United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR P ELIAS (of Queen's Counsel) and MISS D LOBEL (of Counsel) Messrs Macfarlanes Solicitors 10 Norwich Street London EC4A 1BD
For the Respondents	MS J LARDY (A respondent in person)


 


JUDGE PETER CLARK: This case arises out of the purchase by United Airlines Ltd ["United"] of certain routes formerly operated by PanAm between London Heathrow Airport ["LHR"] and the United States of America.

We are concerned with the bearing which that transaction had on the employment of certain PanAm flight attendants, that is air hostesses and stewards, who were London-based.

On 23rd October 1990 United and PanAm entered into an agreement in principle under which United agreed to buy from PanAm part of its business including, in particular, PanAm's LHR authorities, operations and facilities.

The agreement in principle provided for implementation by two definitive agreements, Phase 1 and Phase 2.

We are concerned with Phase 2, which provided for the sale, inter alia, of certain LHR routes.

Under the agreement in principle, United undertook to use its best endeavours to take up to 100 qualified flight attendants from PanAm's Flight Attendance Seniority List at LHR. At the time there were about 400 PanAm flight attendants based at LHR.

In addition to the flight attendants PanAm had another group of London-based employees. They were described as the "pound based" employees, that is, mainly ground staff who were paid in sterling. The flight attendants were within the second group described as "dollar based" employees.

One material distinction, so far as the parties to the commercial agreement were concerned, was that United accepted that they were bound to accept the pound based employees, to whom it was acknowledged the provision of TUPE ["the regulations"] applied. No such acknowledgement was given to the dollar based employees.

The terms of the contracts of employment of the PanAm flight attendants were contained in a collective bargaining agreement ["CBA"] made between PanAm and the trade union IUFA to which the flight attendants belonged.

The Phase 2 agreement was entered into on 14th November 1990. That agreement provided that at closing all the assets identified in the agreement, including the LHR routes, would be transferred to United. Closing eventually took place on 3rd April 1991, at which date the relevant PanAm flight attendants were dismissed.

On 8th January 1991 PanAm petitioned in the New York Bankruptcy Courts under Chapter 11 of the Federal Bankruptcy Laws.

On 25th January 1991 PanAm gave notice to IUFA that the London Flight Service based at LHR would close as a result of the transfer of certain London route authorities to United.

On 31st January 1991 PanAm wrote to its London based flight attendants offering four options:

(1) To submit an application to be considered for employment with United. There was no guarantee that such employment would be offered, and employees were asked to choose one of the three further PanAm options, namely

(2) to apply for a vacancy at the proposed new PanAm London base to be opened at London Gatwick. In fact, that proposal never came to fruition.

(3) to elect, depending on seniority and in accordance with Section 21.B.2 and 4 of the CBA, to fill a vacancy or displace the most Junior flight attendant in the system at one of four American bases in Washington, New York, Los Angeles or Miami.

(4) to elect to accept furlough (that is, redundancy) in which case the employee might be eligible for severance allowance under Section 21.C.1 and 1.B.7 of CBA.

Various deadlines were imposed on the flight attendants for choosing their options. The remaining respondent to this appeal, Ms Fredriksson wished to take employment with United, but was not accepted. She opted for furlough rather than displacement, and was dismissed by PanAm at closing on 3rd April 1991.

The fate of the PanAm flight attendants has led to extensive litigation both here and in the United States.

The Chancery Proceedings

Four PanAm flight attendants commenced proceedings against United in the Chancery Division.

On a motion for interlocutory relief which came before Sir Nicholas Browne-Wilkinson V-C the relief claimed was limited to an order in favour of the third and fourth plaintiffs, who had applied to and been accepted by United, restraining United from treating those plaintiffs, their employees, as being employed other than on the basis of the seniority which they enjoyed with PanAm. The significance of such seniority related both to the level of pay and the order in which flight attendants were able to bid for flights. Under the terms proposed by United those plaintiffs would lose their flight seniority held with PanAm and effectively go to the bottom of the heap with United. The reason for this was that a tension existed between the flight seniority arrangements agreed in the CBA made between United and the union to whom it afforded bargaining rights, the AFA, and the arrangement made between United and IUFA under its CBA.

In resisting the motion, supported by AFA which was added as second defendant, United took four points in answer to the plaintiffs contention that the TUPE regulations applied to transfer their employment, on the same terms and conditions, from PanAm to United, namely:

(1) Do the regulations apply at all?

(2) Was there a transfer of part of PanAm's undertaking to United?

(3) If there was such a transfer, were the former PanAm flight attendants employed in the part transferred?

(4) Would the PanAm contracts of employment have been terminated by the closing of the Phase 2 agreement were it not for the regulations?

We bear in mind that the Vice-Chancellor was dealing with those issues on an interlocutory motion on affidavit evidence. The plaintiffs sought in effect mandatory interim injunctions. He directed himself as to the approach to be taken by reminding himself that he was dealing with an application for interim mandatory relief, and in such a case, the burden on the plaintiffs if they are to obtain such relief is much greater than it is in the ordinary claim for interim negative relief.

In that context he considered each of the four points to which we have referred. As to the fourth point he said this:

"Although I certainly could not say this point was unarguable, I have very considerable doubts whether the Plaintiffs would succeed on this point at the trial. As I have said, the flight attendants were employed centrally and under their terms of employment they could be transferred involuntarily from one home base to another. They had no right to stay at a particular base. More important, under the collective agreement and under the options put to the Pan-Am flight attendants, each flight attendant was given the option to transfer to another place of employment with Pan-Am. It was entirely within the volition of each flight attendant whether or not the Phase II Agreement did or did not terminated their employment with Pan-Am. I am not in any sense criticising the Plaintiffs or those they represent in this case for not exercising that option: they were obviously faced with a human difficulty. But I find it difficult to see at the moment how it can be said that, if the flight attendants had the option to continue elsewhere their employment with Pan-Am, their employment would have terminated by reason of transfer. What has terminated their employment with Pan-Am is not, arguably, the transfer, but their refusal to exercise their option to continue their employment elsewhere. I have considerable doubts whether the Regulations apply to a case where an employee is not employed exclusively at one place and that employee has the option of the closure of that place of business to transfer to another."

In the event, the Vice-Chancellor dismissed the motion on 10th May 1991.

The Industrial Tribunal Proceedings

On 2nd July 1991 35 PanAm flight attendants presented originating applications to an Industrial Tribunal. Relying on the regulations they contended that their employment with PanAm had been transferred to United, and they claimed that they had been unfairly dismissed and/or made redundant by United.

On 14th October 1993 United made application to a chairman sitting at London (North) Industrial Tribunal [Mrs Stoll] for a direction that a specific issue, which they formulated, on the application of the regulations in these cases should be taken at a preliminary hearing. The application was opposed on behalf of the applicants, but the order sought was made. Against that direction the appellants appealed to this tribunal.

On 24th February 1994 this tribunal (Mummery J presiding) dismissed the applicants' appeal. The tribunal directed the trial of a preliminary issue before the Industrial Tribunal formulated in this way:

"On the assumption (for the purposes of the preliminary issue only) that:

(i) the sale and purchase of the Phase Two assets referred to in paragraphs 3.4 of the Applicant's Originating Application constituted a relevant transfer within the meaning of Regulation 3 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the 1981 Regulations), either on (a) 14 November 1990 or (b) 8 January 1991 or (c) 7 March 1991 or (d) 21 March 1991 or (e) 3 April 1991; and

(ii) the Applicants were employed in the undertaking or part transferred; and

(iii) if the transfer was on any date prior to 3 April 1991 that the Applicants were employed by the Respondent immediately on or after the transfer.

The Tribunal is to determine in relation to each such date whether the Applicant's contract of employment would have been terminated by the said transfer within the meaning of Regulation 5 of the 1981 Regulations but for the operation of the 1981 Regulations."

That preliminary issue came for hearing before a full tribunal sitting at London (North) under the Chairmanship of Mr E M Prevezer on 8th, 9th and 10th January 1996. By a decision with full reasons dated 16th January 1996 the tribunal answered the question in the affirmative. Against that decision United now appeal.

The American Litigation

It is unnecessary for the purposes of this judgment to recount the progress of that litigation in any detail.

Suffice it to say that the instant appeal was originally listed for hearing before this tribunal on 24th July 1996 .

On an application by United to vacate that date on the grounds that a global settlement of all litigation was likely to be reached and approved in the American Courts on 23rd July 1996, I granted the application at a directions hearing held on 18th July subject to the proviso that unless the appeal was withdrawn by 31st July 1996 it would be relisted on the first available date this term. That was to allow for any of the applicants to pursue their Industrial Tribunal claim if they so wished.

33 of the applicants signed up to the global settlement; they do not appear and are not represented today; we have seen correspondence which indicates that formal withdrawal of their originating applications and a consequential order by the Industrial Tribunal dismissing their complaints is imminent. However, we have not seen any such formal order made by the tribunal, and in these circumstances we think it right to adjourn those cases on the application of Mr Elias for United. The Registrar is to be notified by the parties when and if those 33 applications are formally dismissed.

That leaves two of the original respondents to this appeal.

Ms Lardy signed the global agreement, but now claims that United have repudiated that agreement. United dispute that contention. In the event, United have withdrawn their appeal against her on the grounds that they do not wish to be thought to be in breach of that agreement by pursuing this appeal. Accordingly we dismiss the appeal in her case.

That leaves Ms Fredriksson as the sole respondent to the appeal.

The Appeal

The appeal raises a short point. Was Ms Fredriksson's employment terminated on 3rd April 1991 by reason of the transfer, as the tribunal found, or was it by reason of her failing to exercise the option to accept displacement with PanAm? The issue is one of causation.

Mr Elias submits that it is the latter. He contends that the purpose of Directive 77/187 and the regulations is to confer on employees a right to preserve their employment on (as near as may be) its existing contractual terms.

He points out that under the PanAm contract Ms Fredriksson had no right to remain at the LHR base. The CBA Section 22 provides for involuntary transfer, where the company wishes to transfer flight attendants from a base station against their will. However, that is not a right under the contract which PanAm chose to enforce. Instead, PanAm offered to their employees the option of voluntary displacement or furlough. Ms Fredriksson opted for furlough.

It seems to us that the purpose of the directive and the regulations is clear. It is, as the European Court of Justice put it in the case of D'Urso and Others v Ercole Marelli Elettromeccanica Generale SpA (in special administration) and others [1992] IRLR 136, at paragraph 9 and 12:

"9 ... the Directive is intended to safeguard the rights of employees in the event of a change of employer by making it possible for them to continue working for the transferee under the same conditions as those agreed with the transferor. The rules applicable in the event of a transfer of an undertaking or business to another employer are intended to safeguard, in the interests of the employees, the existing employment relationships which are part of the economic entity transferred.

...

12 It follows that when an undertaking is transferred the contracts of employment or employment relationship linking the personnel employed to the undertaking transferred cannot be continued with the transferor and continues in full effect with the transferee. ..."

Had PanAm exercised its assumed right of involuntary transfer in the case of Ms Fredriksson and had she refused to transfer, it is arguable that the chain of causation would then broken. However, on the assumptions which we are required to make for the purposes of the preliminary question, the part of the undertaking in which Ms Fredriksson was employed by PanAm was transferred to United. She wished to continue in that employment with United. She was not permitted to do so. It was the transfer which caused the termination of her employment.

We are urged to adopt the view of Lord Browne-Wilkinson which he apparently expressed in that passage of his judgment to which we have referred. We decline to do so, bearing in mind that he was considering the matter on an interlocutory motion. His view was therefore necessarily provisional.

In these circumstances we have reached the conclusion that the Industrial Tribunal was entitled to decide the preliminary question in the way in which it did. This appeal is dismissed.