At the Tribunal | |
Before
THE HONOURABLE LORD JOHNSTON
MR J M KEENAN
MR P HUNTER
APPELLANT | |
(2) CROUCH MINING LTD (IN ADMINISTRATION) |
RESPONDENT |
Transcript of Proceedings
JUDGMENT
For the Appellants | Mr R McKenzie, Solicitor Of- Messrs Harper Macleod Solicitors The Ca'd'oro 45 Gordon Street GLASGOW G1 3PE |
For the 1st Respondents For the 2nd Respondents |
Mr B Murphy, Solicitor Of- Messrs A C White Solicitors 23 Wellington Square AYR KA7 1HG No Appearance, Nor Representation |
TUPE: Whether transfer of undertaking
LORD JOHNSTON:
"Each of the representatives then addressed us on the evidence, and made helpful submissions. All of the representatives were clearly familiar with the well-trodden path through the TUPE minefield, and skilfully tried to steer us away from what each considered to be the dangerous areas. Mr Murphy based his submission on Chapter Five of MacMullen on Business Transfers, which is an authoritative and exhaustive analysis of the "definition of a transfer and when a transfer occurs." Mrs Sutherland supported the conclusions drawn from this analysis by Mr Murphy, but felt that the questions for the Tribunal to determine could be narrowed down to a much shorter list of four individual issues, as follows:-
1. Was the first respondents undertaking at Chalmerston/Pennyvenie a stable economic entity?
2. Was the first respondents undertaking there confined to a specific works contract?
3. Was there a change in the identity of the employer of that undertaking on or about 13/14 April 2001?
4. Did the transferred undertaking retain its identity after 13/14 April 2001?
It is a feature of TUPE that every few years, in an effort to be helpful, the European Court of Justice, or the United Kingdom courts, set out a list of what they consider to be the relevant factors in question regarding TUPE transfers. Succeeding Spijkers, from the European Court of Justice, we now have Cheesman from the Employment Appeal Tribunal, and Miss McManus took us through this case for the basis of her analysis of the facts and law.
Having considered the various submissions, we preferred to follow the guidance of Cheesman which seemed to us to more fully address the issues (and also for the very good reason that it is binding authority). We looked at each of the points for consideration listed in that case, insofar as they were relevant to our present deliberations.
On the first issue of whether there was an undertaking, EAT observed that:-
( there needs to be a stable economic entity whose activity is not limited to performing one specific works contract - an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective. It has been held that "one specific works contract" is restricted to a contract for building works.
This was one of the primary issues. We came to the conclusion that whilst it was true that immediately before the transfer, the workforce were largely engaged on one specific contract, they were not exclusively engaged on that, and, in any event, it was not open to us to simply ignore any previous activity ongoing continuously since 1988, as if this latest contract was something entirely separate. It clearly was not. It was merely part of the ongoing mining process, which for some reason had been separately defined. After the alleged transfer, the remaining part of the mining process was resumed.
We have to say that we do not understand the rationale behind the expressed view of the employment Appeal Tribunal that the authority of the case of Rygaard is to be restricted to a contract for "building" works. It is difficult to see the distinction between excavating the top cover of soil for purposes of erecting a building and carrying out a similar process for the purpose of extracting coal. We would have been inclined to regard ourselves as bound by the European Court in that case had the facts been that the applicants had been engaged on a "specific works contract" for the removal of the overburden, without any previous history on the site, and if there had been no intention immediately thereafter to proceed to extraction. If these had been the circumstances, we would have been inclined to accept the views of Ms McManus.
( in order to be such an undertaking it must be sufficiently structured and autonomous, but it will not necessarily have significant tangible or intangible assets.
The applicants formed part of a team (or "unit", as one witness claimed). They had a defined management structure, but were clearly locally autonomous from both the first and second respondents. Even apart from the issue of the earth moving plant, there were significant tangible assets, which did not transfer with them.
( an organised grouping of wage-earners who are specifically and permanently assigned to a common task may, in the absence of other factors or production, amount to an economic entity.
We regarded the common task as the mining aspect of the whole site, to which for is all intents and purposes the workforce was specifically and permanently assigned from 1988 until 14 April 2001. The contractual basis of the arrangements for the extraction between the first and second respondents did not affect that reality, in our view. We appreciate that at various points in time, the contract went out to tender, but the result seems to have been accepted as a foregone conclusion. Presumably the reason for this is that the setting up costs for a new contractor would be so great as to make it not a viable proposition. The facts point to a position that so long as the second respondents wished to extract coal, and the first respondents were acceptable as contractors, then the relationship, and the operations, would continue.
( an activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it.
The fact that the second respondents wished to take on the same workforce is of significance here. The local knowledge, the familiarity with each other, and with the equipment, the continuity of operating method including "the box cutting", shift pattern, etc, all point to the existence of a stable economic entity since 1988.
As to whether there has been a transfer, EAT stated that regard must be had to the following:
( the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, amongst other things, by the fact that its operation is actually continued or resumed.
There was no evidence that there was any intention on the part of the second respondents to cease operations at the site. The interruption was only momentary, and would have been a holiday period in any event for most of those employed. There was only one change in the workforce; the replacement of the foreman. Weighed against the fact that apart from administrative matters, no other changes were effected, this is in our view insignificant. Our finding is that the entity retained its identity.
( in a labour-intensive sector it is to be recognised that an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessors to that task. That follows from the fact that in certain labour-intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity.
There was no argument that the vast majority (all but one) of the workforce ceased working for the first respondents, and were instructed thereafter to attend for duty one week later. From the surrounding facts and circumstances, the workforce clearly felt that they were obliged to do so. Again, this is an indication to us that the economic entity retained its identity.
( it is necessary to consider all the factors characterising the transaction in question - but each is a single factor and none is to be considered in isolation. However; whilst there is no legal authority on the point, it is presumably not an error of law to consider 'the decisive criterion' in isolation because that is an aspect of its being 'decisive', although when considering 'the decisive criterion' it is necessary to have regard to the fact that it is not itself dependent on a single factor.
We did not regard any one single factor as being decisive in this case. The matter was complicated, and it was necessary for us to take an overall view of a large number of factors. There was no "smoking gun".
( matters that require consideration include the type of undertaking, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer; whether or not the majority of its employees are taken over by the new company, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer; and the period, if any, in which they are suspended.
We did consider all of these matters. We disagreed with Mrs Sutherland that assets transferred included any rights in respect of the coal itself. In our view, all that the first respondents had in this respect was a contractual obligation to work 'the coal, and a right to be paid for that work in terms of their ongoing contract. It was clear that no contractual obligations were transferred. There could not be any "goodwill" in the circumstances we have described. The only intangible asset that was transferred was the value of the coherent and experienced workforce. It also seemed to us that customers were not relevant to our consideration. The obligation of the first respondents were simply to deliver coal to a rail head from whence it was delivered to customers by the first respondents. If there was any customer relationship, then the first respondents were the "customers" of the second respondents.
( account also has to be taken, amongst other things, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on.
We did attach importance, as did the respondents, to the continuity of the workforce. Mining is a dangerous activity, and safety is a major consideration. All other things being equal, it appeared to us that a site experienced workforce will be safer and more efficient than a workforce which is not familiar with the site. These must be the primary reasons why the second respondents wished to retain the existing workforce.
( the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor.
This factor alone does not justify the conclusion, but it is a factor which we can take into account.
( the absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is not conclusive as there is no need for any such direct contractual relationship.
We agreed that there was no contractual link in terms of continuing obligations after 14 April. The fact that the discharge of the earlier contracts was still to be completed is probably irrelevant in this context. There is, however, abundant authority for the view that any incoming contractor needs no direct contract with the outgoing contractor for the transfer regulations to apply.
( when no employees are transferred, the reasons why can be relevant to determine whether or not there was a transfer.
Our finding is that the employees did transfer.
( the fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but no particular importance should be attached to a gap between the end of the work by one sub-contractor and the start by the successor
If there was any gap in the operations at all, it was of no significance.
Since the case of Lightways, it is open to the Tribunal to consider as a factor the attitudes adopted by the parties in anticipation of the transaction. In the present proceedings, we heard a deal of evidence about the positions adopted by the first and second respondents at various points in advance of, and immediately after the transfer.
We took the view that such evidence as was produced was not clear cut as to, in particular, the position of the second respondents. The difficulty for the Tribunal, was that the second respondents are an incorporated body, and different officers and agents, with different responsibilities, have apparently said different things at different times. Where no settled and concluded view is apparent, we took the view that it would be wrong for us to assume that such a settled and concluded view existed, and draw any inference from it.
In any event, it was not necessary for us to do so. There was a sufficiency of other evidence, in our view, to hold that the answers to each of Mrs Sutherland's questions pointed to the existence of a transfer, and having considered all those matters which we have narrated, we find accordingly.
At the close of the submissions, Mr Murphy asked to address the hearing on the issue of expenses. These cases will now proceed to a hearing on the merits, which, as we have earlier indicated will be before another Tribunal. We think it would be appropriate to defer consideration of expenses until after all these proceedings are complete, since it is possible that any findings by us in relation to expenses at this stage could complicate matters further down the line. For the avoidance of doubt, however, if such a motion is made at the end of the day, it will be considered by this Tribunal, insofar as it relates to the proceedings before us."
Jozef Maria Antonius Spijkers v Gebroeders BenedikAbattoir CV and Alfred Benedik en Zonen BV, Case 24/85 ERC 1119
Ledernes Hovedorganisation, acting on behalf of Ole Rygaard v Dansk Arbejdsgiverforening, acting on behalf of Strø Mølle Akustik A/S, Case C-48/94 ECR 1995 1-2745
Ayse Süzen -v- Zehnacker Gebäudereinigung GmbH Krankenhausservice Case C-13/95 1997 ECR 1-1259
G.C. Allen and Others v Amalgamated Construction Co.Ltd Case C-234/98 ECR 1996 1-8643
Oy Liikenne Ab v Pekka Liskojärvi and Pentti Juntunen, Case C-172/99 ECR 2001 1-745
Betts and Others (plaintiffs/respondents) v Brintel Helicopters Ltd (defendants) and KLM ERA Helicopters (UK) Ltd (defendants/appellants) [1997] IRLR 361
Argyll Training Ltd (appellants) v (1) Sinclair and (2) Argyll & The Islands Enterprise Ltd (respondents) [2000] IRLR 630
Cheesman and others (appellants) v R. Brewer Contracts Ltd (respondents) [2001] IRLR 144
ADI (UK) Ltd (appellants) v WilIer and others (respondents) [2001] IRLR 542
P & 0 Trans European Ltd (appellants) v Initial Transport Services Ltd and others (respondents) [2003] IRLR 128
"(a) That in the case of an activity involving the carrying out of a number of works contracts, even sequentially, the necessary prerequisite of a stable economic entity, capable of being transferred for the purposes of the Directive and TUPE, cannot, by definition, apply where the putative transfer is claimed to occur on the conclusion of a works contract and where there was no transfer of "a body of assets enabling the activities or certain activities of the transferor undertaking to be carried on in a stable way" (Rygaard paragraph 21).
(b) The Tribunal erred in law in failing to properly address the question of whether a stable economic entity existed.
(c) That in the case of an economic entity characterised by substantial tangible and/or intangible assets there can be no transfer of that entity for the purposes of the directive or TUPE if at least a substantial proportion of such assets do not transfer.
(d) The Tribunal erred in its approach to the determination of the question of whether a transfer of an identifiable economic entity took place by applying an analysis appropriate to a case of a labour intensive service type industry where the principal characterisation of the entity is its workforce."