United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR M WEST (Senior Advocate) Peninsula Business Services 361-365 Chapel Street Manchester M3 5JY
For the First, Second and Third Respondents	MR B CARR (of Counsel) Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE
For the Fourth Respondent	MR B NAPIER (of Counsel) Messrs Biddle & Co. Solicitors 1 Gresham Street London EC2V 7BU


 


MR JUSTICE MORISON (PRESIDENT): This is an appeal by OCO Heating and Mechanical Engineers Ltd who I will refer to (as "OCO") from a decision of a Tribunal sitting at London (South), which held that the contract of employment of Messrs Bissett, Harden and Murphy, to whom I shall refer as the Applicants, transferred from Ellis Tylin Benham Ltd, who I will call ("ETB") to OCO as of the 1 May 1995 in accordance with the provisions of the Transfers of Undertakings (Protection of Employment) Regulations 1981 which I shall refer to as the ("Regulations").

Briefly the facts may be summarised in this way. The City of Westminster Council (the "Council") divided up its mechanical and electrical work in relation to residential properties into three areas, A, B and C. The ETB was responsible for the M&E work in areas A and B, the Council's own Direct Services Organisation was responsible for the work performed in area C. In relation to the non-residential work, ETB did the M&E work north of Oxford Street and the Direct Services Organisation performed the work of that type South of Oxford Street.

As part of the process of reorganisation, the Council put the M&E work for the areas A, B and C out to competitive tender, but no longer as the three previous areas, but as eight contract areas with individual contracts within each area. The Council was of the view that the activity which it was carrying out would render the Regulations applicable and accordingly informed those companies who were tendering for the work of this belief.

The M&E work for the eight new contract areas was successfully tendered for by three companies. OCO, Goddard Building Limited ("Goddard") and Seaflame Limited ("Seaflame"). ETB failed to win any of the contracts put out to tender, and accordingly it was their view that its workforce should be transferred proportionately to the three new contractors.

Discussions and negotiations took place between the three companies, ETB and the Council. Goddard took on seven men and Seaflame took on four, that is of the ETB's workers. It is the situation regarding the 'transfer' of the three Applicants from ETB to OCO that has led to this case being heard before us.

The Industrial Tribunal were faced with a question as to whether the Transfer Of Undertakings Regulations applied in the circumstances of this case, and in particular whether the three Applicants were assigned to the part of the business which was transferred to OCO. In looking at the issues at a preliminary hearing, Judge Peter Clark identified as the only arguable point, whether the Applicants were to be transferred to OCO by reason of the nature of the work which they did immediately prior to the transfer. In other words as we understand his decision and as confirmed by the Notice of Appeal and by the able submissions of Mr West on behalf of the Appellants, OCO, there is no current live issue as to whether there was a transfer of an undertaking in relation to the event which lead to the three companies taking on that part of the work which previously had been done by ETB and the direct labour organisation.

The Industrial Tribunal found as a fact that on 25 April the three Applicants were offered employment on a continuation basis with OCO as of 1 May 1995. That finding is at sub-paragraph 50 on page 31 of our file. They confirmed that position in paragraph 14 of their conclusions where they say this:

"The First Respondents [who were OCO] at an interview on 25th April 1995 offered the Applicants continuation of employment with the First Respondents as of the 1st May 1995 on the basis that the First Respondent was of the understanding that the Transfer Of Undertakings Regulations applied, and that was the position as at the 25th April 1995, and would have remained the First Respondent's view had the Council not made it a condition of accepting the First Respondent's tender that the First Respondent take on all of the DLO Staff. The Second Respondents [who were ETB] acted honourably throughout insofar as their staff were concerned in trying to resolve their employment position, and they took steps immediately they knew they were not going to be successful in the tender process to contact the successful tenderers to make the appropriate arrangements to ensure a smooth transfer of staff. The workforce of Ellis Tylin were divided up into appropriate groups and "assigned" by Ellis [that is by ETB] to work which they previously did so as to follow the work which was done by the new contractor."

The Industrial Tribunal were presented with arguments, both oral and in writing and were referred to a number of reported decisions.

It is not the case advanced on behalf of the Appellants in front of the Employment Appeal Tribunal that there has been any overt misdirection in law. Rather the suggestion is that the Tribunal has not approached the question of whether the Applicants were assigned to the work which was taken over by OCO in a correct and sustainable manner.

The Industrial Tribunal's conclusion was based on the fact that OCO and the Applicants had been working on the basis that the Regulations did apply; that the transfer of the other ETB employees to Goddard and Seaflame was done on the basis of an appropriate number of ETB's staff in relation to the proportion of the work which those entities had taken on and which had previously been done by ETB, and on the basis that the workforce of ETB had been divided up into appropriate groups and assigned by ETB to the work which they had previously done, so as to enable the employees to follow the work taken on by the new contractor.

They reminded themselves in paragraph 18 of their Decision of the purpose of the Regulations. They say this:

"There was an actual transfer of staff and offer of employment by the First Respondent to the Applicants - there was discussion between the original contractor and the new contractor there was in our view an acceptance by the First Respondent [OCO] that insofar as these Applicants were concurred the Regulations did apply, the new contracts covered different geographical areas but incorporated the original areas and, the work is substantially the same. We do not believe that the Regulations are "defeated" merely because the whole of the work done by one company is subsequently carried out by more than one company, if that were possible we can envisage situations where potential transferees of a business would set up one, two three associated companies or make arrangements with third parties with a view of defeating by the Regulations."

Then they said in paragraph 19:

"19. The purpose of the Regulations, is to protect employees. The Regulations were drawn by lawyers and have to be implemented by business men. One must interpret them in a common sense and practical way to achieve the purpose of the Regulations. We believe that the way that the Second Respondent [ETB] approached the matter was correct they sought from the Third Respondents [the Council], who had awarded the new contracts guidance as to the approximate breakdown of the work that they previously done between the new contractors confirmation that the new work was substantially the same and then allocating the staff according, their actions were within the spirit and intention of the Regulations.

20. In our opinion the Transfer Of Undertaking Regulations do not apply and indeed the First Respondents [OCO] and Third Respondents [the Council], and indeed the Applicants anticipated and intended that the Regulations should apply. The First, Second and Third Respondents were well aware of the consequences of the Regulations and especially so the First Respondents [OCO]. In our unanimous opinion the Applicant's contracts of employment transferred by virtue of the Regulations at midnight on the 30th April/1st May 1995 to the First Respondents [OCO]."

The Appellants here have presented the following argument. They say that the Industrial Tribunal's approach to the assignment issue, was wrong in law. Firstly because the Industrial Tribunal appeared to have assumed that the Regulations applied either to all of the work carried out by ETB and the DSO or to none of it. Secondly they criticised the Tribunal for making an assumption that if a party believed that the Regulations applied then the Regulations did apply, which was fallacious in law. Thirdly, the Tribunal assumed that if the Regulations applied to a part of the work done by the DSO, which formed part of area 1, the same conclusion resulted in relation to the rest of area 1, even though the staff deployed to carry out the work previously worked throughout old areas A and B. Fourthly, despite time sheets being put before them, the Tribunal failed to take proper account of them or to explain why those time sheets were not relevant to their decision. Five, despite there being no evidence or any expressed conclusion that those in control of the retendering exercise were seeking to defeat the operation of the Regulations, the Industrial Tribunal erroneously applied, what is described in the submission as 'an evasion principle', in coming to their conclusion that there was a transfer and that the three Applicants were transferred to OCO. Finally, the Tribunal failed to consider the allocation of staff to the new contracts in considering the before and after situations, which is the approach supported by the majority of the authorities.

I hope I have done justice in a summary form to the extent of the submissions which was made to us. Stress was placed in the course of these submissions on various passages from the decision in the European Court of Justice of Botzen and in particular to the statements made in the opinion of the Advocate General, Mr Gordon Slynn QC, as he then was. Reference was also made to dicta in the case of Süzen -v- Zhenacker Gedaudereingung GmbH Krankenhausservice Lefahrt GmbH and to what was said by this Court in that case. The appeal really amounted to an attack on the methodology adopted by the Industrial Tribunal in this case, in their approach to the question as to whether these Applicants were assigned to the work which was transferred to OCO.

In response, it was submitted to us that this was a somewhat unusual transfer type situation. This was a case where in relation to the DSO and ETB, the whole of the work was being transferred out to three new entities. This was not a case like Botzen or other cases where a transferor retains part of his business and transfers another part out to another entity. It was not so much a question, it was submitted by Mr Carr on their behalf, of looking to see whether the transferor retained any of the employees, it was rather a question of looking to see how all the employees were to be accommodated within the transfer. To that extent, it was perfectly proper for the Industrial Tribunal to take into account the agreement which had been made between the parties, including the agreement which was made between OCO and the three Applicants and which would have been honoured, but for commercial pressure applied by Westminster City Council during the contractual phrase which required OCO to take on more Direct Labour Organisation employees than they had anticipated when they made the offer to these three Applicants.

It was submitted by Mr Carr in this case, that the allocation or assignment of employees to the work was done by agreement; that arrangement should not disadvantage an employee who, by reason of the parties' acceptance of the position, would or might have been deterred from arguing that they should have been transferred to one of the other entities. The fact of agreement was a matter which the Tribunal were entitled to take into account.

Mr Napier's position is similar on behalf of ETB. He said that there were two questions before the Industrial Tribunal. One, was there a transfer, and two, if there was, were these employees assigned to a part transferred to OCO? He pointed out that the only issue before this Court was the second question, despite the fact that some of Mr West's submissions may have strayed into the first. He drew out attention in particular to a decision which was recently given by the Court of Appeal in a transfer case, namely, Jones & Kingston -v- Darlows Estate Agency which is not yet reported but the E.A.T. reference is EAT RF97/1246/3. There the Employment Appeal Tribunal had criticised the approach of the Industrial Tribunal to the question as to whether the employees were assigned to the part of the business which was being transferred. What the Employment Appeal Tribunal said was this:

"We have come to the view the Industrial Tribunal did not make such findings of act as were necessary to consider the question whether Mr Kingston and Miss Jones were assigned to that part of the undertaking which was transferred, namely the Welsh area. We consider that the Tribunal were acquired to make findings of fact within the ambit of those matters set out in Duncan Web Offset (Maidstone) Limited -v- Cooper [1995] IRLR 633 and it was an error of law merely to rely on hypothetical contingencies that might occur rather than considering what both employees were actually doing. Moreover, each of the Applicant's applications was entitled to have their position [I think it must be each of the Applicant's was entitled to have their position considered separately] and their job function was such that it may be their prospective positions could not be equated. This is not a matter which it is possible to speculate in view of the absence of findings of fact made by the Tribunal."

And in support of the decision of the Employment Appeal Tribunal, Counsel submitted to the Court of Appeal this:

"The Tribunal did not embark on the necessary fact finding exercise. Its reasoning for its decision is quoted in paragraph 21 where the Tribunal finds the employees responsibilities extend to Wales and the West. Thereafter, he said, he considers what would have happened if certain events had occurred but it had made no findings about what actually did happen in relation to the amount of time spent in dealing with different areas. How costs were apportioned. What the value of each Applicant's work was to each area and the number and frequency of problems which required the employee's attention. In failing to do this, he said, the Industrial Tribunal had erred in law and that the Employment Appeal Tribunal had correctly allowed the appeal."

That submission rang a bell with the Employment Appeal Tribunal in this case, in the sense that it was similar, if not identical to the submission which Mr West had put before us this morning. In giving their judgment, the Court of Appeal said this:

"In my judgment there is no reason to doubt that the Industrial Tribunal did carry out this exercise in this case as it was bound to do. It was not under any obligation to set out in its Extended Reasons all the evidence which it heard on this point. In my view the Industrial Tribunal did not, as Mr Nicholls submits that it did simply considered the contractual relationship between the parties and Cornerstone, it is clearly stated in the decision that its conclusions of fact were reached on the evidence and that is a conclusion which has not been demonstrated by argument before the Employment Appeal Tribunal or this Court as unsupported by evidence or is contrary to uncontradicted evidence.

In brief, the Industrial Tribunal asked the right questions relating to the assignment of the two Applicants to the part of the undertaking transferred, it made finding of fact that they were not so assigned. It reasoning is not defective. The Extended Reasons which are clear and full contain an account of the relevant facts sufficient to explain the application of the law to those facts and to enable the parties to know why they have won or loss as the case may be, that the case before the Industrial Tribunal."

So says Mr Napier is the position here.

It seems to us in this case that the last submission referred to made by Mr Napier is entirely correct. There can no longer be any doubt but that the issue as to whether a person has been assigned to a part of a business which is being transferred is a question of fact for the fact finding Tribunal. That was said not just by the Employment Appeal Tribunal in Duncan at paragraph 15:

"1. X has a business in which he employees a number of people. X transfers part of his business to Y. In order to determine which employees were employed by X in the part transferred it is necessary to ask: which of X's employees were assigned to the part transferred - Botzen [1986] 2 CMLR p.50. In Gale it was suggested that the question might be asked whether a particular employee was 'part of the .... human resources' of the part transferred, which is the same thing put another way. The contracts of employment of those who were so assigned will, unless the employees object, pass over to the transferee, thus giving effect to the purpose of the Regulations and the Acquired Rights Directive, pursuant to which they were made, that an employee should not forfeit his job because of a change in the identity of his employer. There will often be difficult questions of fact for industrial tribunals to consider when deciding who was 'assigned' and who was not. We were invited to give evidence to industrial tribunals about such a decision, but decline to do so because the facts will vary so markedly from case to case. In the course of argument a number were suggested, such as the amount of time spend on one part of the business or the other; the amount of value given to each part of the employee; the terms of the contract of employment showing what the employee could be required to do; how the cost to the employer of the employee's services had been allocated between the different parts of the business. This is, plainly, not an exhaustive list; we are quite prepared to accept that these or some of these matters may well fall for consideration by an industrial tribunal which is seeking to determine to which part of his employers' business the employee had been assigned."

But was also reaffirmed by the Court of Appeal in the unreported judgment where they referred to that case and to Buchannan-Smith -v- Schleicher & Co. International Ltd [1996] ICR 613 and to a passage in the Advocate General's opinion in Botzen which says that the issues to whether someone is assigned to a part of the business is largely a question of fact.

The second general observation we would make is that it is wrong for parties to cite the opinion of the Advocate General in Botzen without drawing attention to the fact as it unquestionably is a fact, that the European Court of Justice itself did not accept the opinion as laying down the correct test to be applied. That emerges from looking at what the learned Advocate General had said, comparing it with the paragraphs 13 and 14 of the Judgment of the Court of Justice in that case, where they set out the contention of one of the parties whose name is best left unpronounced, and on the other hand the submission made by the commission which it considered to be preferable. The commission submitted that the only criterion is whether or not a transfer takes place of the department to which the employees were assigned and formed the organisation or framework within which their employment relationship took effect. That submission was preferred.

Accordingly, in future, we would not expect in the light of that decision , parties to rely on what was said by the Advocate General in that case, on this point. That is emphasised in an unreported decision of the Employment Appeal Tribunal called Kavanagh -v- Coral Racing Limited and Video Limited which is E.A.T./23/97. The Employment Appeal Tribunal made it clear that the Court had not followed the advice or opinion of the Advocate General.

That being so, what I think the appeal really amount to is this. Is the proposition that the Industrial Tribunal have manifestly failed to take into account the time sheets which would have shown, says Mr West, that the three Applicants were not truly assigned to the part of the undertaking which was transferred to OCO. The basis of that submission is that there was no reference in the decision itself or in the Tribunal's reasoning which makes reference to the time sheets. It seems to us that is the very fallacy which was exposed by the Court of Appeal in the unreported case to which we have referred involving the estate agents. The fact that a Tribunal does not refer to one particular piece of evidence, does not indicate that it did not take it into account when arriving at its decision. Mr West in his reply indicated that it would have been better if the Industrial Tribunal had referred to the time sheets if only to say that it had looked at the time sheets when arriving at its conclusion. It seems to us that decisions are not to be reduced to some form of formula, where if something is referred to then it is all right, but if no reference is made to it, then it is not. It is the task of the Industrial Tribunal to weigh all the evidence and all the facts pointing in one direction or another.

In this case we entirely agree with the emphasis which was placed by the Industrial Tribunal on the importance of the agreement made between the parties. That may not lead to any doctrine of estoppel, but it does seem to us to be a highly material factor in a case where there was no dispute that there was going to be a transfer, but the only question was were these three employees assigned to the part being transferred to OCO. I have no doubt that if there had been any real doubt about the position, OCO would not have agreed to enter into the contract with the three Applicants. They chose to do so on the basis that the Regulations applied and would apply to them.

The only reason why they eventually reneged on that agreement was because they were subjected to commercial pressure thereafter, by the City of Westminster Council. All that can be said is that perhaps understandably, OCO took a commercial decision that it would be cheaper to go ahead with the tender which they had presented and which may have been accepted at that date, then it would be to break the contract with the three individuals, which they accept and must accept, has occurred on this occasion.

Accordingly, it seems to us, that there is no reason to believe that the Industrial Tribunal has done other than the task which it is required to do, having regard to the correct principles of law. It has looked at the evidence; we have not. It has decided that there was an assignment to the part transferred, that is sufficient to determine this appeal and accordingly the appeal will be dismissed.

We have, I think, outstanding the question of costs which has been raised, who is asking for them and against who?

In this case, ETB when faced with a Notice of Appeal thought it would be correct to file a cross-notice of appeal which would have affected the position of the City of Westminster Council. After mature reflection about three months after they had notified their information to cross-appeal, they decided to withdraw it. Westminster City Council say that making the cross-appeal was an unreasonable step to take as presumably is indicated by the fact that the cross-appeal was subsequently withdrawn, and that they have incurred significant expenditure in relation to it, namely, to-ing and fro-ing within the Council and a telephone call to a barrister.

We have to be satisfied that there has been unreasonable conduct. In this case we are not persuaded that the ETB's decision to file a cross-notice of appeal could be described as unreasonable any more than its withdrawal. It was withdrawn well before this hearing, it was withdrawn in August, it is now November. It seems to us that the application for costs should fail.