United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR N CARR (of Counsel) Instructed by: Blyth Valley Citizens Advice Bureau The Eric Tolhurst Centre 3-13 Quay Road Blyth Northumberland
For the Respondent	No appearance or representation by or on behalf of the Appellant/Respondent


 


JUDGE PETER CLARK

1. By an Originating Application presented to the Newcastle Employment Tribunal on 6 September 2000, the Applicant, Mr Williams, complained of unfair dismissal and/or claimed entitlement to a redundancy payment. Those claims were directed against the First Respondent, Lockhart Securities Services Ltd (Lockhart) and the Second Respondent, Allied Security Services Ltd (Allied). By their Notice of Appearance Lockhart contended that there had been a relevant transfer of the Applicant's employment to Allied, who were responsible for any payments due to the Applicant.
2. At the hearing of the application before a Tribunal chaired by Ms T L Green on 9 July 2001 the Applicant, then represented by Mr Carr of Counsel, withdrew all claims against Allied. Accordingly the Tribunal had evidence only from the Applicant and Mr Campbell, Lockhart's Operations Manager. Lockhart was then represented by Mr Rosul, its Head of Strategy.
3. In these circumstances the Tribunal heard no evidence from Allied as to events after they took on the relevant guarding contract on 17 June 2000.
4. In a Decision with Extended Reasons promulgated on 9 October 2001 the material facts found by the Tribunal were as follows. The Applicant commenced employment with Lockhart as a security guard on 7 August 1993. During the last two years of his employment he worked exclusively at the Darlington Retail Park (DRP) pursuant to a guarding contract made between Lockhart and DRP.
5. In June 2000 Lockhart lost the guarding contract at DRP, The new contract was awarded to Allied. Prior to the loss of the contract on 16 June 2000 Lockhart employed three security officers at the DRP site, working twelve hour shifts. They were originally Dennis Healey, Sean Love and the Applicant. Shortly before the loss of the DRP contract Healey resigned and was replaced by Peter McGurk. McGurk accepted alternative work offered by Lockhart at another site. It follows that he did not go to work for Allied.
6. In early June Allied representatives visited the DRP site and spoke to both Love and the Applicant. At that stage both Lockhart and Allied considered that upon Allied taking over the DRP contract a relevant transfer for the purposes of the TUPE Regulations 1981 would take place. Allied requested details of transferring employees from Lockhart. On 9 June a list, including the Applicant's name, was faxed to Allied. The Allied representatives asked both men whether they wished to work for Allied or remain with Lockhart. The Applicant said that he wished to stay with Lockhart, something which he repeated to Mr Campbell on 12 June. Love indicated to the Allied representatives that he wished to work for Allied at the DRP site. However, on being informed that he could not continue working at that site because DRP had stipulated that they wanted none of Lockhart's employees working there, Love resigned from his employment.
7. The Applicant's last day of work with Lockhart was Thursday 15 June 2000. He was not due on shift again until the following Tuesday. On 15 June he was informed by Mr Campbell that there was no more work for him after his shift that day. He telephoned Lockhart on 18 June to find out if he was to be given work elsewhere but was told that there was no work for him. On 21 June Lockhart wrote to the Applicant, telling him that Allied was liable to offer him employment under the same terms under the TUPE Regulations. It continued:

"should you deem not to transfer to Allied Security you will in effect terminate your own employment with us and lose all benefits you may have accrued"

8. In due course he received a form P45 from Lockhart showing his last day of work as 16 June 2000.
9. On 16 June Mr Campbell removed the Lockhart clocking machines and notices bearing the company's name from the DRP site. Allied took over the provision of security services at the site from 17 June 2000. None of the physical assets of Lockhart were acquired by Allied.
10. In directing themselves as to the law the Tribunal referred both to the Acquired Rights Directive (EC/77/187) and the TUPE Regulations. They observe and this is uncontroversial, that those provisions have given rise to a considerable amount of case law both nationally and at the ECJ. At the time when this Decision was reached the most recent domestic authorities considered by the Tribunal were the EAT decision in Cheesman -v- R Brewer Contracts Ltd [2001] IRLR 144 (Lindsay P presiding) and the majority Court of Appeal decision in ADI (UK) Ltd -v- Willer [2001] IRLR 542, decided on 22 June 2001. They did not have before them the benefit of the subsequent Court of Appeal judgment in RCO Support Services -v- UNISON [2002] IRLR 401, later decided on 12 April 2002.
11. From Cheesman, in which the President carried out a review of the earlier authorities, both domestic and in the ECJ, the Tribunal identified two questions to be answered; was there an identifiable business entity constituting an entity within the meaning of the Regulations and, if so, whether or not there was a relevant transfer?
12. In applying the law to the facts as found they concluded that there was a relevant transfer. Their reasoning appears to be:

(a) that the present case was distinguishable on its facts from that of ADI because the transferee, Allied, did not reject the Applicant. He told them he did not want to transfer. Further, they found, his colleague (presumably Love) was 'taken on' by Allied but offered work elsewhere which he rejected (Reasons paragraph 20).

(b) That this was a labour intensive undertaking and the employees of Lockhart would have been taken on by Allied were it not for the fact that the Applicant objected and DRP did not want former security guards to work on site (Reasons paragraph 21).

(c) DRP put the security services out to tender. Both Lockhart and Allied tendered for the new contract. Allied won the contract. That supported the Tribunal's conclusion that the 'undertaking' before and after 16 June was an economic entity capable of transfer. The loss of the contract by Lockhart and Allied's winning of the contract amounted to a transfer (Reasons paragraph 22).

13. Having found a relevant transfer the Tribunal concluded that in objecting to the transfer (although he was not then aware that he could not continue at the DRP site with Allied due to DRP's objection) he was disentitled from bringing a claim against either the transferor, Lockhart or the transferee, Allied, by virtue of Regulation 5(4B) of the TUPE Regulations. Accordingly his complaint was dismissed.
14. In this appeal Mr Carr appears again on behalf of the Applicant. Mr Rosul has indicated in correspondence that he relies on the Tribunal's Decision. Accordingly we have heard no additional argument by or on behalf of Lockhart.
15. Mr Carr does not challenge the Tribunal's finding that if there was a relevant transfer then the Applicant was disentitled from pursuing a claim against Lockhart due to his objection to a transfer to Allied. However, he submits that the Tribunal misapplied the law and/or reached a perverse conclusion in finding that a relevant transfer between Lockhart and Allied had taken place.
16. It is convenient to begin with the most recent revelation of the law on what is a relevant transfer to be found in RCO. Factually, we concentrate on the award of the cleaning contract at Fazakerley Hospital, formerly held by Initial, to new contractors RCO, by the hospital operators Aintree Hospitals NHS Trust.
17. On the facts, RCO indicated to the relevant Initial employees that they were prepared to continue to employ them at their old place of work, but on RCO's terms and conditions of employment, not those enjoyed with Initial. The employees declined that offer. A Tribunal held that there had been a relevant transfer from Initial to RCO. That decision was upheld by the EAT and in due course by the Court of Appeal. In giving the leading judgment of the Court, with which Hale LJ and Pill LJ agreed, Mummery LJ rejected RCO's submission that, as a matter of community law, there can never be a transfer of an undertaking in a contracting-out case if neither assets nor workforce are transferred.
18. At paragraph 31 of the judgment Mummery LJ, applying the majority conclusion in ADI, accepted that the ECJ decision in Suzen [1997] IRLR 255, does not require the National Court (here the Employment Tribunal) to exclude from its consideration of all the facts characterising the transaction (listed in the ECJ judgment in Spijkers [1986] ECR 1119, paragraph 13, set out at paragraph 26 of RCO), the circumstances of the decision by the putative transferee not to take on the workforce.
19. Thus, in RCO, the fact that none of the Initial employees moved over to RCO had to be seen in the context that RCO required a workforce to operate the cleaning contract at the hospital, which was a relevant factor, as was the fact that RCO would have taken on Initial's employees had they been prepared to resign from the employment and accept the RCO terms and conditions offered. There were factors pointing towards a relevant transfer, in particular, the retention of the identity of the undertaking post-transfer. In considering the earlier authorities Mummery LJ commented on the earlier Court of Appeal decision, to which he was a party, in ECM -v- Cox [1999] IRLR 559, explaining that what is described as the ECM point (that is, the case of a transferee who deliberately refuses to take on any of the transferor's employees employed in the relevant undertaking) is not a separate point in considering the application of the Spijkers test, in the sense of investigating the subjective motive of the transferee; rather it forms part of the circumstances of the decision of the putative employee not to take on the transferor's workforce.
20. Returning to the present case, Mr Carr advances the following criticisms of this Tribunal's reasoning:

(1) The Tribunal has not considered the second question, properly posed, namely whether the economic entity retained its identity post-transfer date, 16 June 2000, it being accepted that an identifiable economic entity existed before that date.

(2) The Tribunal's statement, at paragraph 20 of their Reasons, that Love was 'taken on' by Allied but offered work elsewhere which he rejected, is inconsistent with their earlier finding of fact (Reasons paragraph 6(o) ) that Love had indicated a wish to work for Allied at DRP but resigned on being told that he could not work at that site due to objection by DRP, that resignation taking place, on the Tribunal's findings, before the loss of the contract at DRP, that is before the relevant date, 16 June. On these findings of fact Love was not 'taken on' by Allied.

(3) The wining and the losing of the contract, of itself, does not amount to the retention of the identity of the economic entity post 'transfer'. A distinction is to be drawn between continuing the activity and retaining the identity of the economic entity. See Suzen paragraph 21.

(4) The Tribunal have failed, in applying the Spijkers test, to consider the circumstances of Allied's decision not to take on the Lockhart workforce on the DRP site. In this connection he draws a distinction between circumstances in which that decision is made, for example, to circumvent the TUPE protection (see ECM) or because the transferee is not prepared to honour the transferor's terms and conditions of employment (RCO) and where the decision is made against a background where it is impossible for the transferee to continue to employ the transferor's employees on the new contract. By way of illustration he has referred us to the unreported EAT decision in MOD -v- (1) Carvey and Others and (2) Rentokil Initial Security Ltd (EAT/202/00. 26 October 2001. Charles J presiding). There, the MOD awarded a guarding contract to Rentokil in respect of a category A army camp on Salisbury Plain. Normally such a camp was to be patrolled by armed guards. By dispensation the camp was guarded by unarmed guards supplied by Rentokil. At the expiry of the contract guarding duties were taken over 'in-house' by the Military Provost Guarding Service (MPGS). MPGS provided armed guards. The Rentokil guards were not taken on by the MOD.

21. The Tribunal found that the overriding reason for the termination of the Rentokil contract was one of economics and not the overriding need to have armed guards. A relevant transfer had taken place.
22. On appeal the EAT held that the Tribunal had not found that the MOD had deliberately chosen not to employ the former Rentokil employees to avoid the operation of TUPE (cf ECM) The EAT accepted, in line with the ECJ decisions in Sanchez Hildago [2002] ICR 73 (Note) and Hernandez Vidal [1999] IRLR 132 (referred to in RCO, paragraph 22) that the fact that a major part of the workforce in a labour intensive activity is not taken on does not mean that there is not a transfer, but held that the motive or reason for not taking on the former employees is a relevant factor to be taken into account by the Tribunal. However, they concluded that the Tribunal had failed to make a full comparison between the position before and after the transfer in reaching their conclusion. For this and other reasons the appeal was allowed and the finding of the Tribunal reversed, all relevant facts having been found below. MOD had a genuine reason for not taking on the Rentokil employees; they could not perform armed guarding required under the new contract; there were changes in the shift pattern. The inevitable result was that no transfer took place.
23. We accept the submissions of Mr Carr. In particular, we are not satisfied that the Tribunal correctly applied the Spijkers test, or asked themselves whether the identifiable economic entity was retained after Allied took over the guarding contract at DRP. On their findings of fact none of the Lockhart employees were employed on the DRP contract. They did not enquire into the reason for that decision. In answering that question, it is correct to say that none of the three guards indicated a wish to transfer to Allied; however, had they done so they would not have been employed on the DRP contract, not through any lack of good faith on the part of Allied, but because DRP would not accept those employees on their site. But for that there is every indication that Allied would have continued their employment on the same terms as before at the DRP site. In those circumstances the relevant transfer would have taken place and any employee objecting to such transfer solely on the basis of the change of employer would have been disentitled from bringing a claim against either transferor or transferee, as the Tribunal found here in the case of the Applicant.
24. In the absence of any evidence as to how the Allied contract was operated post-16 June 2000 the facts remain as found by the Tribunal. No further facts remain to be found on remission.
25. In these circumstances we feel able, having allowed the appeal on the basis of the Tribunal's misdirections in law more particularly set out above, to reach our own conclusion applying the law as we understand it to be. Our conclusions are that in circumstances where no physical assets or employees were transferred from Lockhart to Allied after they took over this labour intensive contract and the reason for Allied not taking on those employees dedicated to the Lockhart contract was that they were prevented from doing so due to objection by the client, DRP, itself, no identifiable economic entity transferred to Allied. Consequently there was no relevant transfer.
26. It follows that this case must be remitted to a fresh Tribunal with a direction to consider the Applicant's complaint of unfair dismissal and/or entitlement to a redundancy payment against Lockhart, by whom he was employed at all relevant times.