United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR BRIAN NAPIER (One of Her Majesty's Counsel) Instructed by: Messrs Brodies Solicitors 15 Atholl Crescent Edinburgh EH3 8HA
For the Respondent	MR PATRICK GREEN (of Counsel) Instructed by: Messrs Bevans Solicitors Grove House Grove Road Redland Bristol BS6 6UL


 


SUMMARY

Transfer of Undertakings – pensions and other terms

The Claimant started to work for the transferor in 1999 where there was no severance pay scheme. She transferred to the Appellant in 2004 where there is a dual scheme providing different benefits to those who "joined" before and after 2002, each increasing with length of service. In 2005 it was incorporated into her contract. When she was made redundant in 2005 she was treated as having length of service back to 1999, but it was the post-2002 joiner scheme which was applied to her. It was held that TUPE Reg 5(1) did not give her the retrospective right to be treated as a pre-2002 joiner, since the Regulations protect existing rights and do not create or increase them.
 


HIS HONOUR JUDGE McMULLEN QC

1. This case is about the effect of the TUPE Regulations 1981 on a contractual right to enhanced severance payments. The Judgment represents the views of all three members. We will refer to the parties as the Claimant and the Respondent.

Introduction

2. It is an appeal by the Respondent in those proceedings against the Judgment of an Employment Tribunal, sitting at Bristol, Chairman Mr C F Sara, registered with reasons on 31 July 2006. The parties were represented by solicitors, and today by Mr Patrick Green of Counsel and Mr Brian Napier QC, respectively. The Claimant claimed unfair dismissal and breach of contract. The Respondent denied the claims. The essential issue, as defined by the Employment Tribunal and now relevant on appeal, was to decide the entitlement of the Claimant to the severance terms offered by her employer.
3. The Tribunal upheld her claim of unfair dismissal. It also upheld her contract claim against which the Respondent appeals. Directions sending it to a full hearing were given in Chambers by HHJ Ansell.

The legislation

4. The relevant provisions of the legislation begin with the Transfer of Undertakings (Protection of Employment) Regulations 1981, Regulation 5(1) of which provides as follows:

"A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee."

5. Also relevant to the discussion in this case is the concept of continuous employment, which is provided for by Part XIV of the Employment Rights Act 1996. Sections 210 and 211 provide elaborate rules for counting employment for certain statutory purposes. These purposes include the right to claim unfair dismissal (section 111), and the right to a redundancy payment and the amount of a redundancy payment (section 162). Also relevant is section 1, which requires an employer to give a statement of employment particulars and of changes thereto, and these include particulars of the date when the employment began. The Tribunal directed itself by reference to TUPE.

The facts

6. The Tribunal described the Respondent in this case as follows:

"…The respondent is part of an international group of companies which are based in Australia, the name of the holding company being Computershare Investor Services Ltd. The respondent was formed as a UK company and in 1998 they took over a number of staff who had formerly been Royal Bank of Scotland staff. There was union recognition in respect of the respondent company and, based on the fact that the Royal Bank of Scotland staff had previously had some fairly generous redundancy terms, the respondent and another group company called Computershare Ltd entered into a Recognition Agreement with the Banking, Insurance and Finance Union, as it then was."

7. As for the Claimant, the Tribunal said this:

"Turning to the claimant. In 1999 she joined a company called Ci (UK) Ltd as Finance Manager This was an entirely separate business from the respondent company and initially was not even part of the Computershare group of companies. It was a joint venture, 50% owned by an entirely different company and 50% owned by one of the parent companies in the Computershare Group with the latter having a golden share. The claimant entered into a contract of employment which made no reference to redundancy payments and also specifically excluded any collective agreements. It is common ground that there was no collective agreement that applied to Ci (UK) Ltd and that the Recognition Agreement to which we have referred was never applied to Ci (UK) Ltd."

She was employed as a Finance Manager at a salary of some £58,000 per year, and she is today 47 years old.

8. In summary, the Claimant started work for the transferor in 1999, and had her contract of employment transferred to the transferee, the Respondent, in June 2004. At the time of her transfer she had no terms relating to enhanced redundancy or severance payments. By 9 December 2005 the Claimant became entitled to the severance terms, which are the subject of the claim. The relevant clauses are as follow:

"Severance Terms – Date of Entry pre 1 March 2002

Computershare Investor Services PLC and Computershare Limited operate two sets of severance terms and these are outlined below. The first set apply to those employees who joined prior to 1 March 2002 and the second set apply to all those staff who joined on or after 1 March 2002.

Employees who joined prior to 1 March 2002 Only

…

Severance Terms – New Entrants after 1 March 2002

Employees who joined on or after 1 March 2002 – Severance Terms

Employees who joined the service of Computershare Investor Services PLC or Computershare Limited after 1 March 2002 will be entitled to the following table of severance terms in the event of redundancy. This table is broadly based on the Statutory Redundancy table however there is no weekly pay cap as for Statutory Redundancy. They will also be entitled to the agreed notice period for redundancies which is three months."

9. The Tribunal was asked to consider two issues: first, whether those terms were incorporated. The Tribunal held that they were. That was the subject of a ground of appeal recently abandoned by the Respondent. The second was whether or not they provided rights to the Claimant so that she could claim, in effect, her continuous service back to 1999 and be treated as a pre-2002 joiner. The Tribunal therefore fastened upon the first words of the clause:

"17… So, the question is: When did the claimant "join" the respondent? As a matter of fact, the answer is fairly simple, she joined them on the date of the transfer in 2004. In 1999 she was an employee of Ci (UK) Ltd. She wasn't an employee of the respondent."

10. That was its principal common sense finding. But it turned then, at the invitation of the Claimant, to consider the effect of regulation 5(1), requiring, as it said, the Respondent to face up to TUPE, and it said this:

"17… That is a deeming provision. No one is suggesting that her contract of employment was made by the respondent but it has effect as if made by the respondent. This is the reason why in calculating her redundancy payment they treated her service as beginning in 1999.

18. It is suggested on behalf of the respondent that Regulation 5(1) should be narrowly construed as relating only to the terms of the contract itself and not to the variations which took place in 2004 or 2005 but we see no reason to treat it in that way. The whole idea of the Transfer of Undertakings Regulations is to protect employees who have moved to another company. The respondent was not under an obligation to allow the claimant to take advantage of the redundancy policy which applied to other employees but as soon as her contract was varied to allow that then she was entitled to pursue a claim under that contract in accordance with the deeming provisions of Regulation 5. In those circumstances, since she is deemed to have joined the respondents in 1999, she is entitled to a full redundancy payment."

11. On the basis of those findings the Respondent was wrong to apply the post-2002 joiner terms and the Claimant's case for breach of contract was upheld. It was subject to the statutory cap of £25,000. We understand the practical effect of success in this appeal is that that would be set aside. As a matter of fact, the Respondent applied precisely neither the pre-2002 nor the post-2002 severance terms, for the Claimant was given credit for service of between 5 and 9 years at the age which she then was. To put it neutrally, she did better than a strict application of the post-2002 joiner terms would provide but worse than application of the pre-2002 terms.

The submissions

12. Two simple propositions are advanced by Mr Napier QC on behalf of the Respondent. The first is that the Tribunal's error was caused by its reliance upon TUPE and TUPE cannot create rights post-transfer which were not there pre-transfer. Secondly a variation of terms of employment occurring after a relevant transfer is not capable of invoking rights under TUPE unless they are a diminution of the terms already agreed at the time of the transfer.
13. On behalf of the Claimant, Mr Green contends that the sole issue is the variation in the contractual term. Since TUPE gave the Claimant continuous employment from 1999, certainly for statutory purposes, the effect of TUPE was to require her employment to have begun as at the time of her engagement by the transferor and to be continuous thereafter with the Respondent. When the variation took effect by 2005, the severance terms agreed by the Respondent applied to her. It is a strictly contractual analysis.

The legal principles

14. The legal principles to be applied in this case appear to be as follow and they are not controversial before us.
15. We should interpret TUPE to give effect to the European Union obligations set out in the Acquired Rights Directive, the full title of which is "Council Directive 77/187 on the approximation of the laws of member states relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses". That essentially is replicated by the full title of TUPE; the language of safeguarding and protecting rights is important.
16. The objective of the Directive is to ensure that employees' rights are safeguarded in the event of a transfer, for the European Court of Justice in Bork (P) International A/S v Foreningen af Arbejdsledere i Danmark [1989] IRLR 41 said this:

"… the objective of Directive 77/187 is to ensure that employees' rights are safeguarded in the event of a change of employer and to allow them to remain in the employment of the new employer on the same conditions as those agreed with the transferor."

17. The objective of the Directive is not to improve on existing rights: see Viggosdottir v Islandspostur HF [2002] IRLR 425 at paragraph 36 and 37, where this is said:

"36. The Court has previously held that the transfer of the employee's rights cannot be restricted, even with the employee's consent.

37. … the objective of the Directive, which is not to improve the situation of an employee following a transfer, but merely to preserve his acquired rights."

18. In so far as there is any invocation of TUPE after a transfer, it relates to the protection of those rights against any damage which would be done to them by a subsequent variation, albeit agreed, for variations connected with the transfer would run foul of the TUPE regime: see the case generally known as Daddy's Dance Hall [1988] IRLR 315, where the ECJ said this:

"It follows that the workers concerned do not have the option to waive the rights conferred on them by the Directive and that it is not permissible to diminish these rights, even with their consent. This interpretation is notwithstanding the fact that, as in the instant case, the worker, to offset disadvantages arising for him from a change in his employment relationship, obtains new advantages so that he is not, overall, left in a worse position than he was before."

19. As applied in the United Kingdom, TUPE affects both statutory constructs, such as continuity of service, for the purposes of unfair dismissal and redundancy pay, and also contractual terms and conditions.
20. The task of construction with which we are faced is to give effect to the joint intention of the parties to this contract. Being a contract, it is susceptible to a legal analysis where, as here, the sole issue for determination derives from documents. It thus excludes any parole material or representations.

Conclusions

21. We prefer the arguments of the Respondent and allow the appeal. We accept that one cannot use TUPE to advance upon a position which was not there on the date of the transfer, such position being in the contract of employment or in the statutory constructs applicable to employment. Nor can TUPE be brought in respect of a criticism of post-transfer variations, unless it is to safeguard a pre-transfer right.
22. The logical position of the Claimant that everything in her contractual terms in place once the variation was agreed harks back to her commencement of employment in 1999. We do not, with respect, regard that as correct. The introduction of these contractual terms by the Respondent, possibly after further collective bargaining, was a matter for it. It could have provided no severance terms to the Claimant. It could have decided on a completely different set of terms, or that various employees, otherwise in scope of any severance scheme, could be excluded from it. All those are matters for it as a matter of contract. There is no logical connection between the fact that the Claimant was, by TUPE, deemed to be employed by the Respondent from the date of her employment by its predecessor in 1999 and her ability to pick up all subsequent changes made by the Respondent..
23. We can understand the force of the Claimant's feelings about the offer which was made to her but what is clear about the terms is that there is a dual system. The terms do not use language which one finds in the statutes to which we have referred, such as "commencement of employment". The words used here are "joined" and "joined the service". There is no challenge to the common sense finding by the Tribunal that "join" means actually joining the Respondent, in her case in 2004. It is only by reason of TUPE that she is deemed to have been in the employment of the Respondent at an earlier stage.
24. Provided it has no connection to the relevant transfer, a variation of her contract can be effected. The simple fact that she is to be regarded, for statutory purposes, as having been employed by the Respondent from 1999 does not affect that central analysis. While there may be other arguments, and certainly there may be some based upon what reasonable employers might do, the sole argument addressed in this case is the correctness of the Tribunal's reliance on TUPE Regulation 5(1). Since we have held that Mr Napier's submission is correct, it follows that the Tribunal's reliance upon TUPE to treat the Claimant as a pre-2002 joiner under the scheme was impermissible.
25. The implications of the Tribunal's approach have been painted large for us. Mr Napier may be right when he says that if the Tribunal's Judgment were applied uniformly it would affect retrospectively large numbers of employees, simply because their contracts had been transferred. Secondly a simple illustration was debated: suppose the Claimant had become entitled by the Respondent's offer to a Christmas contractual bonus. She would be entitled not only this year but in the years prior to her actual joining of the company, and that cannot be right. In any event, our task was simply to determine whether the Tribunal was correct in allowing TUPE to change what was the plain meaning of "joining" the Respondent and we hold that it was incorrect so to do.

Disposal

26. We would very much like to thank both Counsel for the very concise way in which they have put the case. The appeal is allowed. Permission to appeal is granted. Mediation is to be considered. [Reasons not transcribed.]