Scottish Court of Session Decisions

The respondents are former employees of the appellants. They brought applications to the Employment Tribunal claiming unfair dismissal. The Tribunal upheld their claims and made monetary awards. The Employment Appeal Tribunal upheld that decision.

The relevant facts are set out in detail in the decision of the Employment Tribunal. The appellants are a company who supply catering services to offshore installations and sea-going vessels. The respondents had been engaged by the appellants to perform these various tasks. At the material time the respondents were working as members of the catering staff on a sea-going vessel known as the Flex Installer. This vessel was owned by a French company and managed by a Norwegian company called Uglands. The appellants had a contract with Uglands to provide the catering services on the vessel. In December 1995 the vessel was sold by its owners and the appellants submitted proposals to the new owner to retain the contract. They were, however, informed that the contract would not be continued and that another firm would be taking over the catering services. In these circumstances the respondents were dismissed.

The respondents contended that in terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981, which were passed to implement Council Directive No. 77/187/EEC, there was no relevant transfer of an undertaking and accordingly the employment of the respondents was not deemed to have effect as if originally made with the new contractors. They further maintained that neither the Directive nor the Regulations applied to persons employed on sea-going vessels. The appellants contended that the Regulations did apply and had the effect of transferring the employment of the respondents to the incoming contractors. The respondents' contentions were upheld by the Tribunal and by the Employment Appeal Tribunal.

Article 1 of the Council Directive reads:

Regulation 2(2) of the Transfer of Undertakings (Protection of Employment) Regulations 1981 provides:

Regulation 13 applies to exclusion of employment abroad or as a dock worker, and paragraph (2) provides:

The general purpose of the Regulations is to protect employees, and Article 7 of the Council Directive provides that the Directive shall not affect the right of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to employees. In these circumstances it is open to the United Kingdom, when making regulations to implement the Council Directive, to make provisions which may be regarded as more favourable to employees. In particular, in so far as there is an exclusion in the Council Directive which removes employees from the scope of its protection, that exclusion can be deleted or modified by the Member State.

The first matter to be considered is whether or not there has been "a relevant transfer". The decision of the European Court which most clearly sets out the necessary criteria is Spijkers v. Gebroeders Benedik Abattoir C.V. [1986] ECR 1119. What is there said is that

Counsel for the appellants before this court accepted that the Employment Tribunal had correctly identified the relevant tests but submitted that they had placed an additional hurdle in saying that there was no decisive element. The relevant part of the Tribunal's decision is in the following terms:

It was the final sentence of that passage which was criticised by counsel for the appellants. He maintained that the Tribunal should not have been looking for a decisive element but should have considered all the relevant factors and taken a decision having considered all of those factors. He further maintained that the reference to a decisive element implies that there is a burden of proof on the transferor when in fact there is no burden of proof specifically on either the transferor or the transferee. It was accepted by counsel, as indeed had been accepted by the Employment Appeal Tribunal, that whether or not there was a relevant transfer was a question of fact, and this court could only interfere with the Tribunal's decision if it had applied the wrong test or, on the basis of the facts found, had reached a perverse conclusion. Accordingly, counsel accepted that but for the sentence to which we have referred in the Tribunal's decision, he could not maintain that the Tribunal was not entitled to come to the conclusion which it did.

In our opinion counsel's criticism of the Tribunal is not well-founded. In order to reach a conclusion one way or the other the Tribunal would have to be persuaded one way or the other by the relevant facts. Accordingly we are not satisfied that the use of the word "persuade" indicates that the Tribunal is improperly imposing some burden of proof on the appellants. If the Tribunal had referred to the absence of any decisive factor it might have been arguable that the appellants' complaint was justified. However, what the Tribunal has said is that there was no decisive element to persuade them that an economic entity had been transferred, and this was after considering all the relevant factors. Accordingly, while the sentence might have been better expressed, in our view all it means, read in the context of the reasoning as a whole, is that the Tribunal considered that the problem for the appellants was that there was nothing in the factors which it considered which enabled it to reach the conclusion that a transfer of an economic entity had actually occurred. Accordingly we consider that on this ground the appeal must be refused.

The second ground upon which the Tribunal rejected the appellants' contentions was that the respondents, despite being employed by the appellants, were to be regarded as members of the crew of the vessel and in terms of Article 1.3 of the Directive and Regulation 2(2) members of the crew of a sea-going vessel were excluded from the provisions of the Directive and Regulations. The argument before the Tribunal, and indeed the Employment Appeal Tribunal, appears to have centred around the question of whether or not the respondents could be regarded as members of the crew of the vessel. Before this court, however, counsel for the appellants adopted a different approach. His submission was that, accepting that the respondents were members of the crew, nevertheless it was not in all circumstances that the crew of a sea-going vessel were excluded from the benefit of the Regulations. Article 1.3 does not in fact refer to the crew at all, providing as it does that the Directive shall not apply to sea-going vessels. As the Directive is concerned with the employment of individuals and not vessels, plainly this Article has to be construed. Parties were agreed that the proper construction, in accordance with previous cases, was that the Directive does not apply to sea-going vessels or to the crews of such vessels. However, this is an exclusion from the benefit of the Directive and Member States are entitled to relax that exclusion. Counsel submitted that Regulation 2(2) plainly did constitute such a relaxation. Where it is said, in the Regulation, that the transfer of part of an undertaking does not include reference to a transfer of a ship without more, it clearly implies that if there is more then the reference to transfer of a part of an undertaking does include references to the transfer of a ship. The fact that crews of a sea-going vessel are not to be automatically and completely excluded can also be seen from Regulation 13. Counsel for the respondents submitted that the Directive was clear and excluded the crews of sea-going vessels. As far as Regulation 2(2) was concerned it could be construed as meaning that as far as the transfer of a business was concerned those employees who were part of that business would not be excluded, but in so far as they were employees who were engaged as crew of a sea-going vessel, they would be excluded.

In our opinion Regulation 2(2), which is what we have to construe, does not automatically exclude all crew members of sea-going vessels. If we take the example of a shipping company with two vessels, if one of those vessels is sold to another company, the crew would be excluded from the Regulations. This would be because there has been the transfer of the vessel, but there is "nothing more". This would be consistent with the concept expressed in Spijkers that the sale of an asset does not constitute the sale of part of a business. If, however, the whole of the company was taken over by another company then the whole of the business would be transferred, including, of course, the two vessels. In that situation there would be transfer of the business as a whole and this would constitute more than the mere transfer of the ship or ships. In that situation it appears to us that on a proper construction of Regulation 2(2) the crews of the vessels would not be excluded from the benefit of the Regulations. This construction would also give some content to Regulation 13 which counsel for the respondents frankly admitted was inconsistent with his interpretation of Regulation 2(2). On this aspect of the appeal, therefore, we consider that the appellants would be entitled to succeed. However, as they required to succeed on both aspects of the appeal in order to overturn the decision of the Tribunal, the appeal, as a whole, must fail.