United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR DECLAN O'DEMPSEY (of Counsel) Instructed By: Messrs Harpers Solicitors and Advocates Hamilton House 1 Temple Avenue London EC4Y 0HA
For the Respondents	MISS VICTORIA VON WACHTER (of Counsel) Messrs Alexander Johnson Solicitors 10-11 Lanark Square Glengall Bridge London E14 9RP


 


THE HONOURABLE MR JUSTICE MAURICE KAY:

1. The Appellant complained that on 7 October 2000 he was unfairly dismissed from his employment as salon manager and senior stylist at Mango Hair, a hairdressing salon run by a partnership of Mr. Carvalho and Mr. Day. By a decision promulgated on 23 May 2001 an Employment Tribunal decided that it had no jurisdiction to hear a claim for unfair dismissal because the Appellant did not satisfy the one year qualifying period pursuant to section 108 of the Employment Rights Act 1996. He now appeals against that decision.
2. The Appellant had commenced work at another hairdressing salon called The Gentry on 26 August 1998. The Gentry was owned by Mr. Day alone. Its premises were at Cabot Place Concourse, Canary Wharf. The subsequent history of events is recounted in the following findings of fact by the Employment Tribunal (in which we have transposed the names of the parties as appropriate):

"(a) The Appellant was unhappy in his employment with Mr. Day in … The Gentry. In December 1998 he was ready to resign … after having been employed there for only about four months.

(b) Following discussions with Mr. Day, the Appellant was content to remain in his employment at The Gentry upon the possibility, which was held out to him by Mr Day, that he would become the manager of a new salon which Mr. Day intended to open at some unspecified time in the future.

(c) The Appellant remained in the employment of Mr. Day at The Gentry until 25 August 2000, a further period of approximately 20 months. In the course of that continued employment he discovered from conversation with Mr. Day in about September 1999 that the business in the new salon would be in the ownership not only of Mr. Day but also of Mr. Carvalho, who would become a partner of Mr. Day in the new venture.

(f) Whereas in the Appellant's written contract of employment with The Gentry he was employed in the position of senior stylist at a salary of £250 per week basic, he entered into a new contract of employment with Mango Hair dated 29 August 2000 in which he was described as a salon manager/senior stylist, and his basic earnings were agreed at £300 net of tax and national insurance.

(g) The Appellant's contract of employment with Mango Hair was entered into on behalf of [the partnership] by Mr. Carvalho.

(h) The premises occupied by [Mango Hair] for the new business were not far from the premises of The Gentry. The Appellant commenced employment with Mango Hair on the first day on which the new salon was open for business, namely on 29 August 2000. The salon was equipped with completely new furnishings. There was no transfer of stock between The Gentry and the new business. One other employee, a junior assistant, left her employment at The Gentry in order to work at the new salon on the same date as the Appellant. The business of The Gentry continued to operate as before in the premises at Cabot Place Concourse

(i) The Appellant only worked for Mango Hair in the new salon for a period of some five to six weeks."

The Employment Tribunal made certain other findings which explain some of the background. Mango Hair employed a firm of accountants who were the same accountants who acted for Mr. Day in relation to The Gentry and two other salons which he ran as a sole trader. Mango Hair and The Gentry maintained separate accounting systems and were separately registered for VAT. On 25 August 2000 the accountants prepared a P45 for the Appellant to reflect the fact that he had ceased to be an employee of The Gentry. The appropriate part was sent to the Inland Revenue but it does not seem that the Appellant was ever given the employee's part of it.

3. The case for the Appellant was that he satisfied the twelve month qualifying period under section 108 because there had been continuity of employment notwithstanding that he had moved from The Gentry to Mango Hair. At the forefront of the Tribunal's consideration of this issue was section 218(2) of the 1996 Act which provides:

"If a trade or business, or an undertaking (whether or not established by or under an Act), is transferred from one business to another -

(a) the period of employment of an employee in the trade or business or undertaking at the time of the transfer counts as a period of employment with the transferee, and

(b) the transfer does not break the continuity of the period of employment."

In addition, section 218 (5) provides:

"If there is a change in the partners, personal representatives or trustees who employ any person -

(a) the employee's period of employment at the time of the change counts as a period of employment with the partners, personal representatives or trustees after the change, and

(b) the change does not break the continuity of the period of employment."

4. The conclusion of the Employment Tribunal is contained in these two passages from the extended reasons:

"We do not consider that on the facts of this case it could be argued successfully that the circumstance envisaged by section 218 (2) … applies. It cannot be successfully argued that the new salon was, in effect, a going concern in which operations were carried on without interruption. It cannot be argued, therefore, that Mr. Carvalho and Mr. Day became the proprietors of a business which was in succession to that of The Gentry which continued to operate as before. There was no transfer of stock or goodwill to Mango Hair from The Gentry. A disinterested observer would not have considered that part of the business of The Gentry was being transferred to Mango Hair and being operated in another place. This was therefore not a transaction, with regard to which the Appellant can rely on the provisions either of section 218(2) of the Act or the provisions of the Transfer of Undertakings (Protection of Employment) Regulations in order to establish continuity. It is clear to us that the two businesses are separate and, whilst there is a connection in that Mr. Day is owner of one and part owner of another, that is the extent of the connection.

…

It seems to us that the Appellant has between August 1998 and October 2000 been employed by two distinct legal entities, albeit connected by Mr Day's ownership in one and part ownership in the other. In order to show continuity, it would be necessary for there to be a clear statutory provision upon which the Appellant can rely. However, we find that he is unable to bring himself within any of the circumstances in section 218 … which would allow him to claim continuity of employment in the circumstances of this case."

5. On behalf of the Appellant Mr. O'Dempsey submits that these passages disclose a failure adequately to grapple with the issues raised by section 218(2). It is well established that "the time of transfer" in that provision may relate to a process extending over a period of time rather than a particular moment in time: Clark and Tokeley Ltd v Oakes [1999] 1CR 276. It is also common ground that section 218(2) covers circumstances in which part of a business is transferred: Melon v. Hector Powe Ltd [1980] IRLR 477. Moreover, the part transferred may be goodwill rather than physical assets: Ward v Haines Watts [1983] 1 CR 231. None of these principles is disputed by Miss von Wachter on behalf of Mango Hair. Indeed, they appear to have been acknowledged by the Employment Tribunal in paragraph 5 of the extended reasons. Mr. O'Dempsey's complaint is that what was then required was a rigorous application of them to the evidence in the case but that this the Employment Tribunal failed to do.
6. The Chairman's notes of evidence contain the following (in addition to the parts which expressly become findings of fact in the extended reasons):

The Appellant:

"I asked for one of the staff from The Gentry. He [Mr Day] said yes and she was transferred as well to Mango.

All my customers from Gentry went to Mango. Nicky did not bring many customers. I brought about more than 100. Ladies and a few gentlemen. I saw my customers about 4-6 weekly."

Mr Day:

"It is impossible to gauge how many customers may have gone with him. People do follow their hairdresser…..We had enough customers. I was not losing customers. They are customers at a different salon."

Mr. Carvalho:

"Some of the customers did follow - 3 or 4 a day were old customers."

Those last figures are susceptible to an arithmetical projection close to the figures given by the Appellant. His case is that all this material is crucial to any analysis of whether there was a transfer of part of the business from The Gentry to Mango Hair. Not only did a significant number of customers follow him from The Gentry to Mango Hair. It was the intention and expectation of Mr. Day and Mr Carvalho that they would.

7. Miss Von Wachter submits that the Employment Tribunal committed no legal error in relation to this material. There was no significant difference between the Appellant moving from The Gentry to Mango Hair and his moving purely for his own reasons from The Gentry to a wholly unconnected salon to which some of his customers transferred their custom. She places reliance – as did the Employment Tribunal - on Wynne v. Hair Control [1978] 1 CR 870, the facts of which bear a resemblance to those of the present case.
8. In our judgment, there is a conspicuous difference between the present case and one where a hairdresser simply leaves of his own accord to work for an unconnected business. In the present case Mr. Day was instrumental in bringing about the Appellant's move which he must have considered advantageous from a business point of view. Moreover, this was expected to result in a transfer of customers – a consequence which was in the mutual interest of all parties although, of course, as in any similar case there is no guarantee as to the extent of such a transfer.
9. We do not consider that Wynne v. Hair Control is fatal to the Appellant's case on section 218(2). For one thing, its ratio relates to the calculation of "weeks". Although it goes on to address the predecessor of section 218, it does so primarily in relation to the predecessor of section 218(5) which, on any basis, does not assist the Appellant in the present case. Wynne does not contain any consideration of "transfer of part of a business". Indeed, we venture to suggest that, in 1978, such an analysis would have been far less familiar than it is today.
10. We have come to the conclusion that, perhaps because it was seduced by the factual similarity of Wynne v. Hair Control, the Employment Tribunal in the present case did not carry out a proper analysis of the evidence to ascertain whether or not there had been a transfer of part of the business from The Gentry to Mango Hair. We reach this conclusion mindful of our obligation not to expose the decision of the Tribunal to excessive scrutiny and not to substitute, or indeed to express, any view of our own as to the appropriate conclusion on the evidence. We simply conclude that the Tribunal omitted to analyse a potentially crucial area of evidence which, upon proper analysis, may produce a different result. Accordingly, the appeal must succeed and we shall remit the case to a differently constituted Tribunal for rehearing.
11. At the hearing of the appeal we gave permission to the Appellant to amend his grounds of appeal so as to embrace the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). There is no doubt that the Employment Tribunal considered TUPE. In the passage we have quoted it decided that there was not a TUPE transfer. Of course, if there had been, the accrued right not to be dismissed unfairly would have been transferred. The question of a TUPE transfer requires consideration of

"whether, having regard all the facts characterising the transaction, the business was disposed of as a going concern, as would be indicated inter alia by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities." [Spijkers v. Gebroeders Benedik Abattoir [1986] 2 CMLR 486, 494, ECJ]."

The same approach applies to the transfer of part of a business.

12. In our judgment, this called for a similar analysis of the evidence to that which was required in relation to section 218(2) but it did not receive it. We also allow the appeal on this basis, with the same remission.
13. We wish to record three further matters. First, we have some sympathy with the Employment Tribunal in this case because the Appellant acted in person there and the Tribunal was deprived of professional representation of his case in a difficult matter. Secondly, bearing in mind that a great deal of time has passed since the events which gave rise to this case, that the unfair dismissal claim is, by virtue of our decision, still at a preliminary stage, that there is an outstanding breach of contract claim still awaiting determination in the Employment Tribunal and that the costs incurred and yet to be incurred must be substantial, we urge the parties to attempt settlement of this and any other dispute between them. Thirdly, we are not minded to make a costs order in relation to this appeal or any part of it.