United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR N A CAMERON (of Counsel) Messrs J H Powell & Co Solicitors Cathedral Chambers 2 Amen Alley Derby DE1 3GT
For the 1st and 2nd Respondents For the 3rd Respondent	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE 1ST AND 2ND RESPONDENTS MR O SEGAL (of Counsel) Messrs Osborne Clarke OWA Solicitors 50 Queen Charlotte Street Bristol BS1 4HE


 


HIS HONOUR JUDGE PETER CLARK

1. The principal issue before an Employment Tribunal sitting at Hull under the Chairmanship of Mr Peter Hildebrand on 29 and 30 January 2001 was whether a relevant transfer of the contracts of employment of the 2 Applicants, Messrs Beecroft and Robertson, had taken place from their former employer, Staveley Industries PLC trading as Integral ("Integral") to J Tomlinson Ltd ("Tomlinson") for the purposes of the Transfer of Undertakings Protection of Employment Regulations 1981 ("TUPE").
2. Following a day's deliberation in private on 19 April the Tribunal promulgated their Reserved Decision with very full Extended Reasons on 18 June 2001. They found that a relevant transfer had taken place on or shortly after 31 March 2000. Certain consequential orders were then made in favour of the Applicants with which we are not directly concerned. The Applicants have taken no active part in this appeal, which is brought by Tomlinson against the finding that a relevant transfer had taken place.

The Facts

3. Prior to 1 April 2000 Integral held separate contracts with both North Kesteven District Council ("NKC") and South Kesteven District Council ("SKC") for the service, maintenance, repair and replacement of domestic gas appliances in council-owned residential properties, some 2,800 in the case of NKC, with which we are concerned and 5,200 SKC properties. Of 6 employees working on the 2 contracts, 4 spent less than half their time on the NKC contract but these 2 Applicants spent 90% of their working time on NKC maintenance and service work.
4. Integral decided not to tender for the NKC contract when it was coming up for renewal at the end of March 2000. Tomlinson was the successful tenderer. Integral lost the SKC contract to another competitor, Wallmotts. An issue then arose between Integral and Tomlinson as to whether these 2 Applicants, whom Integral contended were assigned to the NKC contract, were transferred automatically to Tomlinson under the TUPE provisions. Integral claimed that they were transferred; Tomlinson disputed that claim. Tomlinson had 4 of their own employees available to work on the NKC contract. They took on none of the Integral employees and in particular these 2 Applicants.

TUPE

5. We shall not, in this judgment, review the wealth of case law, domestic and European, which this piece of secondary legislation and the Acquired Rights Directive has spawned. Suffice it to say that this Employment Tribunal, deciding the case last year, directed themselves in accordance with the guidance provided by the President, Lindsay J in Cheeseman v R Brewer Contracts Ltd [2001] IRLR 144, and cases there cited, including the seminal European Court of Justice judgment in Spijkers [1986] ECR 1119.
6. In his valuable analysis of the then learning on the topic the President built on his earlier judgment in RCO Support Services v Unison [2000] IRLR 624, itself later upheld by the Court of Appeal in RCO Services [2002] IRLR 401, following the Court of Appeal decision in ECM v Cox [1999] ICR 1162, approved by the majority decision of the court in ADI (UK) Ltd v Willer [2001] IRLR 542.
7. In Cheeseman, 2 questions were identified:

(1) Was there an undertaking, that is a stable economic entity whose activity is not limited to performing one specific works contracts, and

(2) Was that undertaking transferred such that it retained its identity?

Cheeseman provides further guidance from the earlier cases in answering those 2 questions on the facts of any particular case, bearing in mind that it is for the national court, here the Employment Tribunal, to consider all the relevant factors, none being determinative, in order to reach a conclusion on the transfer issues – see Spijkers.

The Employment Tribunal Decision

8. As to the first question, the Employment Tribunal found that there was an organised grouping of persons engaged on the NKC contract. The 2 Applicants were almost exclusively devoted to that work. There were no substantial tangible assets devoted to the undertaking. Integral's administrative function was involved in managing the way in which the work was done. It was a stable economic entity.
9. As to the second question, the Tribunal found that the economic entity retained its identity after Tomlinson took over the NKC contract. There was no pause in the operation of providing gas services to the 2,800 council properties formerly serviced by Integral. The same properties were serviced by Tomlinson. Thus the customer base was transferred. This was a primarily labour intensive operation, not requiring significant tangible assets. Tomlinson acquired a significant intangible asset in the form of the contract. Tomlinson declined to accept the employees assigned to the work by Integral for reasons which the Tribunal found to be disingenuous.
10. Looking at the matter as a whole the Tribunal concluded that the economic entity carried on by Integral retained its identity with Tomlinson, notwithstanding the absence of Integral employees or lack of tangible assets transferred. A relevant transfer of the Applicant's contracts to Tomlinson had taken place.

The Appeal

11. The starting point in this appeal must be what is the error of law said by Tomlinson to have been made by this Tribunal in reaching their conclusion that a relevant transfer had taken place. Mr Cameron allowed that that simple question was not capable of a simple answer in this case. He submitted that the Tribunal had misapplied the appropriate principles of law in ways which he then developed.
12. We begin with the principles. Mr Cameron contended that Cheeseman must be read in the light of the subsequent Court of Appeal decision in RCO Services. Having done so, we accept Mr Segal's submission that, although not expressly mentioned in the leading judgment given by Mummery LJ in RCO Services, with which Hale LJ and Pill LJ agreed, RCO does not alter or materially add to the President's judgment in Cheeseman.
13. Turning to the first question, whether there was a stable economic entity prior to
    31 March 2000 capable of being transferred to Tomlinson, Mr Cameron contended first that it is difficult to see that 2 employees, these Appellants, out of 6 working on the NKC contract, could be regarded as a discrete undertaking. We do not accept that that was the Tribunal's finding. They concluded that all 6 relevant employees comprised an organised grouping of persons, but that only the 2 Applicants could properly be regarded as being assigned to that part of the undertaking for the purpose of determining which employees transferred to Tomlinson.
14. He then reviewed the Tribunal's application of the principles collected at paragraph 10 of the judgment in Cheeseman. Particular attention was draw to paragraph 10(iv) which reads:

"An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity – Vidal paragraph 27; Sanchez Hidalgo paragraph 26."

From this reference to those earlier European Court of Justice judgments Mr Cameron seeks to erect the principle of law that, as an irreducible minimum, for there to be an economic entity there must be an organised grouping of wage-earners who are specifically and permanently applied to a common task. Here, none of the 6 Integral employees were solely and exclusively assigned to the NKC contract. There are a number of answers to that point; first, we do not accept, on all the authorities, that any one feature was determinative of this question; secondly, the President was there indicating, based on European Court of Justice authority, a situation which may give rise to a finding of an economic entity; the absence of persons specifically and permanently assigned to the common task may not be fatal to a finding of an economic entity, depending on the overall factual matrix and thirdly, it is not there suggested that the employees should be assigned exclusively to that task and no other.

15. Having considered the points made by Mr Cameron on this part of the appeal, we prefer the submissions of Mr Segal, by reference to the Tribunal's findings, particularly at paragraphs 12, 14 and 16 of their reasons, that on the facts found the economic entity here was not simply the activity of maintaining gas appliances in the NKC's properties, it was the commercial organisation established by Integral to fulfil its obligations under the maintenance contract. That was a permissible finding on the facts in our judgment.
16. Was there a transfer of that economic entity, such that it retained its identity? True it is that no tangible assets passed to Tomlinson, nor were any of the Integral employees taken on by Tomlinson. However, that was the point in RCO Services. It was there argued that there could be no relevant transfer in contracting out cases if neither assets nor workforce went over. That proposition was expressly rejected by Mummery LJ (paragraph 25).
17. Mr Cameron submits that the Tribunal fell into error by mistakenly believing that the mere fact that the operation continued with Tomlinson determined the question as to whether the economic entity retained its identity after the contract changeover date. We think that submission is based on a false understanding of paragraph 17 of the Tribunal's reasons, probably caused by a typographical error. In the second sentence of paragraph 17 the Tribunal purports to quote from paragraph 11(i) of the judgment in Cheeseman. The citation is accurate, save that the Latin words 'inter alia' in Cheeseman are transcribed as the word 'earlier' in the Tribunal's reasons.
18. In these circumstances we are not persuaded that the Tribunal fell into the error of elevating that factor to one which was determinative, nor did they equate the provision of the same service as before with the retention of the identity of the old economic entity – see Cheeseman paragraph 11(ix). Instead, the Tribunal looked at all the factors identified, particularly at paragraph 13 of the Spijkers judgment and concluded, permissibly we find, that a relevant transfer had taken place. The same service was being provided to the same customers without interruption, albeit with Tomlinson's employees and not those whom Integral had assigned to the work, pursuant to a similar contract which the Tribunal chose to describe as an "intangible asset", a description on which, as Mr Segal submits, nothing in our view turns.
19. In our judgment this was a careful Tribunal decision, permissibly applying the correct legal principles to the facts as found. Accordingly, this appeal is dismissed.