United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR BRUCE CARR (Of Counsel) Instructed by Messrs Rowley Ashworth 247 The Broadway Wimbledon London SW19 1SE
For the Second Respondent	MR AKHLAQ CHOUDHURY (Of Counsel) Instructed by Messrs Dibb Lupton Alsop 117 The Headrow Leeds LS1 5JX


 


JUDGE PETER CLARK

Judgment

1. This is an appeal by (1) AEEU (the Union) and (2) Mr Stephen Davidson and 6 others (the Employees) against a reserved decision of the Leeds Employment Tribunal (chaired by Mr J R Barton), promulgated with Extended Reasons on 24 August 1999, that no relevant transfer of the undertaking or part of the undertaking of the first Respondent Lyndon Scaffolding Plc (Lyndon) in which the employees had been employed, to the second Respondent, Cape Industrial Services Ltd (Cape) had taken place. Lyndon do not resist the appeal, Cape does.

The Facts

2. At all relevant times up to 30 November 1998 the employees were employed by Lyndon as scaffolders and were member of the Union. They worked exclusively at Ferrybridge power station, fulfilling Lyndon's contract with Powergen, operators of the power station, to provide scaffolding services on site. Lyndon was a specialist scaffolding firm. It had held the contract to provide scaffolding services for Powergen at Ferrybridge since 1987. The last such contract was due to end on 30 November 1998.
3. Prior to expiry of the contract Powergen invited tenders, not simply for scaffolding work but for a combination of scaffolding, insulation and cleaning services. Lyndon was not invited to tender for the new contract. Instead 2 companies, one of which was Cape were asked to and did submit tenders. Cape was the successful bidder.
4. On 27 November 1998 Lyndon wrote to the employees, informing them that they had lost the Ferrybridge contract and suggesting that they approached the new contractors, Cape, for work.
5. Both Lyndon and the Union considered that a relevant transfer under the TUPE regulations took place, transferring that part of Lyndon's undertaking engaged on the Ferrybridge contract to Cape.
6. Each of the employees was employed by Lyndon on terms which included a mobility clause. Lyndon offered them, as an option, alternative employment elsewhere, but the employees did not wish to live away from home and preferred to remain working locally at Ferrybridge with Cape on the same terms and conditions as applied to their employment with Lyndon.
7. Cape did not accept that a relevant transfer had occurred. They declined to employ the employees on their new Ferrybridge contract.
8. In the event Cape used scaffolders from their own pool of labour at the Ferrybridge site. They brought their own equipment onto site, valued at some £200,000 and acquired no assets, tangible or intangible, from Lyndon. They did not take on any of the employees, not, so the Employment Tribunal found, in order to avoid the effects of the TUPE regulations, but because they preferred to use their existing labour.
9. Meanwhile Lyndon were granted an extension to their contract with Powergen in order to clear their scaffolding from the site. That extension came to an end on 18 February 1999. During that period they used the employees for that work. Thereafter 5 of the 7 employees accepted employment with Lyndon at a power station elsewhere; 2 have taken employment with Cape; but all are on what is described as "outage" work, that is on one off assignments rather than permanent continuing contracts.

The Complaints

10. In these circumstances the Union presented an Originating Application to the Employment Tribunal on 12 March 1999, complaining of a lack of consultation on the part of Lyndon contrary to regulation 10 of TUPE, and on 11 May 1999 the employees presented complaints of unfair dismissal, entitlement to a redundancy payment and breach of contract against Lyndon and Cape in the alternative. The claims were resisted by both Respondents and the necessary question as to whether or not a relevant transfer took place was listed for hearing as a preliminary issue before Mr Barton's Tribunal.

The Employment Tribunal decision

11. Having made the principal findings of fact set out above and considered a number of authorities referred to in their reasons the Employment Tribunal concluded that no relevant transfer had occurred, taking into account the following factors:

(1) There had been no transfer of tangible or intangible assets from Lyndon to Cape

(2) Cape had not taken on the employees of Lyndon dedicated to their contract at Ferrybridge. That was not through an attempt to avoid the effect of the TUPE regulations, but because they genuinely wanted to use their own labour, so the Employment Tribunal found, having considered the Employment Appeal Tribunal decision in ECM & Cox (1998) IRLR 416. Having raised the point in argument with Counsel before us today it seems that we can leave open for present purposes any question as to whether the approach of Morrison J in ECM was wholly approved by the Court of Appeal in that case (1999) IRLR 559.

(3) The entity in which the employees were engaged by Lyndon continued after Cape began their contract with Powergen on 30 November 1998. The employees remained on site, working for Lyndon until 18 February 1999.

(4) The nature of Cape's contract with Powergen was fundamentally different from that earlier made between Lyndon and Powergen. The Lyndon contract was for the supply of scaffolding services only; although the Cape contract included scaffolding services, it also covered cleaning and insulation services, all 3 under one management.

12. In these circumstances the Employment Tribunal, bearing in mind that the mere loss of a service contract by one business and the taking on of a new contract by a second business does not of itself amount to a relevant transfer, concluded that there had not been a transfer of an economic entity which maintained its identity before and after the alleged transfer date, 30 November 1998. They were not satisfied that a relevant transfer within the meaning of regulation 3(1) of TUPE had taken place.

The Appeal

13. In support of this appeal Mr Carr takes essentially 2 points. Before turning to those submissions we would make the following general observations.
14. We have watched, with some dismay, the apparent twists and turns in the decided cases on this topic, both in the European Court of Justice and domestically. That dismay is not so much for ourselves, but for those engaged in industry, whether employers, trade unions or employees, particularly in the service contracting fields, who cannot be expected to know precisely where they stand in any given situation. We shall not burden this judgment by chronicling the various changes of emphasis in the cases.
15. In our respectful view Burton J was correct in saying, in Whitewater Leisure Management Ltd v Barnes (2000) IRLR 456, paragraph 11, that the best and clearest guidelines, are to be found in the ECJ judgment in Spijkers (1986) CMLR 296, paragraphs 12-13, where the Court said this:

"12. Consequently it cannot be said that there is a transfer of an enterprise, business or part of part of a business on the sole ground that its assets have been sold. On the contrary, in the case like the present, it is necessary to determine whether what has been sold is an economic entity, which is still in existence, and this will be apparent from the fact that its operation is actually being continued or has been taken over by the new employer, with the same economic or similar activities.

13. To decide whether these conditions are fulfilled it is necessary to take account of all the factual circumstances of the transaction in question, including the type of undertaking or business in question, the transfer or otherwise of a tangible asset such as buildings and stocks, the value of intangible assets at the date of transfer , whether the majority of the staff was taken over by the new employer, the transfer or otherwise of a circle of customers and the degree of similarity between activities before and after the transfer and the duration of any interruption in those activities. It should be made clear, however, that each of these factors is only a part of the overall assessment which is required and therefore they cannot be examined independently of each other."

16. That is particularly so in a non-labour intensive contract case such as the present one, see per Kennedy LJ in Betts v Brintel Helicopters (1997) IRLR 361, paragraph 49. The provision of scaffolding services under contract involves the provision of both highly-skilled workers and substantial plant and equipment, by contrast with, for example a cleaning contract, which may involve unskilled staff and little by way of equipment.
17. Dealing then with the points taken by Mr Carr in the appeal, he attacks the Tribunal's findings in relation to the 3^rd and 4^th factors which we have set out above, and he attacks each finding on the basis, first that they were irrelevant factors and, further or alternatively, that each was elevated to the status of a determinative factor by the Employment Tribunal, contrary to the principle in Spijkers, that the Employment Tribunal must make an overall assessment of all the relevant factors as found.

The 3^rd factor

18. Mr Carr submits that the Employment was wrong to find that Powergen's contract with Cape was fundamentally different from that with Lyndon. In our view that was a permissible finding of fact for the Employment Tribunal with which we cannot and should not interfere. Nevertheless, Mr Carr argues that it is in any event an irrelevant factor. Merely because the scaffolding service provided by Lyndon was subsumed into a wider contract entered into by Cape is nothing to the point. We disagree. It is a relevant, although not conclusive factor in determining whether the former economic entity operated by Lyndon was transferred to Cape, it being accepted by Mr Choudhury that there was in existence an economic entity at the date relied on by Mr Carr as the relevant transfer date, 30 November 1998. If the nature of the service formerly provided differs materially from that provided by the incoming contractor, that is a factor which the Employment Tribunal is entitled to take into account in considering whether the former economic entity has retained its identity.
19. Next, he submits that the Employment Tribunal elevated this factor into one determinative of the transfer question. In support of that submission he relies on the Employment Appeal Tribunal decision in Farmer v Danzas (EAT 858/93. 6 October 1994. Unreported). Having been taken to Morison J's judgment in that case we find that the facts there are far removed from the facts of this case, and that no assistance is gained from the, plainly correct observation, at page 4G:

"There is nothing in any European decision to suggest that an economic entity ceases to retain its identity merely because the economic activity is subsumed into the transferee's business."

20. We do not understand this Employment Tribunal to have isolated the 3^rd factor as being determinative of the Transfer question in this case, as opposed to the Employment Tribunal in Farmer deciding that case on a single factor, all other factors pointing to a transfer, itself an impermissible consideration, so as to arrive at the opposite conclusion.

The 4^th factor

21. We are equally satisfied that the continuation of Lyndon's contract with Powergen beyond the 30 November 1998 was not treated by this Employment Tribunal as being itself determinative of the transfer question.
22. As to its relevance, Mr Carr submits that there will often be cases in which the takeover by one contractor from another will take place over a period of time. He also submits that there was a difference between Lyndon's original contract to supply scaffolding services, and the further contract, described by the Employment Tribunal as an extension to the original contract, to remove that scaffolding.
23. However, that confuses the contract with the economic entity, as Mr Choudhury submits. The economic entity consisted of scaffolding work, involving a dedicated workforce using Lyndon's scaffolding equipment at Ferrybridge. The fact is that that part of Lyndon's undertaking continued after 30 November 1998 until 18 February 1999. Meanwhile Cape were on site, providing scaffolding services to Powergen under contract, using their own men and equipment. It cannot be said in these circumstances that the continuation of work by Lyndon, using the employees, is irrelevant to the overall question of whether the economic entity operated by Lyndon was transferred to Cape, retaining its own identity.
24. It follows having considered and rejected the points made by Mr Carr in this appeal that we are unable to find any error of law, which would entitle us to interfere with the decision of the Employment Tribunal. More broadly we would not wish to do so. It seems to us that Employment Tribunals have a difficult task in considering this transfer question on the particular facts of any given case.
25. In our judgment this Employment Tribunal carefully found the facts, took into account all relevant factors, correctly applied the law and reached a conclusion which was plainly permissible. In these circumstances the appeal is dismissed.