Request for a preliminary ruling by the Court of Justice of the European Communities pursuant to Article 234 of the Treaty Establishing the European Communities
ORDERED TO REPORT
The Committee (Lord Bingham of Cornhill, Lord Nicholls of Birkenhead, Lord Steyn, Lord Hobhouse of Woodborough, Lord Rodger of Earlsferry) have met and considered the cause Celtec Limited (Appellants) v. Astley and others (Respondents). We have heard counsel on behalf of the appellants and respondents.
1. This is the considered opinion of the Committee. The cause should be referred to the Court of Justice of the European Communities for a preliminary ruling pursuant to Article 234 of the Treaty establishing the European Communities and all proceedings in this appeal shall be stayed until the Court of Justice has given its ruling on the questions or until further order, with costs being reserved.
2. In this preliminary reference, the Court of Justice is asked to interpret the provisions of Council Directive 77/187/EEC of 14 February 1977 ("the Directive"). It is asked to do so in the context of applications originally brought by the respondents against the appellants in the domestic Employment Tribunal to establish continuity of employment throughout their employment as civil servants and then by the appellants. The appellants denied that such employment was continuous.
3. The appellants in these proceedings is Celtec Limited ("Celtec"). Celtec is a company limited by guarantee and is responsible for the management of training and enterprise activities in North Wales.
4. The respondents, Mr John Astley, Ms Julie Owens and Ms Deborah Lynn Hawkes were full time civil servants employed in the local area offices which were formerly responsible for the management of training and enterprise activities in North Wales. They were representative applicants in the Employment Tribunal for a group of 15 former civil servants in the North Wales area.
5. The facts giving rise to the dispute are set out in the decision of the Employment Tribunal dated 22 December 1999, the judgment of the Employment Appeal Tribunal [2001] IRLR 788 and the Court of Appeal [2002] ICR 1289, to which reference may be made. In very brief summary, the essential facts agreed between the parties are these:
(1) Prior to the creation and establishment of Training and Enterprise Councils ("TECs"), the Department of Employment ("DoE"), through its local Area Offices, arranged and funded programmes for the training of young people and unemployed adults by entering into contracts with training providers.
(2) In 1989 the Government announced a new initiative for post-16 vocational training and enterprise activities that it funded in England and Wales. Hitherto the training organisations contracted to provide the service had been managed by civil servants based in the 60 local Area Offices of the DoE. The new initiative included the establishment of TECs. The initiative was found to be a radical initiative by the Employment Tribunal. It was part of the contraction of the Civil Service and was also intended to provide a more effective liaison between training organisations and enterprise organisations. The aim was to deliver training that was truly needed by industry on a far more local basis than hitherto had been the case.
(3) The DoE's Area Offices were staffed by civil servants. Some of these staff were in mobile grades and had, therefore, an expectation that they might be asked to carry out work for the DoE in any appropriate location. Other staff were in non-mobile grades and would have expected to remain working in their local area. All staff were free to apply for transfer to other parts of the DoE or to the wider Civil Service if they so wished.
(4) The implementation of the new initiative required no legislation. Groups of employers were encouraged to set up TECs, local companies limited by guarantee, to take over the management of the activities in their area. Some 82 such companies were in due course set up.
(5) The work of the 60 Area Offices was divided between these TECs, so that together they had a monopoly on the management of all the training and enterprise activities previously carried on for the DoE in England and Wales.
(6) Some TECs took over DoE premises and all were given free access to the existing information systems and database. By November 1991 all of the 82 TECs in England and Wales had become operational.
(7) It was always anticipated that this initiative would take some time to implement and that the civil servants would be seconded to the newly created TECs for a period of 3 years. When the TECs originally started, they recruited only a handful of their own employees and the project was therefore staffed almost entirely by the seconded civil servants. During the secondments the civil servants remained as employees of the DoE.
(8) In a letter to the Chairmen of the TECs' Staffing Group dated 16 December 1991 the Secretary of State expressed a wish for all TECs to have made the change to becoming employers of all their staff on or before the end of their fifth year of operation.
(9) To meet concerns expressed by the TECs in 1992, an agreement was entered into between the DoE and the TECs dealing with their obligations to each other upon a secondee joining a TEC. This included arrangements for "under-pinning" the accrued Civil Service redundancy rights of former secondees. According to these arrangements the Secretary of State undertook to reimburse a TEC should a court or Industrial Tribunal subsequently decide that both periods of employment were continuous for calculation purposes.
(10) In North Wales, the Area Offices of the DoE in Wrexham and Bangor were taken over by the North East Wales TEC ("NEWTEC"). NEWTEC was an emanation of the state. Celtec is a successor to NEWTEC. It is the result of a merger in 1997 between NEWTEC and the TEC for the North West Wales.
(11) The TECs had a board of directors drawn from local businessmen. NEWTEC had 15 such directors and became operational in September 1990.
(12) The secondments to NEWTEC ended on a number of dates during 1993 and early 1994. Of the 43 civil servants who were initially seconded to NEWTEC, 18 resigned from the Civil Service and took up employment with the TEC, 10 chose to remain civil servants and were redeployed, 13 retired from the Civil Service (but in some cases subsequently took up employment with a TEC) and 2 left for other reasons not material to the proceedings.
(13) Mr Astley, Ms Hawkes and Ms Owens were full time civil servants employed in the management of the service in North Wales prior to the take-over of these offices. They were full-time employees whose work was dedicated to the undertaking and they were therefore assigned to the undertaking prior to the transfer.
(14) On the day in September 1990 when NEWTEC commenced operations there was no difference between the work they did and the work they had done as civil servants the day before. They worked from the same desks, in the same building. The programmes which the Government had guaranteed to provide for prospective, and current, trainees had to be continued. The careers of young people depended on these and there could be no interruption of activities. The Government had a responsibility to the trainees which could not be interrupted. A seamless transition was important even if the economic structure was to change with time.
(15) Towards the end of their three year secondments, each of the respondents elected to resign from the Civil Service and take up employment with the TEC. This was part of a long process of transfer of the undertaking and was in accordance with the plan laid out at the beginning of the process. There was no gap in time between the resignations and their employment by the TEC. The TEC would never have become their employer had it not been for the transfer of the undertaking.
(16) Ms Hawkes was dismissed for redundancy by Celtec in 1998.
(17) This change in arrangements amounted to a transfer of an undertaking within the meaning of the Directive. The recognisable and definable economic entity transferred was "the management of the government-funded post-16 vocational training and enterprise activities in England and Wales together with the information systems and database, some staff and some premises."
(18) This was a "labour intensive" undertaking and therefore movement of the Civil Service staff from the DoE to the TECs was an important defining part of the undertaking and its transfer.
(19) The Employment Tribunal (formerly known as the "Industrial Tribunal") found that each of the respondents had continuity of employment under section 218 of the Employment Rights Act 1996 (formerly paragraph 17(1) of Schedule 13 to the Employment Protection (Consolidation) Act 1978 as amended) and by virtue of the Directive. Mr Astley also had continuity by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 19811. This was so notwithstanding that the relevant transfer was a long process. The Employment Tribunal considered that the direct employment of previously seconded staff constituted a transaction and was one of a series of steps in a very long process which was a planned process predicted and envisaged from the start, which was to last several years.
(20) The Employment Appeal Tribunal, by a majority decision, allowed the appellants' appeal by concluding that the transfer was completed when the transferee was in actual occupation and control of the old business. This was so for the purposes of both the domestic law provisions applied by the Employment Tribunal and the Directive (although before the Employment Appeal Tribunal the respondents did not concede that the Directive was of direct effect in this case). The majority concluded that, on this approach, the transfer was completed in about September 1990 and certainly long before 1993 when the respondents became employees of the TEC.
(21) Before the Court of Appeal the appellants accepted that the Directive had direct effect. The argument before the Court of Appeal was therefore principally as to the proper interpretation of the Directive, rather than the domestic provisions for continuity of employment. The Court of Appeal unanimously reversed the decision of the Employment Appeal Tribunal and interpreted Article 3(1) of the Directive as sufficiently wide in its terms to embrace a transfer which takes place over a period.
6. By Article 1(1) the Directive applied to any transfer of an undertaking business, or part of an undertaking or business to another employer.
7. Article 2 of the Directive provided:
"For the purposes of this Directive (a) 'transferor' means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), ceases to be the employer in respect of the undertaking, business or part of the business; (b) "transferee" means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking, business or part of the business…"
8. Article 3(1) of the Directive provided:
"The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee".
9. The arguments of the respective parties in outline are as follows:
(1) The appellants contend that the proper interpretation of the expression "the date of transfer" in Article 3(1) of the Directive is that there is a single occasion when the process of transfer is complete and the consequences and obligations imposed by the Directive are triggered from this date. There is therefore only one "date of transfer" even if the transfer is completed in stages. It is properly interpreted as the date when the transferee gains full possession, occupation and control of the undertaking transferred. It is on that date that the rights and obligations are transferred from transferor to transferee, and any move thereafter is not within the scope of the Directive and does not entitle the employee to the protection he would otherwise gain under the terms of the Directive.
(2) The respondents contend that under Article 3.1 of the Directive the employee's accrued rights are protected where his/her employment relationship with the transferor exists "at the date of the transfer". The case law of the Court of Justice clearly establishes that a single transfer may be affected by one or more transactions, occurring over a period of time. Where (as here) there is no gap in the employment of the staff who transfer between the transferor/transferee employers as an important part of the scheme for such a transfer these words in the Directive must be interpreted so as to ensure the protection of their accrued rights.
Any other approach would be contrary to the purpose of the Directive and would enable employers to structure the movement of employees in such a way as to exclude the workers from the operation of the Directive.
10. The preliminary ruling of the Court of Justice should accordingly be requested on the following questions on which decisions are necessary to enable the House of Lords to give judgment in this appeal, namely:
In the circumstances of this case, as summarised at paragraphs 5(1) to 5(18) above:
1. Are the words "the transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer" in Article 3(1) of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977 L61/26) to be interpreted as meaning that there is a particular point in time at which the transfer of the undertaking or part thereof is deemed to have been completed and the transfer of rights and obligations pursuant to Article 3(1) is effected?
2. If the answer to question 1 is "yes", how is that particular point in time to be identified?
3. If the answer to question 1 is "no", how are the words "on the date of a transfer" in Article 3(1) to be interpreted?
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1 Ms Owens and Ms Hawkes were not entitled to the protection of the 1981 Regulations because when they commenced employment with the TEC the Regulations applied only to undertakings which were "in the nature of a commercial venture". These words were deleted with effect from 30 August 1993. Mr Astley commenced employment with the TEC after this date.
