United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR B CARR (of Counsel) Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE
For the Respondents	MR T LINDEN (of Counsel) Mr P Schofield Head of Legal Affairs Engineering Employers Federation Broadway House Tothill Street London SW1H 9NQ


 


JUDGE CLARK

1. This is an appeal by more than 20 Applicants before the Leicester Employment Tribunal, sitting on 14–16 December 1998, against a part of that Employment Tribunal's reserved decision promulgated with extended reasons on 6 January 1999.

The Facts

2. The first and second Respondents are associated companies, both being wholly owned subsidiaries of the FKI Group. The Appellants were employed by the first Respondents (BTL) in its fabrication shop. BTL manufactured transformers and the second Respondents (BEM) electrical motors and rail traction locomotives. BEM also operated a fabrication shop.
3. In August 1997 group management took a decision to close the BTL fabrication shop. At that stage Mr Price, BEM's fabrication shop manager was asked to report on whether he could perform fabrications for BTL on a sub-contract basis. Mr Price reported back that he was presently working under capacity and would require a further 21 employees in order to absorb the BTL work into his shop.
4. At the relevant time there were 54 employees in BTL's shop and 59 in that of BEM. We take that from the combined total of 113 employees referred to in paragraph 16 of the Employment Tribunal's reasons.
5. The decision having been taken at group level to close the BTL shop a meeting took place on 13 November 1997 between the Managing Directors of the 2 companies together with Mr Price, Mr Burgess, the Manufacturing Director of BTL and Mr Vaux, Human Resources Manager of BTL. The purpose of that meeting was to discuss the principles to be applied to the closure of the BTL shop.
6. The agreed principles emerging from that meeting were: -

(a) Essential skills must be retained. Operatives required by BEM would not be given the option of redundancy

(b) Operatives retained by BEM would be integrated into the existing BEM fabrication team and would work on a wider range of products

(c) As BEM was due to announce major redundancies (although, not in the fabrication shop) they could only accept the minimum number of direct operatives.

(d) BTL would deal with any operatives not absorbed by BEM.

The discussion also turned to the question as to whether there would be a relevant transfer under the TUPE Regulations. The view was taken that that was not the case, although management were not certain of the position.

7. Following that meeting an initial announcement was made on 27 November 1997. The Notice issued by BTL informed their staff and union representatives that BTL's fabrication requirements were to be progressively transferred to BEM and that with effect from the end of February 1998 all BTL fabrication will be sub-contracted to BEM's existing facilities. The BTL premises used for fabrication were then to pass to BEM, although not for use by them on fabrication work. It was anticipated that there would be a net loss of 30 – 40 BTL jobs. That Notice was the first that the employees or their Trade Union Representative had heard of the plan. Although consultation was then to begin, the decision to transfer BTL's fabrication work to BEM was cast in stone.
8. On 27 November, BTL gave notice to the Department of Trade and Industry on form HR1 that they intended to make 54 redundancies, that is, all the staff in their fabrication shop. A copy of that Notice was sent to the Engineering Union Regional Officer, Mr Mather by BTL's Personnel Manager, Mrs Jenkins.
9. The first consultation meeting with the unions over the closure of the BTL fabrication shop took place on 2 December 1997. Present, among others, were Mr Burgess and Mrs Jenkins from BTL Management and Mr Horne and Mr McPhee, the Trade Union Representatives. It was Management's position that BTL staff would be interviewed by Mr Price in order to allow him to choose which people he wished to recruit for his shop at BEM. Further consultation meetings then followed up until 12 December. On 5 December a meeting took place between Mrs Jenkins and Messrs Horne and McPhee. The TUPE question was raised. At that stage Mrs Jenkins agreed with the union position that TUPE applied. The union argued that in these circumstances the whole of the BTL fabrication shop workforce should transfer to BEM and that redundancies could then be made, choosing from the combined pool of labour in both shops.
10. Meanwhile, Mr Price carried out his interviews with the BTL fabrication shop workforce and selected 19 to come over to BEM. They did so. Of the remaining BTL staff 9 were found alternative positions within BTL. The remaining 26, including these Appellants, were to be made redundant by BTL.
11. Between 16 December and 5 January 1998 individual consultation meetings were held by Mrs Jenkins and Mr Fisher, Manager of BTL's fabrication shop, with those identified for redundancies. Each was told that there was to be a phased release and each was given his release date, all to take effect during January 1998.
12. A number of employees exercised their right of appeal against the decision to dismiss them. Those appeals were heard between 13 and 26 January 1998. All appeals failed.
13. Following the changes all BTL's fabrications were performed in BEM's fabrication shop. That increased BEM's fabrication workload by 25%. The work was carried out by a workforce of 76, an increase of 17 on their original complement.

Employment Tribunal Decision

14. The Employment Tribunal was asked to determine a number of issues in this case. For the purposes of this appeal the following findings are relevant: -

(1) There was a relevant transfer of part of BTL's undertaking, the fabrication work to BEM. Originally the Respondents sought to cross-appeal against that finding but that cross-appeal is now abandoned.

(2) The dismissals of these Appellants were not automatically unfair under regulation 8(1) of TUPE; the dismissals were for an Economic Technical Organisation reason within the meaning of regulation 8(2). That was a potentially fair reason for dismissal, subject to the question of reasonableness under section 98(4) Employment Rights Act 1996.

(3) As to the section 98(4) question the Employment Tribunal found that the dismissals were unfair on these grounds;

(a) Selection; BTL allowed the selection of those who would go over to BEM to rest with Mr Price of BEM. No consideration was given to length of services, employment records and past experience with BTL. The first and second Respondents acted unreasonably. That rendered the dismissals unfair.

(b) Consultation; Consultation with the union was carried out entirely by BTL, whereas BEM was carrying out the selection procedure. That, in the Employment Tribunal's view compounded and contributed to the unfairness.

(c) Mr Price arranged for the BTL welders to be given a weld test. If they failed that test he did not take that person on. He accepted that he ought to have offered a second test. The evidence on this aspect was unclear, but the Employment Tribunal found that it would be unfair to those welders who were not told that they could take a second test.

(d) Criticism was made by the Employment Tribunal of BTL's efforts to offer alternative employment to some of those dismissed.

(4) However, and this is the crux of the appeal, the Employment Tribunal, at paragraph 32 of their reasons, rejected an argument advanced on behalf of the Appellants that their dismissals were also unfair on the basis that the relevant selection pool for redundancies ought to have included both the BTL and BEM fabrication shop workforces. It ought not to have been limited to BTL staff. The Employment Tribunal observed that the two units were quite separate producing a different product and had been run independently for a long time, even though the work of BTL was to be transferred to and merged within BEM. They found that the second Respondent BEM was not acting unfairly in deciding to select only from BTL's fabrication shop staff.

15. Based on their findings the Employment Tribunal reached the following relevant conclusions, expressed in their decision in this way:

(a) The employment of the individual applicants was transferred from the first respondent to the second respondent by reason of a transfer of undertaking

(b) The individual applicants were dismissed by reason of that transfer and for some other substantial reason within section 98 of the Employment Rights Act 1996.

(c) The dismissal of the applicants was not automatically unfair as it was for an economic, technical or organisational reason

(d) The second respondent acted unfairly in dismissing the individual applicants

The Appeal

16. It seemed at first that a substantial point of law might arise during the course of argument as to whether these dismissals were by the first or second Respondent, and the effect which that might have on the question raised by section 98(4) of the 1996 Act. We were directed to a possible tension between the House of Lord's decision in Wilson –v- St Helens Borough Council [1998] ICR 1141 and the recent European Court of Justice ruling in Allen –v- Amalgamated Construction Co Ltd [200] IRLR 119. A debate, with the assistance of specialist Counsel on both sides, would have proved interesting. However, that question was resolved in this way.
17. There now being no cross-appeal, Mr Linden accepted the findings at paragraph (a)–(d) of the Employment Tribunal decision and on that basis it was common ground that the Appellants were to be treated, as a result of the transfer, as being in no worse position than had the employees in both fabrication shops been employed at all times by the same employer.
18. On that footing the question for us is this? Can it be said that the Employment Tribunal reached a perverse conclusion in finding that the decision by management to exclude the BEM fabrication shop staff from the pool for selection for redundancies was one which a reasonable employer could take?
19. In submitting that such a finding was perverse Mr Carr argued that since the object was to achieve an integrated workforce in the surviving fabrication shop, which could carry out the combined work of the two former shops, the only proper pool for selection was the combined workforce.
20. We detect, in his submissions, a suggestion that by not operating a combined pool the second Respondent, BEM was depriving would be transferred employees of their rights under TUPE. We reject that argument. It seems to us that the BTL employees cannot be in any better position than had both shops' employees had a common employer throughout.
21. Applying the general approach to selection of the pool it is well established that it will be difficult for an employee to challenge the pool for selection where the employer has genuinely applied his mind to the problem. Mr Carr submits that these employers did not, since they believed that there was here no relevant transfer. As to that, the evidence before the Employment Tribunal indicated that whereas the Respondents believed that no transfer would arise they were uncertain of the position and sought to establish a procedure which would be fair if they were wrong in their assumption. Certainly there was no finding by the Employment Tribunal that had the Respondents firmly believed that a relevant transfer would occur, they would have dealt with the matter any differently.
22. Ultimately, as Mr Carr allowed on a perversity appeal, it will often be a matter of impression for the Employment Appeal Tribunal. I have the benefit of sitting with two very experienced industrial members. It is the firm impression of each of us that perversity is not made out in this case. We find ourselves in a similar position of that of Lord McDonald's Employment Appeal Tribunal sitting in Green –v- Fraser [1985] IRLR 55, to which Mr Linden has referred us. This is a case in which two reasonable employers might follow a different course of action. One would opt for a combined pool; the other would not.
23. In these circumstances we have concluded that no error of law is made out. Consequently this appeal must be dismissed.