United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR RICHARD MAWHINNEY (of Counsel) Messrs Clarke & Co Solicitors Commercial Law Chambers Roddis House Old Christchurch Road Bournemouth BH1 1LG
For the Respondents	THE FIRST RESPONDENT IN PERSON THE SECOND RESPONDENT IN PERSON THE THIRD RESPONDENTS NEITHER PRESENT NOR REPRESENTED


 


MR JUSTICE MORISON (PRESIDENT): This is an appeal against the unanimous decision of an Industrial Tribunal held at Exeter which concluded that the applicants were dismissed but there dismissal did not occur as a result of a transfer of undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 applied; that they were dismissed by reason of redundancy by the first respondent, Magna Housing Association who were liable to pay redundancy payments to each of the two applicants, Mr Turner and Mr Raison; that the applicants were unfairly dismissed by Magna Housing Association but they suffered no consequent loss and therefore they were not awarded any compensation; and finally, that as they had been dismissed without the full statutory notice to which they were entitled Magna Housing Association were ordered to pay them sums in lieu of notice.

It will be apparent from what I have said that the proceedings arose out of a complaint of unfair dismissal made by Mr Turner and Mr Raison both against their former employers, Magna Housing Association and secondly a company called Landscaping & Grounds Maintenance Ltd who were the alleged transferees of the business in which they were employed.

In this judgment we will refer to the Regulations as "the Regulations"; and to second respondents as "the Company".

The applicants/employees were engaged on behalf of Magna Housing Association to carry out ground maintenance work. The Magna Housing Association had "entered into a contract with its in-house Works Department to attend to grounds maintenance; and into contracts with external contractors to deal with grass-cutting". Magna Housing Association had themselves taken over some of the housing stock from the West Dorset District Council and were supplying services to the authority, pursuant to the statutory requirement that parts of the Council's activities should be contracted out.

In June 1996, according to the Industrial Tribunal, Magna decided that it would be more economic to combine the grounds maintenance and grass-cutting requirements under one contract for a three year term with an external contractor, and accordingly, tender documents were prepared. It was made plain to each prospective contractor that the contracting out of the grounds maintenance work constituted a transfer to which the Regulations applied, and each contractor was advised of the applicants' terms and conditions of employment on the basis that it would be required to employ them if awarded by the contract. As the tribunal put it, the final contract document envisaged that the contractor to be appointed would be required to provide grass-cutting and grounds maintenance services in accordance with the specifications and subject to the terms and conditions contained in the agreement.

According to the Industrial Tribunal, in February 1997 the applicants were first advised by Magna of its intention to contract out the work for which they were employed; and this involved a transfer subject to the provisions of the Regulations.

They had a meeting on 14th April 1997 with the new prospective contractors, namely the Company. Since what happened at that meeting will be the subject matter of further deliberation by an Industrial Tribunal, the less we say about it the better. It is the applicant's case that they did not know why they were going to the meeting; they did not expect to see the new contractor at that meeting. It was a relatively short meeting at which they were confronted with an option and told that they had to make up their minds within, effectively, five minutes, because otherwise the new company would have to advertise their positions. According to their IT1's they were unprepared to make up their minds then and there; they were refused, so the applicants say, an opportunity to consult in one case with the applicant's wife before giving a decision. That meeting occurred in the morning of 14th April. According to their IT1's it said:

"Having had time to think I decided next morning I did want to work for the new contractors and asked Mr West to telephone, although it was less than 24 hours later. I was told that the contractors had already made other arrangements."

The applicants therefore remained at work with Magna, and came to leave their employment in circumstances where they were paid a redundancy payment and Magna were ordered to pay the monies to which I have referred.

Magna have brought this appeal on the basis that since the Industrial Tribunal's decision was promulgated on 25th November 1997, this Court has given a judgment in the case of ECM Vehicle Delivery Service Ltd v Mr B Cox & Others which they contend materially alters the position. They say on this appeal that on the facts as found by the Industrial Tribunal, there was, contrary to the tribunal's finding, a transfer of an undertaking from Magna to the Company. What is said is that the case of Süzen to which the Industrial Tribunal referred, did not overrule the previous decision of the Court in the case of Schmidt. On the contrary, in Süzen the European Court of Justice referred to their previous decision with approbation. In those circumstances, Counsel makes the forceful submission that the facts of this case are in distinguishable from the facts in Schmidt, whereas the facts of this case are manifestly distinguishable from the facts in Süzen.

In Süzen the European Court of Justice held that all that had occurred on that facts of that case was that a contractor had lost one of its customers. In the case of Schmidt the Bank's only cleaning business was transferred to the contractors. The cleaning of the Bank's own premises was a self-contained business of its own, and although no assets were transferred and Frau Schmidt had been dismissed so that she did not transfer, nonetheless, as the European Court held, this was the transfer of a business. We indicated in the ECM decision that the circumstances in which a tribunal will conclude that there is a "mere transfer of activities" on the one hand as opposed to a transfer of an economic entity on the other, will differ widely and it will be a matter of judgment for the tribunal in every case to decide which side of the line the case falls on.

It seems to us on the facts of this case that the Industrial Tribunal for very understandable reasons has fallen into the error of assuming that the case of Süzen had effectively led to a conclusion that the decision in Schmidt was no longer applicable. It seems to us that that was an error of law as has been submitted to us in a skeleton argument in support of this appeal.

Here, the activities of Magna in relation to grounds maintenance were transferred so that the same jobs were being done before and after the transfer; that the fact that no assets, if that be the position, were transferred is not determinative, nor is it determinative that the employees did not themselves transfer. As we indicated in the ECM decision, if the taking on or not of the workforce controls the application or otherwise of the Regulation, then the question at issue is circular. The issue as to whether employees should have been taken on cannot be determined by asking whether they were taken on. Accordingly, even if the applicant in this case had raised a valid objection within Regulation 5(4)(b), that would not have assisted the tribunal in arriving at its conclusion as to whether there had been a transfer. It was a factor but by no means a determinative factor.

It seems to us that the only conclusion that was open to this Industrial Tribunal on the facts put before them would have been that there had been a transfer of part of Magna Housing business, namely the business of grounds maintenance, like the Bank's cleaning business in the Schmidt case.

It may be that the distinction between the transfer of a mere activity on the one hand and the transfer of a business on the other, is reflected in a sense in our statutory definition of redundancy. There, various redundancy situations are described, including cases where a business or part of a business has closed down on the one hand, and where the requirements of an employer to go on employing the number of employees to do work of a particular kind has ceased or diminished on the other. It may well be that in the Süzen case that would have been a Category 2 type of redundancy, whereas in the Schmidt case and in this case, it was a case where the business in the hands of the transferor had closed down and had then been started again by the new contractor. Those features are important when it comes to deciding whether there is a transfer of a business within the meaning of the Regulations.

Accordingly, without criticising the tribunal at this stage on that point, we have to say that we respectfully disagree with their reasoning. However, the way the tribunal carried out its judicial function in this case, no doubt from good motives, leave a lot to be desired. We have been told, for example, that the actual contract which the Company signed to acquire the business was presented to the Industrial Tribunal just before the lunch recess and that copies of that contract were not made available to the applicants who were unrepresented. Furthermore, as we understand it, the applicants were not invited to give evidence themselves in relation to the transfer issue. We cannot emphasise enough in the Employment Appeal Tribunal the need for Industrial Tribunals to include all parties within their hearing process. It is a denial of justice for a Court or Tribunal to act on the basis of information which is provided to it which is not available to a party. It is clear from paragraph 3 of the tribunal's decision that part, at any rate, of their reasoning process in relation to the question of transfer was posited on the basis of a document which they received in the way I have described. That is not the doing of justice in a visible and transparent way. Justice must, as everybody knows, not only be done but be seen to be done. But because we have taken the view that the only proper outcome of this case can be on the transfer question, that there was a transfer, we are not prepared to leave that issue open for another tribunal to consider in a fair and just manner.

That being so, the question then arises as to whether in the circumstances the applicants can be said to have objected to the transfer so as to deprive them of any remedy against Magna or the transferee. Regulation 5(4A) and (4B) provide:

"(4A)Paragraphs (1) and (2) above shall not operate to transfer his contract of employment and the rights, powers, duties and liabilities under or in connection with it if the employee informs the transferor or the transferee that he objects to becoming employed by the transferee.

(4B) Where an employee so objects the transfer of the undertaking or part in which he is employed shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor."

The issue as to whether a person has objected to becoming employed by the transferee is one which must be decided having heard all the evidence. In this case the applicants did not give any evidence to the Industrial Tribunal. Despite that, they have made findings consistent with a position in which they appear to have held that an objection had been made within the meaning of the Regulations.

We do not agreed with that approach.

It may be when a tribunal comes to consider this question that they will wish to look carefully at the circumstances of the meeting of 14th April 1997 when the applicants were confronted with a position in which they had to apparently make a choice. Tribunals will be well familiar with the position where employees are confronted with situations or react to situations in the heat of the moment without full consideration of their implications. It may well be that an Industrial Tribunal will wish to ask themselves the question whether even if they did indicate an objection at that meeting, that was given fully, knowingly and consciously, so that one can say that the mind went with the statement that was made. People should know precisely where they stand and be given an opportunity to reflect on their position before being asked to make decisions which may affect their future employment.

The applicants have told us, but this is untested, that, for example, they did not know what the base was where they were to work; they tells us, again untested, that in February they had been given an indication that any new person would be not employing them for 12 months in the year, but only for a limited period during presumably the growing season. One of them tells us, again untested, that he specifically asked for time to consider his position and discuss it with his wife. They have told, again untested, that they were told by the new company's representative that they would have to make up their minds because otherwise if they did not to go across, their positions would be advertised. Yet within 24 hours, they were told, according to them, that the contractor had already made other arrangements. All those matters are matters which the tribunal will wish to consider, just as they will wish to consider the explanation which is contained in the IT3 of the Company setting out a different version of what took place on 14th April 1997.

We feel that this issue can well be left for judicial examination by another Industrial Tribunal. We think it would be undesirable in the light of the findings which have been made in this case and the criticism we have made of what has happened, that it should not be heard and determined by the same panel. A differently constituted panel would therefore be appropriate. They will be proceeding on the basis that the issue before them is whether in all the circumstances it can be said that the applicants in this case had objected within the true meaning of the Regulations, having regard to the purpose for which the Directive was made, namely to provide protection for employees where there is a change of employer.

To that extent, therefore, the appeal is allowed and the matter remitted back for rehearing by another Industrial Tribunal.