United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J CAVANAGH (Of Counsel) North East Lincolnshire Council Municipal Offices Town Hall Square Grimsby North East Yorkshire DN31 1HU
First Respondents Second Respondents	MR D BROWN (Of Counsel) Messrs Thompsons Solicitors Price House 37 Stoney Lane The Lace Market Nottingham NG1 1NF MISS H WENLOCK (Of Counsel) Biddle Solicitors 1 Gresham Street London EC2V 7BU


 


JUDGE PETER CLARK: The parties to these proceedings before the Hull Employment Tribunal were (1) Mr Martin Beck and 22 other applicants (the applicants) (2) North East Lincolnshire Council (the Council) and (3) Onyx (UK) Ltd (Onyx).

On 20 October 1997 that Tribunal heard and determined a preliminary issue, namely whether there had been a relevant transfer of the undertaking or part of the undertaking in which the Applicants were employed from Onyx to the Council. By a decision, promulgated with extended reasons on 14 November 1997, the Tribunal held that a relevant transfer had taken place. Against that decision the Council now appeals to this Tribunal. A cross-appeal by Onyx has been withdrawn. There is an application to amend the Answer of 3 of the Applicants, to which we shall return.

The Facts

The case proceeded on the basis of agreed facts which may be summarised as follows.

In 1991 the Cleethorpes Borough Council (now the Council) put out for tender a contract for its refuse collection service under the competitive tendering procedure. Onyx won the contract, which took effect on 1 August 1991. In order to fulfil the terms of its contract Onyx recruited the majority of its workforce, including supervisors, drivers and collectors from among those formerly employed by the Council. Of the 40 or so employed on that service by the Council, approximately 30 were recruited by Onyx. Onyx based its operation in a former coach depot in Neptune Street, Cleethorpes, at which local contract administration was carried out, vehicles were stored overnight and, initially, all vehicle service and maintenance work was carried out. Subsequently the service and maintenance work on vehicles was contracted out to a local private garage.

As to the vehicles required for refuse collection, Onyx began by taking the majority of the Council's leased fleet of collection vehicles on licence. Over the 6 years of the contract most of the vehicles were returned to the Council as they were replaced by new or recondition-ed vehicles acquired by Onyx in their own right.

In September 1997, as a result of fresh competitive tendering, Onyx lost the refuse collection contract for Cleethorpes to the Council's Direct Service Organisation (DSO). The Onyx contract terminated and the new contract was taken up by the DSO on 28 September 1997 (the relevant date).

Of the eight vehicles operated by Onyx at the end of the contract, only two remained on licence from the Council. One was returned to the Council in mid-September 1997 and has been used as a support vehicle, that is, kept in reserve to replace a vehicle used by the Council in the case of breakdown; the second vehicle was returned to the Council in late September 1997. The Council declined to accept that vehicle on the basis that it was unfit for use. It was returned to Onyx for repair. When repaired, it was to be sent back to the Council.

At the relevant date Onyx employed some 30 people assigned to the refuse collection contract, consisting of one cleaner, one depot manager and one administrative assistant based at the Neptune Street depot, together with 27 employees engaged on refuse collection duties. The 23 applicants form part of that group of 27.

Having lost the contract, Onyx wrote to all members of staff on 18 July, informing them that there was a dispute between Onyx and the Council as to whether a relevant transfer from Onyx to the Council would take place on the relevant date. Onyx contended that it would; the Council that it would not, and giving notice of termination of their employment with Onyx on the relevant date.

Of the 30 employees employed by Onyx the Council took on 15; 11 were assigned to the refuse collection work in Cleethorpes; 4 were assigned to street cleaning duties which did not form part of the work contracted to Onyx.

The Council did not take over the Neptune Street depot.

The Tribunal Decision

The Tribunal was referred to the relevant authorities. In their reasons they set out the facts as they appeared to them and directed themselves as to the purpose of the regulations, that is, to preserve the jobs and working conditions of employees where there is a relevant transfer. They drew a distinction between two situations arising on competitive tendering. In the first, where two organisations tender in circumstances where they have their own workforces and one wins the contract in place of another, if the new contractor carries out the activities formerly carried out by the first contractor using its own workforce, there will be no transfer.

The alternative situation is where the new contractor, the successful tenderer, does not have the workforce and everything else that goes with it to perform the contract, then one option open to that contractor is to take over the part of the previous undertaking already existing. In that case a relevant transfer occurs.

On the facts, the Tribunal found that this case fell into the latter category. There was a relevant transfer.

The Appeal

The question for the Tribunal was whether Onyx's operation constituted a stable economic entity whose identity was preserved after the Council took back the refuse collection contract. Betts v Brintel Helicopters (1997) ICR 792, applying Suzen (1997) ICR 662.

Where the contract is 'labour intensive' it will be enough if a majority of the workforce is taken over by the new contractor. Dines v Initial Healthcare Services Ltd (1995) ICR 11. Where significant assets are involved it will be necessary to consider the factors set out in the European Court of Justice judgment in Spijkers (1986) ECR 1119 (para 13). (The Spijkers test).

No question arises in this case of the Council deliberately refusing to take over Onyx staff. cf. ECM (Vehicle Delivery Service) Ltd v Cox (1998) ICR 631.

Three issues arise in this appeal:

(1) Did the Tribunal ask themselves the correct legal question?

(2) Did they approach the case on the correct factual basis?

(3) Did they give adequate reasons for their conclusion that a relevant transfer from Onyx to the Council had taken place?

The critical issue, in our judgment, is the second, that is, the Tribunal's approach to the facts. It is a legitimate ground for complaint on appeal that a Tribunal has made findings of fact unsupported by the evidence. Piggott Bros & Co Ltd v Jackson (1991) IRLR 309.

The Tribunal made the following findings of fact, not merely 'observations' as Mr Brown submits:

(i) at the time when the Council won the tender to take over the contract in 1997 the Council did not have a depot, vehicles or men to fulfil the contract. (Reasons para 6(g)).

(ii) Reasons, para 6 (I):

"It [the Council] could have leased or bought vehicles. That is not what happened. What happened was it saw an existing undertaking doing the work and it went on and took on a large number of the employees. The fact that some of them did not stay is neither here nor there nor that some were placed in other jobs. Out of twenty-three there were some fifteen that were taken on by the first respondent [the Council] and, in effect, a couple of the vehicles, the remnants of the leased vehicles, were also taken on. That enabled the Council to fulfil the activities which it was undertaking to fulfil under the terms of the contract and in order to fulfil those activities under the terms of the contract, in effect, it had taken on part of the Onyx undertaking, that part of the undertaking that did the refuse collection for the client Council which was, in any event, the North East Lincolnshire Council."

It is right to say that the agreed facts did not include details of how the Council fulfilled the refuse collection contract after the relevant date. However, on the basis of the agreed facts there was no warrant for the Tribunal's finding that the Council fulfilled the contract with 15 out of 23 former Onyx employees (of whom 4 were put on street cleaning duties) and a couple of the vehicles. That finding was crucial to their eventual conclusion that this was a case in which the new contractor, lacking the workforce and everything else needed to perform the contract, took over that part of the outgoing contractor's existing undertaking for that purpose.

In our judgment, that impermissible finding on the agreed facts vitiates the Tribunal's conclusion. The appeal must be allowed and the decision set aside.

The next question is what now happens in this case? One option is to remit it to a fresh Employment Tribunal for rehearing. However, the parties chose to proceed below on agreed facts. It follows that we are as well placed to decide the matter as the Employment Tribunal.

Applying the law to those agreed facts we have concluded that the economic entity did not retain its identity following the change of contractor. Whether this is to be treated as a labour intensive contract or not, the Council did not, on any view, take on a majority of the 30 strong workforce; it did not take on Onyx's premises or administrative staff; it did not take on a significant part of the relevant assets, that is, the vehicles. Looking at the matter as a whole it took over the activity formerly carried on by Onyx and no more.

In these circumstances we shall substitute a declaration that no relevant transfer of a part of the undertaking of Onyx to the Council took place on the relevant date.

Finally, we return to the application to amend the Answer of the Applicants, Beevers, Duffield and Osborne to add a cross-appeal against that part of the Tribunal's decision (reasons, para 10) dismissing their complaints on the ground that they each had less than two years continuous service. Those Applicants wish to argue that, in accordance with the direction of the EAT (Lord Johnston presiding) in Davidson v City Electrical Factors (1998) ICR 443, their applications ought to have been stayed pending the ECJ judgment in the Seymour-Smith case.

The proposed amendment was not served until 5 November 1998. No good reason for the delay has been advanced. As a matter of discretion we shall not allow the amendment at this late stage. The application is dismissed.