United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR E WILLIAMS (of Counsel) Instructed by: Messrs Bindman & Partners Solicitors 275 Grays Inn Road London WC1X 8QB
For the 1st, 6th and 7th Respondents	MR D BROOK (of Counsel) Instructed by: Messrs Howell-Jones rhw Solicitors (formerly Howell-Jones Partnership) 75 Surbiton Road Kingston upon Thames Surrey, KT12AF
For the 2nd and 3rd Respondents	MR N DILWORTH (of Counsel) Instructed by: Messrs Parker Bullen Solicitors 45 Castle Street Salisbury Wiltshire, SP13SS


 


SUMMARY

Transfer of Undertakings: Transfer

The Appellant was employed by R1. He worked for a particular consultancy in R1's business. That part of R1's business was sold. The only issue remaining in the EAT was whether he remained working for that part of R1's business at the time of the sale so as to be automatically transferred to the purchaser's employment, or whether he had by then ceased to work for that part of the business and so was not transferred. Held: the ET was entitled to hold that he had ceased to work in the part of the business transferred and so remained employed by R1.


 


HIS HONOUR JUDGE REID QC

1. This is the remaining part of an appeal against a decision of an Employment Tribunal sitting at London South. The Tribunal, after a hearing of ten days (in two tranches) and five days' deliberation in chambers by a judgment dated 26 July 2006:

(a) dismissed the Appellant's claim that his employment had transferred from the First Respondent ("Spherion UK") to the Second Respondent ("RelQ") under the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE");

(b) dismissed the Appellant's claim of (primary) race discrimination;

(c) upheld his claim of race discrimination by way of victimisation and awarded him £8,000 compensation - £4,000 from Spherion UK and £4,000 from the Sixth Respondent ("Mr Thompson");

(d) dismissed his claim for unfair dismissal.

The Appellant appealed against each of decisions (a), (b) and (d). There was a full day preliminary hearing before Underhill J and lay members on 21 March 2007 which resulted in a reserved judgment handed down on 16 May 2007. As a result of that judgment the appeals against (b) and (d) were dismissed and only the appeal against finding (a) was allowed to proceed to this full hearing, and then only on a part of the grounds of appeal.

2. The Appellant sought from the EAT (a) a declaration that he did transfer automatically to the employment of RelQ and thence to System Testing Associates and (b) that the case be remitted to the Employment Tribunal to consider the remedy flowing from the declaration.
3. At the conclusion of his judgment Underhill J said:

"The Appellant should however consider carefully what he stands to gain by pursuing his appeal in this limited respect. He may perhaps establish that as at 18 October 2002 he became an employee of RelQ; but in view of the dismissal of the remainder of his claims it is not clear to us what substantive benefit he would achieve from such a finding."

When the appeal came before us we inquired of counsel what substantive benefit the Appellant hoped to achieve if the appeal was successful and what remedy might flow from the declaration in the particular circumstances of this case. Intelligible answer came there none. We are unable to see what practical benefit the Appellant would obtain if this appeal were to succeed

The Facts in outline

4. The essential facts can be summarised as follows, adopting the summary set out by Underhill J in his judgment.
5. The Appellant is a computer software consultant. He is black, being of Nigerian origin. On 23 April 2001 he commenced employment with Spherion UK. The Managing Director at that time was Mr John Thompson. Spherion UK was a subsidiary of Spherion Corporation, based in Atlanta. The Appellant's line manager was Mr Max Loosli. The Appellant worked in Spherion UK's software quality management ("SQM") practice.
6. The business of Spherion UK was in decline, largely as a result of the loss of a major contract in 2001 and it had fairly recently shed the greater part of its workforce (cutting the force from 140 to 33). In July/August 2002 Spherion Inc decided to pull out of the European market and considered ways of closing down Spherion UK.
7. In September 2002 Spherion UK attracted an important new piece of business for a client called Differentis. At this stage the practice had only six or seven billable customers. It allocated eight consultants to this contract and there were another eight on another contract, the FDE contract. There were another seven consultants working on the other lesser contracts.
8. It was intended that the Appellant should have been a member of the team assigned to that contract. However in early September he told Mr Loosli that he would find it very difficult to work with Ms Edwards, the intended team leader for the Differentis project. He referred inter alia to health difficulties from which he was suffering, including migraines, and which he believed would be caused or exacerbated by stress. There were e-mails between the Appellant and Mr Loosli relating to the issue of whether, and if so how, he could nevertheless be employed on the Differentis team. Mr Thompson was also involved, and in an e-mail to Mr Loosli dated 12 September he said that he thought that the Appellant might be suffering from "a mental illness" and that he should see a company doctor.
9. Over the same period as these difficulties were arising, Spherion UK, as part of the wind down, was in the process of selling the SQM business to RelQ. The transfer was in two stages, the business being sold first to the Third Respondent ("STA"), a British Virgin Islands company, with an immediate on-sale to RelQ. The transfer took effect from 18 October 2002.
10. It is common ground that pursuant to TUPE all employees of Spherion UK assigned to the SQM business were at that point transferred to the employment of RelQ. It was the Respondents' position that the Appellant's employment did not so transfer. That was disputed by the Appellant, and over the following weeks there was a series of e-mails and other communications between him and his solicitors on the one hand and the Respondents and their solicitors on the other, relating both to the issue of transfer and to the question of the Appellant's health and, as things went on, to other aspects of his conduct. Among other things, the Appellant on 5 December 2002 raised, or purported to raise, a grievance with RelQ; and Spherion UK on 9 December 2002 initiated disciplinary proceedings against the Appellant. While these were still pending, Spherion UK discovered - or believed it had discovered - that the Appellant had unlawfully taken confidential documents from its offices; and it sought and obtained a High Court injunction. On 12 February 2003 the Appellant resigned, claiming (incorrectly, as the Employment Tribunal held) that he had been constructively dismissed. His salary continued to be paid by Spherion until his resignation.

The Appellant's case

11. The Appellant's case that he was transferred to RelQ is straightforward. The evidence was unequivocal that he was employed as a member of the SQM practice: his contract of employment described him as a "consultant - SQM practice". What was sold to STA and thence to RelQ was clearly defined in the sale documents as the SQM practice. The SQM practice was thus either an undertaking, or a part of Spherion UK's undertaking, to which he was "assigned" in the sense in which that term is used in the various cases in this area - deriving ultimately from the decision of the European Court of Justice in Botzen v Rotterdamsche Droogdok Maatschappij BV [1985] ECR 519.
12. Whilst it was accepted that the contract by which the SQM business was sold to RelQ did not list the Appellant amongst the persons set out in Schedule 3 of the Agreement as the employees of the business, it did not follow that he was not transferred. What mattered was whether he was an employee assigned to the undertaking or part of the undertaking which was transferred at the date of transfer. Neither a transferor nor a transferee can escape the provisions of TUPE by purporting to exclude an employee from those who would be transferred.
13. The Appellant supported his case by reference to a number of factual matters which, it was submitted, showed that in truth the Appellant had been "assigned" to the part of Spherion's business which was transferred at the date of transfer.
14. His contract of employment with Spherion UK contained the job description "Consultant - SQM Practice". In common with other software consultancies the consultants would be assigned to particular projects and if they were not assigned to a particular project and so "billable" they would be described as being "on the bench", but the fact that a consultant was on the bench at any particular time did not alter the position that he remained a consultant with the practice. The fact that he had been on the bench since he had ceased to be on the EDF contract on about 29 April 2002 did not automatically mean he ceased to be assigned to the SQM practice.
15. When in the latter part of August 2002 the proposed sale of the SQM consultancy was being negotiated all SQM practice consultants (including the Appellant) were informed by email of the proposed sale and the implications for their employment. On 30 August Spherion sent RelQ a list of the 33 staff to be transferred which included the Appellant. After the Appellant made it clear on 11 September he could not work on the Differentis project reporting to Ms Edwards, the senior consultant on the team, because of the adverse effect on his health by way of stress, his line manager consulted Mr Thompson, describing the Appellant as "one of my SQM staff". He indicated the Appellant was on the bench and there was no other work for him. Mr Thompson responded expressing concerns about the Appellant's mental health and indicating he should be required to see Spherion's doctor. On 16 September his line manager emailed the Appellant following a discussion and an exchange of emails concluding:

"…I think it best that you remain in the office at Croydon and do not go on-site. I expect you diligently and efficiently address any tasks communicated to you in the meantime by either myself, the project manager [ie the Differentis project manager] or her deputy (and to address the specific request and not to develop the task into other areas). We will review this situation on resolution of the outstanding discussions."

The Appellant responded with two e-mails, one the same day and the next the following morning, in the latter of which he suggested that he and Spherion mediate their differences through a member of the Chartered Institute of Arbitrators. On 11 and 14 October 2002 e-mails about the transfer were sent to the SQM consultants. The Appellant was included amongst the recipients. All of this, it was said showed that when the transfer was effected on 18 October 2002 (notionally to take effect from the "Effective Date", defined as 12.01am 28 September 2002) the Appellant was an employee "assigned" to the business sold which was defined in the sale agreement as "the business carried on by the Vendor [ie Spherion] of software quality management consultancy under the name "SQM Consulting" at the Effective Date".

The Respondents' case

16. The Respondents' case was simple. The question was whether at the transfer date the Appellant had been "assigned" to the part of Spherion UK's business which was transferred. This was a question of fact. It was accepted that neither transferor nor transferee could exclude an employee from the effect of TUPE merely by purporting to do so, but the Employment Tribunal had made a permissible finding of fact which disposed of the Appellant's claim. It found, as summarised at paragraph 206 of its judgment, that the Appellant

"had ceased as a matter of practical reality to work in the SQM practice; there was no more work for him within the SQM practice; and that in so far as there was evidence before us as to the employment relationship all that evidence pointed to an ongoing employment relationship with [Spherion UK]."

On the Tribunal's findings of fact the Appellant had not been an employee who had as a matter of law been transferred.

The Law

17. Tribunals must be alert to ensure that the provisions of the regulations are not evaded: see for example Carisway Cleaning Consultants Ltd v Richards and anor EAT/629/97 (19 June 1998) and Duncan Web Offset (Maidstone) Ltd v Cooper [1995] IRLR 633 at para 16, but as Bean J pointed out in Williams v Advance Cleaning Services Ltd and anor UKEAT/0838/04/DA (9 March 2005), at para 14,

"What is abundantly clear and has been said on a number of occasions is that in weighing up whether somebody is assigned to the part transferred within the meaning of the Botzeti case the tribunal (as so often in questions under the TUPE Regulations) is essentially reaching a decision on a question of fact."

18. In considering the findings of the Tribunal it is necessary to distinguish between the finding of facts and the assessment and reaching of a legal conclusion on the basis of those facts: see for example per His Honour Judge McMullen QC in Compass Group UK and Ireland T/A Scolarest v Burke and others UKEAT/0623/06/JOJ (15 May 2007) at para 11.
19. Insofar as the Tribunal's findings are properly characterised as findings of fact they can only be attacked if either there is no evidence to support them or the attacker can surmount the high hurdle placed in his way by Crofton v Yeboah [2002] EWCA Civ 794 by showing an overwhelming case that the Tribunal has reached a decision which no reasonable tribunal on a proper appreciation of the evidence and the law would have reached.
20. As to timing, the appropriate test is that propounded by His Honour Judge Burke QC in Fairhurst Ward Abbotts Ltd v Bates Building & ors EAT/1007/00/DA, 27 March 2003 (approved by the Court of Appeal at [2004] EWCA Civ 83):

"Whether he had been employed to work [in the part transferred] immediately before the transfer i.e whether [the part transferred] was his contractual place of work and that was where [the employer] would have required him to work immediately before the transfer had he not been excused from attendance. The same test would apply to the employee on holiday, on study leave or on maternity leave."

21. This test was adopted in United Guarding Services v (1) St James Security Group Ltd (2) Hermoza UKEAT/0770/03/RN (15 April 2004), in which Hooper J held at para 39 that it was open to the Employment Tribunal to conclude that the employee was not assigned to a particular place of work without a finding as to where she was assigned.

The Tribunal's findings of fact

22. The Tribunal made its findings of fact in a somewhat unusual form. It said:

"204. However we incorporate and adopt for the purposes of our conclusions in these reasons the written submissions of Mr Dilworth on behalf of the Second and Third Respondents on TUPE issues, at paragraphs 1-14. We accept the validity and force of both the legal and factual submissions save to the extent that we do not accept that there was ever a concluded agreement between the Claimant and Spherion that the Claimant should actually work for the linked employer in Stratton Street. To the extent that Mr Dilworth's submissions put the case on that issue too high we do not go as far as a conclusion that the Claimant's employment had been transferred to and included a bilateral agreement that the Claimant would from some time in October be working in Stratton Street.

205. However we accept and direct ourselves that it is not necessary for us to reach a conclusion in a case such as this as to precisely what was the Claimant's job role at the time of termination of employment nor for that matter a precise conclusion as to the precise job role of the Claimant at the time of the transfer. To put the matter much more simplistically than the full and detailed submissions of Mr Dilworth our conclusion is quite simply that the Claimant had ceased as a matter of practical reality to work in the SQM practice; there was no more work for him within the SQM practice; and that in so far as there was evidence before us as to the employment relationship all that evidence pointed to an ongoing employment relationship with the First Respondent.

206. We accept and adopt also paragraphs 15 - 29 of Mr Dilworth's submissions as correctly and validly itemising a whole series of pointers and factors which were consistent with what we find to be the obvious overall position that the Claimant as it were remained behind as one of the very few remaining employees of the First Respondent with a number of question marks as to what precisely the future held in store for him depending on the outcome of his we find serious work related problems to do with his health and outstanding disciplinary processes."

23. The submissions on fact set out at paragraphs 15 to 29 of Mr Dilworth's submissions fell into three parts. (i) Spherion UK was contractually entitled to (with or without notice), and did, reassign Mr Onwuka to another associated company or position since the business and / or his employment situation necessitated it. (ii) The contemporaneous evidence of the Respondents' witnesses supported this. (iii) Mr Onwuka's contemporaneous evidence demonstrated his acquiescence in the reassignment.
24. As to the contract, the submissions drew attention to a number of points, in particular, clauses 3.2 and 4.3 by which the contract provided:

"3.2 The use of this job title does not indicate any limitation of your duties or job function. The company reserves the right, in its own interests to transfer you to any other associated company or position if the business or your employment situation necessitates it, in which case your continuity of employment will be preserved."

"4.3 The Company reserves the right upon reasonable notice to alter or vary your job function or duties in accordance with your capabilities."

25. The submission noted that other than clause 3.1 (which was subject to clause 3.2), no reference is made to the SQM practice anywhere in the contract of employment or any of its appendices. No reference was made whatsoever to the business known as "SQM Consulting". No requirement was imposed on Mr Onwuka to work in the business known as "SQM consulting". No contractual requirement was imposed on Spherion UK to obtain Mr Onwuka's consent that it has transferred him, pursuant to its power under clause 3.2 of the contract, to any other associated company or position if his employment situation or the business necessitated it.
26. As to the evidence of the Respondents' witnesses, the submissions set out parts of the evidence of Mr Hughes, the manager at the relevant time of RelQ, Mr Loosli, the Appellant's line manager, and Mr Thompson, the sixth Respondent and former managing director of Spherion. Mr Hughes stated that RelQ was not consulted nor informed about Mr Onwuka's employment, nor did RelQ have any influence over any decision related to his employment with Spherion UK / Spherion Corp. Mr Loosli's evidence in relation to Mr Onwuka's position within or outwith the SQM practice was that

"in or around mid September 2002, by reason of the various health issues raised by Mr Onwuka and because he was no longer part of the SQM Practice, all further management of him as an individual was taken out of my hands, as SQM Practice Manager."

His understanding was that Mr Onwuka had agreed that an ideal solution was reassignment to a different part of the Spherion Corporation within the UK that provides permanent and temporary resources of a technical nature to clients. Consequently, his belief was that that was "a final decision and that Mr Onwuka was no longer part of SQM." Mr Thompson stated that in the light of the concerns over his health and behaviour, Mr Onwuka would be "internally transferred to Spherion's UK IT contracting division in order to preserve his salary and BUPA and permanent healthcare insurance cover". This is consistent with Spherion's power under clause 3.2 of the contract, to move the Appellant's employment to any other associated company or position if his employment situation or the business necessitated it.

27. The point on which the Tribunal was not persuaded was Mr Thompson's evidence

"[The Appellant] then agreed to transfer to another Spherion UK subsidiary which offered contractors (individual technical resource contracts) to the market. [The Appellant] was informed that Spherion would transfer his employment contract to this UK subsidiary on the same terms and conditions."

The limit of the disagreement was whether or not there was "bilateral agreement" as to where the Appellant was to work for Spherion.

28. The Appellant was not notified that he would be transferred, as was expected of those transferring according to question/answer 13 in a TUPE consultation document circulated to Spherion's employees. The Appellant's continuity of employment with Spherion UK was, rather, preserved during and after the transfer of the SQM practice.
29. So far as the Appellant's own evidence was concerned, the points made were (i) He had already clarified to Mr Loosli that he "was willing to work within any arrangement that preserved [his] employment and addressed [his] concern". (ii) That, some time it seems near 20 September 2002, Mr Anderson, Spherion UK's Financial Controller until January 2003, consulted with him about the possibility of working at "Stratton Street" (Stratton Street was a central London office of Spherion UK). (iii) On 21 October 2002, Mr Anderson "reiterated" the "Stratton Street" opportunity. The Appellant rejected this offer on the grounds of the length of the commute.
30. The submissions then made reference to a number of the Appellant's own documents which were said to show, amongst other things, that he was concerned that RelQ might offer him a job (which he did not want) and that he was concerned about the possibility of his job being lost to outsourcing in India.
31. As to the evidence of what the Appellant did after the sale of the SQM practice is concerned, there were sixteen points listed in Mr Dilworth's submissions. Amongst them were:

(i) The Appellant continued to be paid by (and accept payment from) Spherion UK.

(ii) He retained his keys to the Spherion UK's offices at Croydon, company documents and credit card.

(iii) He gained access to the building on Sunday 2 November and used the facilities to send e-mails;

(iv) He sent two e-mails to a potential customer in December holding himself out as a Spherion employee;

(v) He dealt with Spherion UK over annual leave. By an e-mail dated 17 December 2002 and addressed to Mr Thompson and Mr Anderson, he requested his remaining five days of annual leave from 23 December 2002 through to the New Year, inviting approval from Mr Thompson of the dates requested and indicating whether he would be paid cash in lieu in respect of the 5 day leave. That request is approved on 22 December 2002 by Mr Thompson and the Appellant took it. In an e-mail dated 16 December 2002 at 11:47 he correlated his request for annual leave with the assertions that he had given reasonable notice and that his going on leave will not cause Spherion to suffer any commercial detriment.

(vi) He was subject to and responded, in compliance with Clause 9 of his contract, to Spherion UK's company disciplinary procedures. For example in an e-mail on 15 January 2003 he sought an adjournment of the disciplinary hearing originally scheduled for 17 January 2003. He attended the disciplinary hearing on 20 January 2003, and he attended a fact-finding meeting held by Spherion UK management at Spherion UK's premises on 3 February 2003.

(vii) He registered a grievance with Spherion UK in accordance with clause 9 of the contract.

(viii) He purported to resign from Spherion in circumstances alleged to amount to a constructive dismissal.

Discussion and conclusion

32. The Tribunal had before it voluminous evidence dealing not only with the point at issue on the appeal but with a variety of other issues. It is clear that this was not a case where there was an attempt by the purchaser of a business to cherry pick which employees would be transferred. The Tribunal accepted that RelQ had no influence over the decision made in relation to the Appellant's employment. This was not, therefore, a case in which there was an attempt to evade the TUPE legislation.
33. The real point before us was, to use the expression used by Underhill J at paragraph 10 of the preliminary hearing judgment, whether

"the Tribunal's conclusions are inconsistent with its findings of primary fact (and/or with the contents of documents which are not controversial)."

This is not a case, as occurs in instances where the issue is as to the identity of the business entity being transferred, where the real battle ground is the legal conclusion to be drawn from the primary findings of fact. The reality is that the Appellant's case, shorn of the verbiage, was that the finding of the Tribunal was perverse.

34. The high points of that case were (i) that the Appellant's name was on the preliminary lists of those to be transferred, (ii) that he was circulated with the material circulated to those who were to be transferred, and (iii) he had no other fixed employment within the Spherion UK group of companies at the transfer date. All of these were factors before the Employment Tribunal and it was for the Tribunal to attach the weight it thought appropriate to them. There were a substantial number of countervailing factors for the Tribunal to take into account. In the end the Tribunal formed the view on the totality of the facts that at the transfer date the Appellant was not "on the bench" as an employee assigned to the part of the Spherion UK enterprise transferred to STA and thence to RelQ. This was a decision which in our judgment was open to the Tribunal. It cannot be said to have been perverse.
35. It follows that the appeal must be dismissed.