identity of Mr.
Askew’s employer, or if that identity did change at what Mr. Linden
called “the moment of merger” and Mr. Askew was employed before
that moment by the Old Governing Body and thereafter by the New Governing Body,
his rights when employed by the Old Governing Body should have automatically
transferred to the New Governing Body by operation of the Directive and TUPE.
I
shall consider each analysis in turn.
The
“amalgamation” analysis
Mr
Linden submitted that the first Appeal Tribunal erred in assuming that when the
Council formed and carried through their intention to “cease to
maintain” Clifton First and Middle Schools, that meant closing
educational institutions. He said that to cease to maintain them might result
in closing them or it might mean no more than ceasing to maintain two
institutions as separate units, and continuing to provide the education which
they had provided in a single merged unit. He argued that the latter was what
occurred in substance, that on the merger the powers of the old governing
bodies also merged and became jointly the powers of the New Governing Body;
hence, the New Governing Body could not decide whether to appoint Mr. Askew as
a new employee, because he was one of the employees for whom it automatically
acquired responsibility as a result of the merger of the responsibilities of
the two old governing bodies, and so the New Governing Body could only consider
whether or not to dismiss Mr. Askew for redundancy.
In
my judgment these submissions are unsustainable in the light of the statutory
scheme. The descriptions of what occurred as an “amalgamation” and
a “merger of responsibilities” are those of Mr. Askew and his
advisers. They are not to be found in the statutory provisions. It is plain
that the scheme does not make special provision for amalgamations of schools or
mergers of responsibilities.
S. 12 of the 1980 Act provides the only
mechanisms by which county schools can be established or discontinued. It also
provides the mechanism for making a significant change to a county school, but
that was not what the Council chose to do. Instead they opted for the cesser
of maintenance of Clifton First and Middle Schools on 31 August 1993 and once
their proposals received the approval of the Secretary of State they were bound
to implement them. On the cesser of maintenance neither school could in
practice continue to exist nor could its governing bodies perform any function
after that date. Because of
s. 44 of and Sch. 3 to the 1988 Act the Old
Governing Body had the right to recommend the dismissal of persons working
solely at the Clifton First or Middle School and their recommendations had to
be complied with by the Council. Because of the cesser of maintenance it was
inevitable that the Old Governing Body would have to recommend the dismissal of
their teaching staff, and the Council had to give effect to their
recommendations. The New Governing Body are a body distinct from the governing
bodies of Clifton First or Middle Schools. It was for them, or more accurately
for the temporary governing body of Clifton Primary School at the relevant
time, to make recommendations for the employment of staff at their school.
They had no function whatsoever in relation to the dismissal of staff of the
First or Middle Schools. By reason of the 1989 Order it is plain that in
determining whether the dismissal of Mr. Askew was fair or unfair for the
purposes of
s. 57 of the 1978 Act, one looks at what the Old Governing Body did
and for what reason. It is equally plain that Mr. Askew was dismissed for
redundancy or for some other substantial reason (viz. the reorganisation with
its statutory consequences) justifying the dismissal. It was not disputed that
on this basis the dismissal was handled fairly.
It
follows that in my judgment the Industrial Tribunal was clearly wrong and the
first Appeal Tribunal was correct in its decision.
The
TUPE issue
The
second Appeal Tribunal found that there was an undertaking capable of being
transferred when Clifton First and Middle schools ceased to operate and Clifton
Primary School commenced. That was challenged by the Respondents by a
Respondent’s Notice, but the point is no longer pursued.
The
reasoning of the second Appeal Tribunal was as follows. First, where a person
is employed under a contract of service, as Mr. Askew was with the Council,
that person cannot also work for a governing body which are not his employers
so as to fall within the definition, in Reg. 2(1) of TUPE, of an
“employee”. Second, the reference to “or otherwise” in
the phrase “any individual who works for another person whether under a
contract of service or apprenticeship or otherwise” means
“otherwise under a contract” and does not relate to the words
“works for any other person”. Third, Mr. Askew must be able to
rely upon the preservation by Reg. 5(1) of his contract of employment following
a relevant transfer to come within the protection of Reg. 8 against being
unfairly dismissed, but cannot do so.
Mr.
Linden submitted that that Appeal Tribunal erred in law in finding that there
could not have been a relevant transfer for the purposes of Reg. 3(1) of TUPE.
He pointed to the words in Art. 3(1) of the Directive, “rights and
obligations arising from a contract of employment or
from
an employment relationship
existing on the date of a transfer”, and to the words in the definition
of ‘employee’ in Reg. 2(1) of TUPE, “
who
works for another person
whether under a contract of service or apprenticeship
or
otherwise
”
(emphasis added). He contrasted that with the definition of
“employee” to be found in other legislation affecting employees
such as
s. 153(1) of the 1978 Act, which makes clear that a contract is
required if a person is to be an employee. He rightly said that TUPE must be
construed so as to give effect if possible to the purpose of safeguarding
employees’ rights effectively (see, for example,
Litster
v Forth Dry Dock Co. Ltd
.
[1990] 1 AC 546 at pp. 559 and 562 per Lord Oliver). He said that the second
Appeal Tribunal failed to adopt a purposive approach to the construction of
Reg. 3(1) and to the definition of “employee” in Reg. 2(1). He
submitted that the focus should be on the substance and not the form in
applying the test whether there was a change in the person responsible for
carrying on the undertaking. He argued that the governing body of a school
with a delegated budget carry on the business of the school, being responsible
for providing the services of the school. He referred to the 1989 Order,
treating the relevant governing body as the employers for unfair dismissal
claims, and to the fact that governing bodies have wide-ranging powers of
management. He said that the second Appeal Tribunal erred in considering
itself bound by a narrow contractual analysis and in not considering the
reality of the situation. He contended that Mr. Askew had an employment
relationship with the Old Governing Body and on the transfer of the undertaking
on the opening of Clifton Primary School the New Governing Body were the
transferees for the purposes of the Directive and TUPE. The Old Governing Body
dismissed Mr. Askew unfairly, he submitted, because they dismissed him by
reason of the transfer; what should have happened was that the obligation to
employ him was transferred to the New Governing Body, who would then have had
to take the decision whether to dismiss him for redundancy.
I
acknowledge the force of these submissions, attractively advanced as they were
by Mr. Linden. English courts have constantly to be on their guard against too
insular an approach to the construction of European legislative instruments and
of statutes and regulations giving effect to European obligations. As
Advocate-General Sir Gordon Slynn said in
Spijkers
v Benedik
[1986] ECR 1119 at p. 1112 in the context of transfers of undertakings,
“Technical rules are to be avoided and the substance matters more than
the form .... A realistic and robust view must be taken and all the facts be
considered.” But the difficulty lies in fitting the circumstances of the
present case within the scope of the Directive or TUPE.
I
start with the Directive which the Respondents accept for the purposes of this
appeal is directly enforceable against them by Mr. Askew. (They reserve the
right to argue otherwise on a further appeal.) Its purpose is explained by its
recitals:
“Whereas
economic trends are bringing in their wake at both national and Community
level, changes in the structure of undertakings, through transfers of
undertakings, businesses or parts of businesses to other employers as a result
of legal transfers or mergers;
Whereas
it is necessary to provide for the protection of employees in the event of a
change of employer, in particular, to ensure that their rights are safeguarded;
Whereas
differences still remain in the Member States as regards the extent of the
protection of employees in this respect and these differences should be
reduced”.
It
is thus apparent that what was in contemplation was the protection of employees
and the safeguarding of their rights in the event of a change of employer
through a relevant transfer. That the relevant employees had to be employees of
the transferor is made plain by the definition of “transferor” in
Art. 2, with “transferee” given a corresponding meaning. As was
said by the European Court of Justice in
Redmond
Stichting v Hendrikus Bartol
[1992] E.C.R. 1-3189 at p. 1-3127 para. 11 (and has been repeated verbatim in
other judgments of that court):
“the
directive is applicable wherever, in the context of contractual relations,
there is a change in the natural or legal person who is responsible for
carrying on the business and who incurs the obligations of an employer towards
employees of the undertaking”.
The
Directive refers to both a contract of employment and an employment
relationship; the latter term must therefore go wider than the former. But
neither term is defined in the Directive, and there has been some discussion
before us as to whether an employment relationship must be a contractual
relationship. Mr. Oldham for the Respondent pointed to the words of the
European Court of Justice as to the applicability of the Directive wherever
“in the context of contractual relationships” the employer changes.
Mr. Linden submitted that those words were not directed to the relationship
between employers and employees but to that between transferor and transferee.
Whichever is correct, it is clear that the Directive contemplates that the
employment relationship, no less than the contract of employment, must give
rise to rights and obligations on the transferor with rights for the employee
to enforce the liability in respect of those obligations (see Art. 3(1) ). The
European Court of Justice has held that it is a condition for the operation of
the Directive that the employee of the transferor continues as an employee of
the transferee, that the Directive will not apply if the relationship between
the transferor and the person concerned is not that of employer and employee
and that the Directive may be relied upon only by persons who are protected as
employees under the law of the Member State concerned; if they are so
protected, the Directive ensures that their rights arising from a contract of
employment or an employment relationship are not diminished as a result of the
transfer (see
Foreningen
af Arbejdsledere i Danmark v Danmols Inventar
[1985] ECR 2639 especially at p. 2653 paras. 27 and 28). It is therefore
for the English court to determine whether Mr. Askew was an employee of the Old
Governing Body under English law.
Mr.
Linden submitted that Mr. Askew was protected as an employee under English
employment law by virtue of his contract of employment with the Council and
that he also was in an employment relationship with the Old Governing Body;
they were the transferors of the undertaking to the New Governing Body, and the
Directive operated to ensure that Mr. Askew’s rights were not diminished
as a result of the transfer. I cannot accept that submission. The fact that
Mr. Askew was protected as an employee of the Council is irrelevant to the
operation of the Directive unless the Council were the transferors, which
plainly they were not. The question is whether under English law Mr. Askew was
protected as an employee of the Old Governing Body by virtue of an employment
relationship. I cannot see that he was. The only rights and obligations to
which Mr. Linden points as arising from the relationship with the Old Governing
Body are the rights and obligations arising from the employment contract. But
those are rights and obligations of the Council and not of the Old Governing
Body and it required the deeming provisions of the 1989 Order to treat the Old
Governing Body as the employers for certain limited purposes. I do not
overlook the fact that the governing body, not the LEA, are the persons
designated by the 1989 Order to be the parties to proceedings brought by an
employee of the LEA in an industrial tribunal and that by Art. 6(3) of the 1989
Order orders made by the tribunal for reinstatement or reengagement are
excepted from the provision that orders are to have effect as if made against
the LEA. But these are procedural and ancillary matters as distinct from the
substantive right to employment which the Directive was designed to protect.
I
turn next to TUPE. There was some discussion before us on the meaning of the
words “or otherwise” in the definition of the term
“employee”, on which Mr. Linden relies. Mr. Linden sought to
derive assistance from what was said in the House of Lords in the debate on 10
December 1981 on TUPE. He argued that Lord Lyell, who opened the debate for
the Government, appeared to accept that employment relationships were protected
and were not restricted to contractual relationships. I am not persuaded that
the conditions for the admission of such Parliamentary material which were laid
down in
Pepper
v Hart
[1993] AC 593 are satisfied, if only because Lord Lyell’s remarks do
not seem to me to throw any light on what is in issue. He said (Hansard: HL
Debates Vol. 425 col. 1496):
“These
wider definitions of “employee” and the “contract of
employment” are to embrace the wider concept of what appears in the
directive as “employee relationships”.”
In
the present case it is not in dispute that an employee relationship is covered
as well as a contract of employment but what is in dispute is whether that must
be a contractual relationship. Lord Lyell said nothing to elucidate that.
In
my judgment it is clear that TUPE proceeds on the basis that there must be a
contract. One gets that from the application of the eiusdem generis rule to
“contract of service or apprenticeship or otherwise” in the
definition of “employee”, from the definition of “contract of
employment” as meaning any agreement between an employee and his employer
determining the terms and conditions of his employment, and from Reg. 5 (1)
which proceeds on the footing that there will be a contract of employment of a
person employed by the transferor in the undertaking or part transferred. TUPE
also proceeds , consistently with the Directive, on the footing that the
employee is employed by the transferor and will become the employee of the
transferee. Mr Askew, with no contract with the Old Governing Body, and never
employed by that body and with no contract with and never employed by the New
Governing Body, cannot avail himself of TUPE.
I
conclude that the second Appeal Tribunal was right to hold that TUPE has no
application to the circumstances of the present case, and the same can be said
of the Directive.
It
may be said that there is a surprising gap in the statutory provisions through
which teachers like Mr. Askew may fall when, on a common sense view of a
reorganisation of schools, two schools are merged to become a new school though
in effect carrying on providing education to much the same persons as before.
But as Mr. Oldham pointed out, there is a tension between two policies: the
protection of teachers’ employment and the principle that the governing
body of a school choose the staff of the school. It may well be that the gap
has been left deliberately by successive governments of different political
persuasions, so as to allow the latter policy to prevail. It would not have
been difficult to extend the application of the 1989 Order to TUPE or to mirror
the effect of TUPE in the 1988 Act, as was done by
s. 75 in respect of schools
becoming grant-maintained. It is not for the courts to fill that gap.
I
will not comment on the further submissions of Mr. Oldham relating to points
taken in the Respondent’s Notice but not determined by the Industrial
Tribunal or either Appeal Tribunal. For the reasons which I have given I would
dismiss this appeal.
LORD
JUSTICE WARD: There is an attractive logic in the appellant’s case. As
analysed by Mr Linden on his behalf, he lost before the first Employment Appeal
Tribunal ( Kirkwood J. presiding) because it was there held that he had been
made redundant because the Governors of the Middle School (the Old Governors),
for whom he worked, had no more work for him even though the Governors of the
new Primary School (the New Governors) did. On the other hand he lost before
the second Employment Appeal Tribunal (His Honour Judge Peter Clark presiding)
because there it was found that he did not work for the Old Governors but only
for the Local Education Authority so that there could be no transfer of his
work from the Old Governors to the New. Thus, submits Mr Linden, both decisions
cannot be right: either the identity of his employer remained the same (in
which case his employment continued), or it changed (in which case there was a
transfer of the employment relationship from one person to another). Those
submissions demand careful scrutiny.
The
first decision.
It
is common ground that the appellant’s contract of employment was made
between him and the L.E.A. In 1993, after due and proper consultation including
discussions with the Teachers’ Union, the L.E.A. took the decision
pursuant to section 12 of the Education Act 1980 that it intended to cease to
maintain the old First and Middle Schools. The consequence of that decision was
that the schools ceased to be capable of operating at all. The closure date was
fixed to be 31st August 1993. A new Primary School was established to open the
following day. But this was no phoenix, for the new Primary School was quite
different from any amalgamation of the old First and Middle Schools. It must be
noted that the decision taken was to cease to maintain the old schools and to
establish a new school, not a decision - which could also have been taken under
section 12 - “to make any significant change in the character...of a
County School.” The legislative powers were starkly restricted to
“cease”, “establish”, and “change”: there
is, therefore, no place for Mr Linden’s concepts of merger and
amalgamation.
The
decision to cease to maintain the old school having been taken it was the old
Governing Body which had the responsibility for coping with its demise. The old
Governing Body determined, pursuant to paragraph 8 of Schedule 3 to the
Education Reform Act 1988, that the appellant, as a “person employed to
work at the school”, should cease to work there with the required and
inevitable result that the L.E.A. gave him notice terminating his contact of
employment with the Authority. The new school did not formally exist at that
moment of dismissal though a temporary Governing Body did exist to engage staff
for that proposed new school. Their duties were, however, confined to setting
up the new school, not to oversee the cessation of the old. Whilst they had
powers pursuant to paragraph 2 of Schedule 3 to recommend applicants to L.E.A.
for appointment as teachers at the new school, the temporary new Governing Body
had no powers to deal with dismissal of staff at the old school. The decision
to recommend the applicant for dismissal was for the Old Governors to take and
for the L.E.A. to implement. The Employment Appeal Tribunal were in my judgment
right to treat that as a dismissal for redundancy reasons which was fair.
Consequently
I agree, for the further reasons given by Peter Gibson L.J., that the appeal
against the decision of the first Employment Appeal Tribunal must fail.
The
second decision.
The
case argued before the Appeal Tribunal was that the appellant was protected by
the Transfer of Undertakings (Protection of Employment ) Regulations 1981
(“TUPE”). Before us, another case was also urged, namely that the
Acquired Rights Directive (77/187/EEC) (“the Directive”) had direct
effect and that gave the appellant protection. Since the courts of the United
Kingdom are under a duty to give a purposive construction to TUPE in a manner
which would accord with the decisions of the European Court of Justice on the
Directive - see
Litster
-v- Forth Dry Dock Co Ltd
[1990] 1 AC 546 - it is convenient to take both together.
The
preamble to the Directive gives the clue to its purpose. Recognising that there
were “changes in the structure of undertakings, through transfers of
undertakings, businesses or parts of businesses to other employers as a result
of legal transfers or mergers,” the purpose was expressed to be:-
"to
provide for the protection of employees in the event of a change of employer,
in particular, to ensure that their rights are safeguarded."
By
Article 1(1), the Directive applied to:-
"
the transfer of an undertaking, business or part of a business
to
another employer
as a result of legal transfer or merger.” (Emphasis added.)
Article
2 set out the definitions including:-
"(a) “Transferor”
means any natural or legal person who, by reason of a transfer within the
meaning of Article 1(1) ceases to be the employer in respect of the undertaking
business or part of the business;
(b) “Transferee”
means any natural or legal person who, by reason of a transfer within the
meaning of Article 1(1), becomes the employer in respect of the undertaking
business or part of the business..."
The
employees’ rights were protected by Article 3(1) in these terms:-
"The
transferor’s rights and obligations arising from a contract of employment
or from an employment relationship existing on the date of a transfer within
the meaning of Article 1(1) shall, by reason of such transfer, be transferred
to the transferee."
TUPE
is intended to give effect to the Directive. Regulation 3, dealing with
“a relevant transfer” provides:-
"(1) Subject
to the provisions of these Regulations, these Regulations apply to a transfer
from one person to another of an undertaking situated ...in the United Kingdom...
(2) Subject
as aforesaid, these Regulations so apply whether the transfer is effected by
sale or by some other disposition or by operation of law."
The
effect of a relevant transfer is prescribed by Regulation 5 as follows:-
"(1) ...a
relevant transfer shall not operate so as to terminate the contract of
employment of any person employed by the transferor in the undertaking or part
transferred but any such contract which would otherwise have been terminated by
the transfer shall have effect after the transfer as if originally made between
the person so employed and the transferee."
The
protection to employees is given by Regulation 8 as follows:-
"(1) Where
either before or after a relevant transfer, any employee of the transferor or
transferee is dismissed, that employee shall be treated for purposes of Part V
of the 1978 Act...(unfair dismissal) as unfairly dismissed if the transfer or
reason connected with it is the reason or principal reason for his dismissal.
(2) Where
an economic technical or organisational reason entailing changes in the work
force of either the transferor or the transferee before or after a relevant
transfer is the reason or principle reason for dismissing an employee -
(a)
paragraph (1) above shall not apply to his dismissal..."
There
are definitions in Regulation 2 as follows:-
"“contract
of Employment” means any agreement between an employee and his employer
determining the terms and conditions of his employment;
“employee”
means any individual who works for another person whether under a contract of
service or apprenticeship or otherwise but does not include anyone who provides
services under a contract for services and references to a person’s
employer shall be construed accordingly;
“relevant
transfer” means a transfer to which these Regulations apply and
“transferor” and “transferee” shall be construed
accordingly;
“undertaking”
includes any trade or business"
The
Employment Appeal Tribunal held that the Old School was an undertaking for
these purposes and the cross-appeal against that finding has been abandoned. I
did not, however, understand Mr Oldham to abandon his argument that there has
been no transfer. Since the whole application of the regulations depends upon
whether there was or was not, I consider that first.
One
of the earliest decisions from Luxembourg was
Spijkers
-v- Benedik
1986 ECR 1119 where the court gave this guidance:-
"11...
It is clear from the scheme of Directive No 77/187 and from the terms of
Article 1(1) thereof that the Directive is intended to ensure the continuity of
employment relationships existing within a business, irrespective of any change
of ownership. It follows that the decisive criterion for establishing whether
there is a transfer for the purposes of the Directive is whether the business
in question retains its identity.
...
15...In
order to establish whether or not such a transfer has taken place in a case
such as that before the national court, it is necessary to consider whether,
having regard to all the facts characterising the transaction, the business was
disposed of as a going concern, as would be indicated
inter
alia
by the fact that its operation was actually continuing or resumed by the new
employer, with the same or similar activities."
I
note that “employment relationships” seems to be used in a wide
umbrella-like way and I note also that the cardinal feature of any transfer
lies in the fact that the business operation is to be continued or resumed by a
new employer. Both the adjective “new” and the description
“employer” are significant.
Another
much quoted case is
Dr
Sophie Redmond Stichting -v- Bartol
1992 E.C.R. 1-3189. There the court held:-
"11...It
(the court) has therefore given that concept (the expression “legal
transfer”) a sufficiently flexible interpretation in keeping with the
objective of the Directive, which is to safeguard employees in the event of a
transfer of their undertaking and has held that the Directive is applicable
whenever, in the context of contractual relations, there is a change in the
natural or legal person who is responsible for carrying on the business and who
incurs the obligations of an employer towards employees of the undertaking."
One
notes again that the essence is that there should be a change and this case
emphasises that the change is to be
both
in the person who is responsible for carrying on the business
and
also
in the person who incurs the obligations of an employer towards employees. So
there must be different owners or operators of the business and there must be
different employers of the staff.
That
was applied in
Hidalgo
-v- Ziemann
1999 I.R.L.R. 136 where the court added that:-
"Whilst
the absence of any contractual link between the transferor and the
transferee... may be evidence that no transfer within the meaning of the
Directive has occurred, it is certainly not conclusive."
Applying
these principles to the facts before us, what is required in order that any
protection be afforded to employees whether under the Directive or under TUPE
is that there be a transfer of the undertaking “to another
employer”, per the Directive, or “from one person to
another”, per TUPE. The first pointer away from such a transfer (but it
is no more than that) is that there is nothing in the nature of a contract or
anything “in the context of contractual relations” suggesting a
”legal transfer or merger” which usually forms the cornerstone of
the transfer. Although that may not necessarily be fatal, the position here
seems closer to that which prevailed in
Henke
-v- Schierke
1996 E.C.R. 1-4989 where the court held:-
"14. Consequently,
the reorganisation of structures of the public administration or the transfer
of administrative functions between public administrative authorities does not
constitute a “transfer of an undertaking” within the meaning of the
Directive."
Turning
to TUPE, and to Regulation 3(2) there is no transfer “effected by
sale.” Nor is it easy to find any other “disposition” if, as
Lord Hoffmann said in
Newlon
Housing Trust -v- Alsulaimen
[1997] 1 A.C. 313, 316:-
"“Disposition”
is a familiar enough word in the law of property and ordinarily means an act by
which someone ceases to be the owner of that property in law or in equity."
As
I understand it, the L.E.A. owned the property of the Middle School and the
L.E.A. continued to own it after it had established the new school. The
Governing Body do not own the assets. I see some force in the submission that
that the Governors may be “responsible for carrying on the
business”, in the European sense, because pursuant to
section 16 of the
Education (No. 2) Act 1986 the conduct of the school is under the direction of
the Governing Body and they manage the school’s budget pursuant to
section 36 of the
Education Reform Act 1988. Since the essence of the Directive
and TUPE is a new proprietor, rather than a new manager, I doubt whether that
is enough by itself for there is still the requirement for a new employer to
which I will return. Finally, the reorganisation does not seem to have effected
a transfer of the undertaking “by operation of law” within the
meaning of Regulation 3(2) because under section 12 of the Education Act 1980
it is the L.E.A. which ceased to maintain the old school and the L.E.A. which
established the new. What happened is no different from any commercial
reorganisation of resources, human and material, perhaps with the introduction
of some new management team, all taking place within the same business.
The
fatal flaw in the appellant’s argument, in my judgment, is that he cannot
establish the essential requirement of a change of employer. The Directive is
explicit: it requires the transfer of the undertaking “to another
employer”. There is no definition of “employer”. We have seen
in S
pijkers
that
whether or not there is a transfer is a matter for the national court. So it is
in the case of an employee: see
Foreningen
-v- Danmols
1985 ECR 2639 where it was held:-
"28...the
term “employee” within the meaning of Directive No 77/187 must be
interpreted as covering any person who, in the Member State concerned, is
protected as an employee under National Employment Law. It is for the national
court to establish whether that is the case in this instance."
I
therefore proceed upon a basis that it for us to determine whether there has
been a change of employer. In my judgment there has not. It is common ground
that the only contract of employment was with the L.E.A.. The governing body
are not employers of the staff in the schools even when the staff work only at
their schools. Mr Askew did not work for the Old Governors as Mr Linden
postulates in his opening submission of inconsistency between the two E.A. T .
decisions and this error may undermine the coherence of that superficially
attractive argument. The reality is that the L.E.A. would be the employer of
the employees of the new school just as it was of the staff of the old school.
Given the way our educational system is organised with contracts of employment
being made between teacher and L.E.A. with the school governors having no more
than an advisory role, there simply is no way in which the appellant can show
that there was a transfer of anything to a new employer. In my judgment the
appellant fails to establish that there was a transfer within the meaning of
Article 1(1) of the Directive.
When
one turns to TUPE, the position is made clear in Regulation 5. Assuming for the
purpose of the argument that there was a transfer, then the scheme of the
regulations is that the transfer does not operate so as to terminate the
contract of
employment
of the person employed by the transferor and the contract of employment has
effect as if originally made with the transferee. The regulation envisages a
contract of employment with the transferor being imposed upon the transferee, a
different person. There must be a different employer not, as here, the same
employer. The Regulations deal only with the effect of the transfer on a
contract of employment , not on anything else and so there cannot be any
novation of a non-contractual employment relationship, even if there is such a
thing.
The
appellant’s next submission is that Regulation 8 provides his remedy
because, as an employee of the transferor, he is to be treated as unfairly
dismissed. He identifies the Old Governors as that transferor. This submission
is also flawed. Firstly, and crucially, he must for Regulation 8 purposes be an
employee of the transferor who, under the definition in Regulation 2(1), is the
person making the transfer to which the Regulations apply. He needs to say he
is the employee of the Old Governors but they transferred nothing for they had
no undertaking trade or business to transfer. If anyone was transferring
anything, it was the L.E.A.. Secondly, he depends on the definition of employee
in Regulation 2(1). He submits that although his contract of service is with
the L.E.A., he “otherwise” also “works for” the Old
Governors in that, as he works at the school which they govern, he must to some
extent work for them. This is a wholly vague notion running at odds with the
general rule that the right not to be unfairly dismissed is the right of an
employee, i.e. one who has entered into or works under a contract of
employment: see section 153 of the Employment Protection Act 1978. Moreover
that construction unnaturally strains the language. It forces the adverb
“otherwise” to qualify the words “works for” rather
than the word “contract”. On his construction an employee means -
with the words in parenthesis substituted for the word “otherwise”-
an individual who works for a person under a contract of service or
apprenticeship or (who works for a person in some other way). The more natural
meaning is an individual who works for a person under a contract of service or
apprenticeship or (under some other contract). So I reject that argument.
Finally
there is the argument based on the direct effect of Article 3 of the Directive
safeguarding the “employees’ rights” by providing that the
transferor’s rights and obligations arising from a contract of employment
or from an employment relationship shall, by reason of the transfer, be
transferred to the transferee. Since the protection arises by reason of the
transfer, some transfer is an essential prerequisite to the operation of this
Article and in my judgment, for reasons already given, there is no such
transfer in this case. Nevertheless I must deal with the submission that the
Old Governors had rights and obligations arising from an employment
relationship with Mr Askew.
I
have already drawn attention to the broad way in which the phrase is used in
the language of the European Court. The only other case shown to us where the
concept was discussed was
Botzen
-v- Rotterdamsche Droogdok Maatschappij BV
1985 E.C.R. 519. There the issue was whether some of the employees in an
administrative department of a bankrupt engineering company were entitled to
protection in circumstances where their services were not required by the
acquiring company which took over other sections of the company and the staff
employed there. The court held:-
"An
employment relationship is essentially characterised by the link existing
between the employee and the part of the undertaking or business to which he is
assigned to carry out his duties. In order to decide whether the rights and
obligations under an employment relationship are transferred under Directive No
77/187 by reason of a transfer within the meaning of Article 1(1) thereof, it
therefore sufficient to establish to which part of the undertaking or business
the employee was assigned."
This
does not give much help to the problem at hand. It seems to me that an
employment relationship between Mr Askew and the Old Governors, if it existed
at all, could only arise by operation of the Education (Modification of
Enactments Relating to Employment) Order 1989. That refers to “employment
powers” which are defined as references to the powers of appointment,
suspension, discipline and dismissal of staff conferred by or under sections
44, 45, 46, 148 and 149 of, and Schedule 3 and paragraph 4 of Schedule 4 to the
Education Reform Act 1988.
Section 44 (which seems to be the most relevant
section) itself refers to Schedule 3. Schedule 3 does not create any
obligations between the Governing Body and the Staff but merely gives the
Governing Body the power to recommend a person for appointment to a post in the
school with the consequent effect that the Local Education Authority must
appoint that person. The Order also provides that references in various
enactments, including relevantly for this purpose, Part V of the Employment
Protection (Consolidation) Act 1978, are to have effect as if any reference to
an employer included a reference to the Governing Body as if the Governing Body
had at all material times been such an employer. Paragraph 4 of the Order deals
specifically with dismissal and provides that the Employment Protection
(Consolidation) Act 1978 shall have effect in relation to any dismissal as if
the Governing Body had dismissed the employee, their reasons being treated as
the reasons for the dismissal. Those are deeming provisions having procedural
effect only. The need to join the governors in any proceedings before the
Industrial Tribunal is another procedural requirement. Any finding of the
Tribunal may give rise to obligations but the arise from the order, not from an
employment relationship as required by the Directive. For my part I cannot see
that the Modification Order creates rights and obligations capable of being
transferred. Indeed we have not been given any example of any right or
obligation which a teacher could enforce against the governors or
vice
versa.
The
appellant cannot avail of Article 3(1).
For
these reasons, I would dismiss the appeal. If in the result it is illogical
that teachers should fall between two stools, then Parliament must redress
their hardship.
LORD
JUSTICE CHADWICK: I agree that the conclusions reached by the Employment
Appeal Tribunal on the questions before them were correct. But, on the new
question raised in the course of this appeal - namely, whether the appellant
was entitled to the relief which he seeks by the direct application of the E C
Council Directive of 14 February 1977 (“the acquired rights
directive”) - I have reached a different conclusion from that of the
other members of the court. It is appropriate, therefore, that I should explain
my reasons.
There
is nothing that I wish to add to the reasons given by Lord Justice Peter Gibson
for his conclusion that the decision reached by the Employment Appeal Tribunal
on 27 January 1997 is unassailable. The necessary effect of Articles 3 and 4 of
the Education (Modification of Enactments Relating to Employment) Order 1989,
read in conjunction with section 44(3) of, and paragraph 8(1) in schedule 3 to,
the
Education Reform Act 1988, is that - subject to the Transfer of
Undertakings (Protection of Employment) Regulations 1981 (“TUPE”)
and the acquired rights directive - the question whether the appellant was
unfairly dismissed for the purposes of Part V of the Employment Protection
(Consolidation) Act 1978 must be determined on the hypothesis that he was
dismissed by the governing body of Clifton Middle School (“the old
governing body”) and that the reason or principal reason for which the
old governing body did dismiss him was the reason or principal reason for which
they made their determination under paragraph 8(1) in schedule 3 to the 1988
Act. On that hypothesis it must be accepted that the appellant was dismissed
for a reason falling within section 57(2) of the 1978 Act - namely, that he
was redundant; and it was accepted both before the Employment Appeal Tribunal
and before this Court that, on the basis of redundancy, his case had been dealt
fairly by the old governing body.
I
turn, therefore, to the TUPE regulations, the subject of the decision reached
by the Employment Appeal on 16 June 1997. Regulation 8(1) is in these terms:
Where
either before or after a relevant transfer, any employee of the transferor or
transferee is dismissed, that employee shall be treated for the purposes of
Part V of the [Employment Protection (Consolidation) Act 1978] . . . (unfair
dismissal) as unfairly dismissed if the transfer or a reason connected with it
is the reason or principal reason for his dismissal.
Where
regulation 8(1) applies, with the effect that a dismissal which has (in fact)
taken place before a relevant transfer (but for a reason connected with it)
must be treated as unfair, the employee can rely also on regulation 5 - see
Litster
v Forth Dry Dock & Engineering Co Ltd
[1990] 1 AC 546, at page 577. Regulation 5(1) is in these terms:
.
. . a relevant transfer shall not operate so as to terminate the contract of
employment of any person employed by the transferor in the undertaking or part
transferred but any such contract which would otherwise have been terminated by
the transfer shall have effect as if originally made between the person so
employed and the transferee.
The
effect is that, in such a case, the employee can seek remedies for unfair
dismissal under Part V of the 1978 Act against the transferee.
There
are two short, and related, points of construction. First, whether the
reorganisation of the Borough’s schools - by the closure of Clifton
Middle School and the opening of Clifton Primary School with effect from 1
September 1993 - is a “relevant transfer”; and, second, whether the
appellant can be treated as “an employee of the transferor” in that
context.
A
“relevant transfer” for the purposes of regulations 5(1) and 8(1)
is a transfer to which the TUPE regulations apply, and “transferor”
and “transferee” are to be construed accordingly - see regulation
2. The transfers to which the regulations apply are described in regulation 3.
So far as material, those are transfers “from one person to another of an
undertaking” whether “the transfer is effected by sale or by some
other disposition or by operation of law” - see regulations 3(1) and (2).
It
was accepted by the Employment Appeal Tribunal that the functions formerly
carried at the Clifton Middle School under the direction of the old governing
body were “an undertaking” on the transfer of which the TUPE
regulations were capable of applying. That proposition was challenged by
respondents’ notice; but the challenge was not pursued at the hearing of
the appeal. It was contended by the appellant that the re-organisation of the
Borough’s schools had the effect that there was a relevant transfer of
that undertaking by the old governing body to the governing body of Clifton
Primary School (“the new governing body”). The Employment Appeal
Tribunal took the view that the validity of that contention turned on the
question whether the appellant could be treated as the employee of the old
governing body for the purposes of the TUPE regulations. There could be no
relevant transfer unless the transferor (in this context, the old governing
body) was, at the relevant time, also the employer. I do not understand that
proposition to be challenged by the appellant. His contention is that, on a
proper construction of the TUPE regulations, read in conjunction with the
acquired rights directive, the old governing body is to be treated as his
employer at the time when he was dismissed; that the reason for his dismissal
was the reorganisation which was to be effected by the transfer; and that,
accordingly, the dismissal must be treated as unfair - see regulation 8(1) -
with the consequence that he is entitled to rely on regulation 5(1) as against
the new governing body.
That
leads to the second question; whether the old governing body is to be treated
as having been the appellant’s employer at the time when he was
dismissed. That turns on the definition of “employee” in regulation
2(1). “Employee” means any individual who works for another person
under a contract of service or apprenticeship “or otherwise”, but
does not include anyone who provides services under a contract for services.
The short point of construction is whether the effect of the words “or
otherwise” is that A can be said to be the employee of B notwithstanding
that there is no contract between them; in particular, whether A can be said to
be the employee of B in circumstances where A has a contract of service with C
under which C requires him to provide services to B. If that question fell to
be decided in accordance with the principles of construction applicable to
domestic legislation, and without reference to the obligations of the United
Kingdom under the EC Treaty, I should have no doubt that it should be answered
in the negative. In such a case it is C, and not B, who is the employer. The
position might be otherwise if it could be said that C was acting on behalf of,
or as agent for, B - see the observations of Mr Justice Morrison when giving
the decision of the Employment Appeal Tribunal in
Duncan
Web Offset (Maidstone) Ltd v Cooper
[1995]
IRLR 633, 635 - but that is not this case.
But
the question does not fall to be decided solely in accordance with the
principles of construction applicable to domestic legislation. The TUPE
regulations were made for express purpose of giving effect to the acquired
rights directive and must be construed accordingly - see
Litster
v Forth Dry Dock & Engineering Co Ltd
[1990]
1 AC 547, at page 559.
The
acquired rights directive was adopted for the purpose, amongst others, of
providing “for the protection of employees in the event of a change of
employer, in particular, to ensure that their rights are safeguarded”. To
that end the directive applies “to the transfer of an undertaking,
business or part of a business to another employer as a result of a legal
transfer or merger” - see Article 1(1). Articles 3(1) and 4(1) are in
these terms, so far as material:
3(1) The
transferor’s rights and obligations arising from a contract of employment
or
from an employment relationship
existing on the date of a transfer within the meaning of Article 1(1) shall, by
reason of such transfer be transferred to the transferee. [emphasis added].
4(1) The
transfer of an undertaking, business or part of a business shall not of itself
constitute grounds for dismissal by the transferor or the transferee. . . .
The
directive contains no definition of “employer”,
“employee”, “contract of employment” or
“employment relationship”; but it does contain definitions of
“transferor” and “transferee” -see Article 2:
(a) “transferor”
means any natural or legal person who, by reason of a transfer within the
meaning of Article 1(1), ceases to be the employer in respect of the
undertaking, business or part of the business;
(b) “transferee”
means any natural or legal person who, by reason of a transfer within the
meaning of Article 1(1), becomes the employer in respect of the undertaking,
business or part of the business;
The
only assistance that can be obtained from the acquired rights directive, as it
seems to me, is that it applies only on the transfer of an undertaking,
business or part of a business from one employer to another employer; and that
one person, say “X”, is the employer of another person, say
“Y”, where there exists between X and Y a contract of employment or
“an employment relationship”. The question whether or not a
contract of employment or an employment relationship does exist between X and Y
in any particular case is left to the national law - see
Knud
Wendelboe
v L J Music ApS
(Case
19/83) [1985] 1 ECR 457, at page 467 (paragraph 16 in the judgment of the Court
of Justice),
Foreningen
af Arbejdsledere i Danmark v A/S Danmois Inventar
(Case
105/84)
[1985] ECR 2639, at page 2653 (paragraph 28), and
P
Bork International A/S v Foreningen af Arbejdsledere i Danmark
(Case 101/87) [1989] IRLR 41, at page 44 (paragraph 17). It is for the national
court to decide whether or not, at the date of the transfer, the employee in
question was linked to the undertaking by virtue of a contract of employment or
an employment relationship.
I
am not persuaded that the provisions of the acquired rights directive require -
or enable - the court to give to the words “or otherwise” in TUPE
regulation 2(1) a meaning which extends the definition of
“employee” to an individual (X) who works for another person (Y)
under an arrangement which, as between X and Y, is non-contractual. There is,
plainly, a need when construing the TUPE regulations to give some effect to the
obvious intention that the protection afforded by the acquired rights directive
should extend not only to an employer’s obligations arising from “a
contract of employment” but also to obligations arising from “an
employment relationship”; in whatever sense those expressions are used in
the directive. In the context of the acquired rights directive “an
employment relationship” must be a reference to a relationship under some
arrangement which is not within the phrase “contract of
employment”. But that does not lead to the conclusion that that other
arrangement must be non-contractual. It leads only to the conclusion that, if
contractual, that other arrangement is not, or may not be, regarded by the
national law as a contract of employment.
It
must be kept in mind that the acquired rights directive predates the TUPE
regulations. It cannot be permissible to read into the acquired rights
directive the extended meaning which regulation 2(1) of the TUPE regulations
gives to the phrase “contract of employment”. The more usual
meaning of the phrase, as can be seen from its use in United Kingdom employment
legislation at the time when the acquired rights directive was adopted, is
“a contract of service or apprenticeship” - see section 153(1) of
the Employment Protection (Consolidation) Act 1978. But the phrase can be given
a more extensive meaning - see section 82(1) of the Sex Discrimination Act
1975. The correct approach to the use of that phrase in the acquired rights
directive, as it seems to me, is to attribute to those who framed that
directive an appreciation that “contract of employment” might have
a particular or limited meaning under national law (including, but not limited
to, the domestic law of the United Kingdom); and an intention that the
directive should extend to obligations (including statutory obligations
independent of contract) which arose out of an employment relationship which
was not be founded on a “contract of employment” within that
particular or limited meaning. But the questions “what obligations”
and “what employment relationship” are left to be determined by the
national law.
If
the matter is approached in that way, it can be seen how effect is given to the
intention behind the acquired rights directive by the definitions of
“employee” and “contract of employment” which have been
adopted in the TUPE regulations. “Employee” includes a person who
is not employed under a contract of employment in the sense that that phrase is
used in the 1978 Act; the definition in regulation 2(1) is at least as wide as
that adopted by the legislature for the purposes of the Sex Discrimination Act
1975. “Contract of employment” is given an extended meaning, so as
to include any agreement between an employee and his employer determining the
terms and conditions of his employment. That is, clearly, capable of including
any agreement under which there is “an employment relationship”
within the meaning of the acquired rights directive. So “contract of
employment” is defined in the TUPE regulations to include contracts of
service and apprenticeship - that is to say, to include contracts which would
be “contracts of employment” in the Employment Protection Act sense
- and to include other agreements which record or evidence “an employment
relationship”. But “contract of employment” as defined in
the TUPE regulations does not include an employment relationship in which there
is no agreement between the employee and his employer which determines the
terms and conditions of the employment; nor, in my view, does “contract
of employment” as so defined extend to a non-contractual agreement. The
reason is that the employment relationships to which the TUPE regulations were
intended to apply must be relationships which, at the time when the regulations
were made, were capable of being protected by those regulations. In particular,
the relationships to which the TUPE regulations were intended to apply must be
relationships which, at the time when the regulations were made, provided some
basis for the application of regulation 5(1) or regulation 6; or gave rise to
rights capable of being protected by Part V of the Employment Protection
(Consolidation ) Act 1978 so as to provide a foundation for the application of
regulation 8(1).
I
am satisfied that the need to find one or both of those characteristics in the
employment relationships to which the TUPE regulations were intended to apply
leads, necessarily, to the conclusion that the relationship must be based on a
contract between employee and employer. I am not persuaded that regulations 5
or 6 were intended to apply to non-contractual agreements. The rights protected
by Part V of the 1978 Act are rights under a contract of employment in the
sense defined by section 153 of that Act. It is true that, by virtue of Article
3 of the Education (Modification of Enactments Relating to Employment) Order
1989, Part V of the 1978 Act now has effect as if the governing body of a
maintained county school were the employer - notwithstanding the absence of any
contract between the governing body and the employee - but, in the absence of
some provision to that effect in the 1989 Order, Article 3 cannot, as it seems
to me, alter the meaning of “employee”, or “contract of
employment”, in the TUPE regulations. The 1989 Order is, to my mind, of
relevance in considering the direct application of the acquired rights
directive at the time of the reorganisation of the schools in 1993. But the
TUPE regulations must be construed on the basis of the law as it was in 1981;
not on the basis of the law as it became in 1989.
It
follows that, despite the attractive arguments put forward by Mr Linden on
behalf of the appellant, I am not persuaded that the Employment Appeal Tribunal
were wrong to reach the conclusion that the appellant can derive no assistance
from the TUPE regulations. But for the further point, raised for the first time
in this Court, that would be sufficient to dispose of these appeals.
The
further point, as developed in argument, is that the appellant does not need to
rely on the TUPE regulations; he can rely on the provisions of the acquired
rights directive. The respondents accept, for the purposes of this appeal, that
the provisions of the directive are directly enforceable against them.
The
provision relied upon by the appellant is that in Article 3(1). It is
convenient to set out its terms again:
The
transferor’s rights and obligations arising from a contract of employment
or from an employment relationship existing on the date of a transfer within
the meaning of Article 1(1) shall, by reason of such transfer, be transferred
to the transferee.
The
first hurdle which the appellant must surmount before any assistance can be
obtained from that provision is that, on the facts as found below, his contract
of employment was determined on 31 August 1993; which was the day before the
day (1 September 1993) on which any transfer of the undertaking formerly
carried on by the old governing body could be said to have taken place. On that
basis, there was no contract of employment existing on the date of transfer.
But the appellant relies on Article 4(1):
The
transfer of an undertaking, business or part of a business shall not in itself
constitute grounds for dismissal by the transferor or the transferee. This
provision shall not stand in the way of dismissals which take place for
economic, technical or organizational reasons entailing changes in the work
force.
There
was no finding below on the question whether the dismissal of the appellant was
for economic or organisational reasons. The point was not raised in the
Industrial Tribunal; and, in the light of their conclusion that the TUPE
regulations had no application at all, it was unnecessary for the Employment
Appeal Tribunal to make any finding under regulation 8(2). For my part, on the
facts which were found below, I find it difficult to see how it could be said
that the decision to dismiss the appellant was not taken for economic or
organisational reasons; but that is not a matter which has been developed
before us and I express no concluded view.
The
appellant can gain no assistance from Article 3(1) of the acquired rights
directive unless he can show that the old governing body was subject to
obligations arising from a contract of employment or from an employment
relationship which were capable of being transferred by that Article. For the
reasons already explained the old governing body was subject to no obligations
arising from any contract of employment under which it was the employer. But it
is necessary to go on to consider whether, for the purposes of the acquired
rights directive, the old governing body was subject to obligations arising
from an employment relationship. That is a question to be determined by
national law at the time when it arises. In this case it is a question to be
determined, as it seems to me, by considering the effect of articles 3, 4 and 6
of the 1989 Order on the relevant provisions in the 1978 Act.
Section
54(1), in Part V of the 1978 Act, is in these terms:
In
every employment to which this section applies every employee shall have the
right not to be unfairly dismissed by his employer.
“Employment”,
for that purpose, is defined by section 153 of the Act. It means employment
under a contract of employment. A “contract of employment”, in that
context, has the meaning to which I have already referred; namely, a contract
of service or apprenticeship. But article 3(1) of the 1989 Order requires that
section 54(1) of the 1978 Act shall have effect as if:
(a) any
reference (however expressed) to an employer, a person by whom employment is
offered, or a principal included a reference to the governing body acting in
the exercise of their employment powers and as if that governing body had at
all times been such an employer, person or principal;
(b) in
relation to the exercise of the governing body’s employment powers,
employment by the local education authority at a school or institution were
employment by the governing body of that school or institution;
(c) references
to employees were references to employees at the school or institution in
question;
(d) references
to dismissal by an employer included references to dismissal by the local
education authority following notification of a determination by a governing
body under paragraph 8(1) of Schedule 3 to . . . [the
Education Reform Act
1988]; . . .
If
section 54(1) of the 1978 Act is to have effect in the way which article 3(1)
of the 1989 Order requires, then it must be read as if the
“employer” is the old governing body; as if
“employment” by the local education authority at the school is
employment by the old governing body; and as if the “employee” is
an employee at the school. So read, the section has the effect that employees
at the school are treated as employees of the governing body and have the right
not to be unfairly dismissed by the governing body. If the section confers a
right on the employees it must be taken to impose a correlative obligation on
the governing body, as the deemed employer. The obligation is an obligation not
to dismiss unfairly. The remedies for breach of that obligation include orders
for reinstatement or re-engagement - see
section 69 of the 1978 Act. Those
orders, if made, are made against the governing body, not against the local
authority - see article 6 of the 1989 Order
With
those matters in mind, I find it impossible to hold that the old governing body
was not subject to obligations arising from an employment relationship with the
appellant within the meaning to be given by national law to that expression in
Article 3(1) of the acquired rights directive. It follows that, subject to the
application of Article 4(1) of the directive - which, as I have indicated,
requires a finding on the question whether the dismissal of the appellant on 31
August 1993 was for economic, technical or organisational reasons - I would
hold that the obligations of the old governing body in relation to the
appellant were transferred to the new governing body.
For
the reasons which I have sought to explain, I would have allowed the appeal and
remitted the matter to the employment tribunal to make the necessary findings
of fact.
Order:
Appeal dismissed with costs. Leave to appeal was also refused