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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Astley & Ors v Celtec Ltd [2002] EWCA Civ 1035 (19 July 2002)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1035.html
Cite as: [2002] EWCA Civ 1035, [2002] IRLR 629, [2002] ICR 1289, [2002] Emp LR 1064, [2002] 3 CMLR 15
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- This is the judgment of the court. Before us is an appeal from a majority decision of the Employment Appeal Tribunal (“EAT”) of 5th October 2001, allowing the appeal of Celtec Limited from a decision of the Employment Tribunal (“ET”) dated 22nd December 1999.
- The appellant employees had been made redundant by Celtec in 1998 (Hawkes) or were concerned about possible redundancy (Astley and Owens). They sought a determination by the ET under s. 11 of the Employment Rights Act 1996 (“the ERA”) as to their length of continuous employment as at dismissal for the purposes of establishing their redundancy entitlements and other accrued rights on termination. These were test applications on behalf of a group of 15 employees of R. However, the determination of the issues in this case potentially affects a large number of former Department of Employment (“DoE”) Civil Servants who transferred to Training and Enterprise Councils (“TECs”) shortly after their establishment in the early 1990s.
- The unusual background to the case is well explained in the decision of the Employment Tribunal to whom we would like to pay tribute. They were faced with unusual and complicated facts and had cited to them some 25 decisions here and abroad. Their resulting decision is a well reasoned 23 paragraphs. We have italicised the more important findings.
- The appeal before the court concerns secondees who elected to resign from the civil service and to be employed by one of the TECs. They contend that this did not break their continuity of employment. They all rely on the Acquired Rights Directive 77/187/EEC. Mr Astley relies secondarily upon the Transfer of Undertakings (Protection of Employment) Regulations 1981, commonly referred to as TUPE which purported to transpose the Directive into national law. The other two can not rely on TUPE for reasons not presently relevant. The TEC argued, and the majority of the EAT accepted, that by the time the civil servants resigned from the civil service and became employed by the TEC, the relevant undertaking had already been transferred and therefore neither the Directive not TUPE can avail the erstwhile civil servants.
- Before turning to consider the legal arguments, we set out the relevant findings of the Employment Tribunal.
- Celtec is the result of a merger in 1997 between the North East Wales TEC and the TEC for North West Wales.
- The EAT accepted in paragraph 50 that the description given by the Tribunal in paragraphs 11 and 12 of the reasons could not be faulted. Before us a number of matters were effectively agreed.
- The majority of the EAT considered that the crucial issue was when the undertaking was transferred. It held that the test was when the TEC assumed actual occupation and control of the undertaking. It held that the Tribunal had not applied that test and that therefore the EAT was free to make its own mind up on the facts. It held that the transfer was probably completed in about September 1990 and certainly long before 1993 which was the time when the appellants resigned from the civil service and became the employees of the TEC. It thus reached the conclusion that, although the employees had throughout the relevant period continued doing the same jobs in the same building, the effect of the reorganisation described in the paragraphs of the Employment Tribunal decision which we have quoted was to break the employees continuity of employment. So the EAT allowed the TEC’s appeal. But recognising that the problem was a difficult one they gave permission to appeal to this court.
- Before considering the rival submissions we draw attention to the Acquired Rights Directive 77/187/EEC. The Council of the European Communities adopted this Directive in 1977 because, in the words of part of the preamble, it was
- The Directive has been amended from time to time but at all relevant times it read as follows so far as presently relevant.
- The first version of TUPE was an attempt to transpose the Directive. It is common ground that this did not wholly succeed and that, following an adverse ruling from the E.C.J. that version had to be amended. It is further common ground that TUPE needs to be interpreted in the light of the Directive. We have indicated that it is common ground that the employees can rely as against these employers on such rights the Directive gives them. In those circumstances we consider it right to start by considering the Directive.
- Mr Gavin Millar Q.C. who appeared for the employees in this court but had not appeared below, placed the Directive rather than TUPE at the centre of his submissions. Once it had been agreed that any rights under the Directive were directly enforceable against Celtec, that was a wholly understandable course which rendered marginal much of the argument which had occupied the two Tribunals. In particular the question of when the transfer took place was of much lesser importance than it had been when TUPE was at the centre of the focus.
- He submitted that the court should start with the preamble to the Directive. The effect of the EAT decision is that the rights which the employees had against the DoE have not been safeguarded. The effect of the EAT decision is that the very thing that the Directive was adopted for has not been achieved although there was nothing to suggest that either the DoE or the employees wished this to happen.
- One can distinguish three notionally separate periods – (i) the period when the employees were employed by the DoE and the TECs were not on the scene, (ii) the period when the TECs were on the scene and the employees were seconded to them by the DoE but remained employed by the DoE with the DoE continuing to fund the payment of wages and (iii) the period when the employees had resigned as employees of the DoE and had become employees of the TEC.
- Mr Gavin Millar Q.C. submits that here there was no gap in employment. Each employee continued doing the same work throughout the three periods. When he expressed a wish to be transferred he resigned from the civil service and was then employed by the relevant TEC. All that had happened was that the employer had transferred its responsibilities to its workforce to a variety of new employers over a period of time. The effect of adopting this commercially sensible practice should not be to deprive the employees of any rights but merely to substitute a new employer.
- The mere fact that this process did take a substantial period of time should not have the effect of depriving the employees of the protection which they would have had if the process had happened at the stroke of midnight. Mr Millar submits that it is established in the ECJ case law that a transfer may take place in stages, does not need to take place at an instant in time, and cites Oy Liikenne AB v Liskojärvi and Juntunen Case C-172/99 para 29 and [2001] IRLR 171 and Landesorganisationen I Danmark for Tjenerforbundet I Danmark v Ny Mølle Kro Case 287/86 [1989 ICR 330. He submits that it would be absurd if an employer could avoid the effect of the Directive by setting up a machinery of transfer so that employees transferred over a period of time.
- He submits that, once it is accepted that the transfer need not take place at an instant in time and can take place over a period, then the facts are very important and infinitely variable and it is for the tribunal of fact to evaluate them– see Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice and Lehfarth GmbH Case C-13/95 para 14. The essential facts were found by the Employment Tribunal, they made no error of law in reaching those findings and he rightly emphasises that the appeal only lies for errors of law – Clark & Tokeley Ltd v Oakes (supra).
- Mr Bowers Q.C., who appeared for Celtec, submitted that the proper approach to the Directive was first to establish the date of transfer which was referred to in Article 3 and then to establish what rights and obligations arising from the relevant employee’s contract of employment had on that date arisen in the Department. Those were the obligations which, by virtue of Article 3 were transferred the North-East Wales TEC.
- He submitted that the date of transfer referred to in Article 3(1) was the date of the transfer of the business which was referred to in Article 1, not the date of the transfer of the employee which might or might not coincide with the date of the transfer of the business. Article 2 supported that submission.
- He referred us to Rotsart de Hertaing v V.J.Benoidt S.A. (C-305/94) [1997] 1 CMLR 329 which laid down that at the date of transfer contracts of employment and employment relationships existing on the date of a business transfer were automatically transferred to the transferee by the mere fact of the business transfer and could not be maintained with the transferor. If an employee did not wish the employment relationship to be transferred he was entitled to opt out of the arrangement. See Katsikas v Konstantinidis (C-132/91) [1993] CMLR 845. He submitted that the appellants had opted out by choosing secondment and thus remaining in the civil service for 3 years. See also Mickelsen v Danmols Inventar A/S (C-105/84) [1986] CMLR 316, a case where the national court wished to know the position of those who were employed by the transferor at the date of the transfer but who did not occupy positions as employees with the transferee. The ECJ ruled that where the employee terminates his employment of his own free will at the date of the transfer the Directive has no application.
- As to the date of transfer, he submitted that the transfer of the relevant part of the undertaking of the DoE to each of the new TECs took place and was complete at the time (or over the short period) when that TEC became established and operational in the present case in September 1990. It is implicit in that submission that all those employees who were then on secondment were not part of the undertaking which was transferred in September 1990.
- He submitted that it was not legally open to the ET to conclude that the transfer had not concluded till some years later. To permit such a conclusion would be to introduce uncertainty into the law because the transferee would not know the extent of its obligations. Different civil servants would transfer at different times. Some might stay in the DoE concentrating on other things and then, perhaps years later, accept employment with Celtec.
- He submitted that the employees became employees of the TEC when they accepted an offer from the TEC. Although he accepted that the TEC would never have become the employer of the employees had it not been for the transfer of the undertaking and that thus the two were causally linked, he submitted that this fact did not have as an inevitable result that all the rights and obligations were transferred. In this context he invited us to consider the possibility that some civil servant who initially declined to move to the TEC might then, after a spell doing something else in the Civil Service, decide to accept an offer from the TEC. In those circumstances also it could be said that the TEC would never have become the employer had it not been for the transfer of the undertaking. He submitted that the approach of the ET involved confusing the transfer and the consequences of the transfer.
- He understandably emphasised that this was not a case where the employees were forced to volunteer for secondment nor were they forced to resign from the Department at the end of any period of secondment if they did chose the secondment option. There was not, nor could there be, any suggestion that the DoE or the TEC were deliberately seeking to side-step or avoid obligations under the Directive.
- Mr Bowers referred us to dicta in Teesside Times Ltd v Drury [1980] ICR 338 C.A., which case was also the foundation of much of the reasoning of the majority of the EAT. Those dicta related to a phrase in paragraph 9(2) of Schedule 1 of the Contracts of Employment Act 1972 which re-enacted a provision in the Contracts of Employment Act 1963 and which is similar to the provision now found in section 218(2) of the Employment Rights Act 1996. The phrase was the italicised words in this sentence
- In that case the employee along with all others had been dismissed at 4 p.m. by the receiver of the transferor company with a view to facilitating the transfer. The business of the transferor company was not transferred till a couple of hours later. The submissions with which the dicta were concerned related to the words in italics. Did they refer to the moment in time when the documents were signed or did they refer to a period of time over which the transfer extends? The majority of the court preferred the latter approach. Stephenson L.J. at page 352 said that this
- For this submission Mr Bowers relied on the principle that where an employer transfers part of its business to a transferee, the former employer’s employees can not rely on acquired rights unless at the time of the transfer the employee was working for the part assigned. Thus, for example, someone working in the head office of the DoE in London on some other aspect of employment policy would not be affected by the transfer of the training organisations in Wales – see for example Jones & Kingston v Darlows Estate Agency C.A. (The President, Otton and Mummery LJJ. 6. July 1998 unreported.)
- Mr Bowers submitted it was possible to analyse what had happened as follows. The nationwide undertaking which had been run by 60 area offices of the DoE was transferred to no less than 82 TECs who had all become operational by November 1991. Thus, on this analysis there had been 82 separate transfers by one transferor to 82 separate transferees of 82 parts of the one undertaking previously run by the transferor. The ET had not addressed the question whether and when the employees from the relevant part had been transferred to the appropriate transferee. True it was that none of the appellants had changed the desk from which they were working but the area covered by the one of the 60 Departmental areas in which they were working was larger than the area covered by the TEC into whose employment they entered. So it was possible that their work had completely changed. He invited us to remit this matter to the ET for appropriate findings.
- The principle is not disputed. However, in the light of the acceptance by the Respondent that the 3 employees with whom we are concerned remained in the same building throughout all the relevant time and were employees of a relatively lowly grade it seems probable that the essential nature of their work did not change. I would not think it proportionate and right to remit for further findings on this point.
- As it seems to us the first question is whether the management skills of such of the existing employees of the DoE as were happy to continue in work under the supervision of the TEC formed part of the undertaking which was being transferred. The Employment Tribunal were perfectly entitled to conclude that they did. Those skills would be available to the TEC whether the employees resigned immediately from the civil service and became directly employed by the TEC or whether they preferred to be seconded initially.
- The next question is whether the wording of the Directive implies that the transfer of the undertaking must take place at a moment in time. In our judgement the Directive is sufficiently wide in its terms to embrace a transfer of a business which takes place over a period.
- The last question is whether the ET in holding that, in the present highly unusual circumstances, the period can be as long as several years erred in law. Although we consider the submissions made on behalf of the employers as linguistically formidable – and more formidable in the context of TUPE than in the context of the Directive – we do not consider that they must prevail. Once one accepts that a business can be transferred over a period of time, the establishment of the period of time during which the transfer takes place is a task for the tribunal of fact. We see no legal error in what was done by the ET.
- As a matter of policy, we see no reason to deprive of their accrued rights those who throughout the relevant time continued to work for the relevant business. We have been shown nothing to suggest that the framers of the Directive wished this to occur.
- We therefore allow these appeals, quash the decision of the EAT and restore the decision of the ET. Our reasoning, based on the Directive, applies to each appeal. In the circumstances it is unnecessary to consider the peculiar position of Mr Astley who also relied on TUPE.
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE LAWS
and
MR JUSTICE JACKSON
____________________
| J. ASTLEY AND OTHERS | Appellants | |
- and - | ||
CELTEC LTD. | Respondent |
____________________
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
John Bowers Q.C. (instructed by Mace & Jones) for the Respondent
____________________
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Schiemann:
2. In 1989 the government announced a new initiative for training in the 1990’s and this included the establishment of Training and Enterprise Councils known as TECs. … in England and Wales. This was, as we find, a radical initiative. It was part of the contraction of the civil service and was also intended to provide a more effective liaison between training organisations and enterprise organisations, i.e. groups of employers, with a view to delivering training that was truly needed by industry on a far more local basis than had hitherto been the case.
3. It was always anticipated that this initiative would take some time to implement and the staff concerned, who were all civil servants, were to be seconded to the newly created TECs for a period of three years. In many cases it turned out to be shorter because the secondment was terminable at an earlier date as stated in the letters each secondee received. In some cases it turned out to be longer than three years because some secondees to the TECs applying to be taken back into the civil service had their secondments extended until such time as the civil service had suitable vacancies for them to return to.
6. The TECs are companies limited by guarantee. … The government created the TECs not by any legislation but by a process of policy initiatives and publications. The TECs effectively had a monopoly on the management of all the training and enterprise activities previously carried on by the Employment Department in England and Wales and the TECs were given free access to the information systems and database. Some 80 TECs took over the work of the 60 previous area offices of the Department. We have found as an agreed fact that premises in Wrexham and in Bangor previously used by the Department of Employment as area offices were subsequently taken over by the TECs. There was initially little change in the daily working routine of the staff concerned or in the tasks on which they were engaged.
7. We heard a considerable amount of evidence about the manner in which the staff were seconded and then were asked to take up direct employment with the TEC. It was always the plan that the staff would be seconded. When the TECs originally started up they employed only a handful of their own staff in the whole of England and Wales. The project was staffed by secondees, all civil servants. The projected period of secondment was for some three years. After the three years, or just before, secondees were asked to elect either to resign from the civil service and to take up employment with TEC or to revert to a role in the civil service.
11. The first issue we had to consider was whether there was a transfer of an undertaking. … we … find that there was a transfer of an undertaking. The matter does not admit of a great deal of debate in our view. We should define what we think the undertaking is which was transferred: that is the management of the government funded post-16 vocational training and enterprise activities in England and Wales together with the information systems and database, some staff and some premises. That we think is a recognisable and definable economic entity. There is no doubt that it was run in 1989 by the government. By 1996 all the staff originally seconded had been transferred and the process was complete. The TECs in England and Wales now run these activities with their own staff.
12. Further, it was clear … that the undertaking in question was a “labour intensive” undertaking and therefore the movement of staff from the Department to the TECs was an important defining part of the undertaking and its transfer.
13. The second question we are asked to resolve is whether the applicants were assigned to the undertaking. … In our view they clearly were. If the three applicants before us are anything to judge by they were full time employees dedicated to the undertaking which we have defined, to the extent of 100%. When the North-East Wales TEC started operations in September 1990 there was no difference between tasks they performed with the TEC and the tasks they had with the Department of Employment the day before. It is acknowledged that many of the programmes which the government had guaranteed to provide for prospective trainees and trainees in the middle of their programmes, had to be honoured and continued. We emphasise the fact that training was involved. The careers of young people were at risk and there could be no interruption of activities. The government had a responsibility to the trainees which could not be disrupted. From that point of view a seamless transition was important even if the economic structure was to change with time.
15. … We have come to the firm conclusion that the TEC was an emanation of the State. …
20. The seventh point we have to decide, and probably the most fundamental in this case, was the time of the transfer. Herein lies the novelty of the case. … We have not been given precise dates but we assume that September 1990, which was when the North-East Wales TEC commenced business, was the date on which the transfer commenced. We considered that the direct employment of previously seconded staff represented and constituted a transaction and it was one of series of steps in a very long process, which was a planned process predicted and envisaged from the start, which was to last several years. We have not encountered a case or been referred to a case where the business of transfer has taken some six years, but that seems to be the case in the establishment of the TECs. Regulation 5 (3) of the Transfer Regulations provides as follows:
“... where the transfer is effected by a series of two or more transactions the person so employed immediately before any of those transactions.”
referring to the employees whose rights are protected. In our view, the transfer was a long process starting some time in 1990 as affects these applicants, and ending on a national basis some time in 1996. We have no need to look no further than 1994 in this particular case. [It is common ground that this was a mistaken reference to 1993] That being the length of transfer there were several transactions. Our analysis is that each time a seconded employee became directly employed by the TEC there was another transaction and immediately before that transaction (“any transaction”) that employee was employed by the transferor, i.e. by the civil service and therefore that employee’s rights passed over to the transferee which was the TEC. We see no reason in principle why such a very long period should not be found to be a period of the transfer when that was the plan from the outset. It has been rightly said by the applicants that the setting up of the TEC was “an experiment”. We also have considered the provisions in the terms of employment with the TEC which was to include a five year period of underpinning by the government of the TECs liabilities. … The foregoing analysis is based on the regulations. There is no provision in the Directive which deals with the timing of the transfer, so a fortiori the same reasoning and result can be reached under the Directive as under the Regulations.
22. The eighth question is whether the continuity passes under Section 218 of the Employment Rights Act 1996 (at the time in question this was in Schedule 13 to the EPCA 1978). We have already found there was a transfer for TUPE purposes and by the same reasoning there is a transfer for Section 218 purposes.
…
Our analysis is that during this period of the transfer the secondees entered direct employment at different times. This, in our view, does not affect the smooth working of the Section to preserve their continuity day for day because the transfer was a period and the continuity is the sum of weeks worked. The sum had reached a certain amount at the point the applicants changed from being secondees to being directly employed by the TECs then their continuous employment was counted as a period with the transferee, namely the TEC. Similarly, as to our conclusion under TUPE, each time an employee changed from being secondee to being directly employed he was employed immediately before that change by the transferor Department of Employment. His rights crystallised against the TEC. Each such change was a transaction in the long process of the transfer. We were influenced by the words of Mummery LJ in [Clark & Tokeley Ltd v Oakes [1998 IRLR 577 C.A. ] (para 57) when he referred to the risk of "fortuitous timetabling" depriving employees of valuable rights. In this regard we should say, if it is not already clear, that we consider there has been no attempt whatsoever for these purposes or for TUPE purposes to engineer any particular outcome or to evade liabilities in the way the transfer has been structured. The rationale is justified in business and political terms.”
i) The Directive is directly effective as against the Respondent and each appellant can rely upon such rights as it gives him or her. Celtec in their Respondent’s Notice submitted that the TECs were not emanations of the State and that therefore the Directive could not be relied on by the appellants. However, this point was abandoned before us.
ii) The undertaking referred to in paragraph 11 of the ET decision was transferred and that therefore by virtue of Article 1.1 the Directive applies to the transfer.
iii) The DoE is properly described as the transferor and the North-East Wales TEC is properly described as the transferee within the meaning of Article 2 of the Directive.
“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”
“Article 1.
1. This Directive shall 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.
Article 2
For the purposes of this Directive
(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;
Article 3
1. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing at the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee.”
The arguments in favour of the conclusion of the Employment Tribunal
The arguments in favour of the conclusion of the majority of the EAT
“If … an undertaking …is transferred from one person to another, the period of employment of an employee in the … undertaking at the time of the transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment.”
“makes it easier to identify the time of transfer by reference not to legal and technical considerations of which the employee knows and cares nothing, but to the actual state of affairs known to him. It enables the tribunal to consider the de facto, not de jure, position, and to find a transfer at the time when the new employer is in actual occupation and control of the old business.”
At page 353 he said
“… there is no one stage in the process of transferring a trade or business or undertaking which can be excluded from the time of the transfer by any hard and fast rule, but the question when … an undertaking is transferred or what is the time of its transfer must be a question of fact and degree to be answered by industrial tribunals in the light of common sense and their knowledge of trade and industry applied to all the circumstances of the particular case.”
Respondents’ first alternative submission
Conclusion