Loughborough Solicitors Loughborough Solicitors Morrison v ODS Business Services Ltd and others The claimant was the founder of the second respondent company. He was the majority shareholder, and was employed by the second respondent under the terms of a contract dated 2 December 2002. The contracts of the other directors were in similar terms to that of the claimant save that their remuneration packages were not as generous, and other terms were less favourable. Their pay was subject to the deduction of income tax under the PAYE system. Disciplinary action in relation to the other directors was to be conducted by the claimant, but any such action in relation to the claimant was to be conducted by the second respondent’s accountant. Subsequently, the second respondent went into administration, and the sale of its assets to the first respondent company was effected. The claimant instituted employment tribunal proceedings against the first respondent under the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794. Permission was subsequently given for the joinder of the third respondent for sums due pursuant to ss 166, 167 and 182 of the Employment Rights Act 1996. The claimant then commenced a second set of proceedings against the first respondent alone. It was a prerequisite of both claims that the claimant had been an employee of the second respondent, as defined by s 230 of the 196 Act. Following a pre-hearing review, the tribunal held, inter alia, that whilst the contract of employment was genuine and indicative of a contract of service, having considered the important factor of control, the fact that the claimant was clearly the driving force behind the second respondent, and the preferential terms of his contract in relation to remuneration and disciplinary matters as compared to his fellow directors, the conclusion to be reached was that the claimant had not been employed by the second respondent. The claimant appealed. He submitted, inter alia, that the tribunal had misapplied the relevant law in reaching that conclusion. Alternatively, it was submitted that the tribunal’s findings had been perverse. The appeal would be dismissed. In the instant case, the tribunal had properly applied the relevant law in determining the issue of whether the claimant had been an employee of the second respondent. It had made findings of primary fact which had been properly open to it on the evidence, and those findings had been capable of supporting the conclusions which it had reached Onwuka v Spherion Technology (UK) Ltd and others The employee, a black man of Nigerian origin, was employed by the first respondent as a computer software consultant within its software quality management practice (the SQM business). During 2002, the first respondent, whose business had been in decline, was awarded an important new contract. It was intended that the employee should be a member of the team assigned to that contract. However, he intimated that he did not wish to be so assigned on account of difficulties he perceived in him working with the intended team leader. He cited health problems and intimated that they might be exacerbated by work related stress. During the currency of those difficulties, the first respondent was in the process of selling parts of the SQM business. Subsequently, on 18 October 2002, the SQM business was transferred first to the second respondent and then on to the third respondent. It was common ground between the parties that those employees who had been assigned to the SQM business were, at that point, transferred to the employment of the third respondent pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794 (the regulations). However, it was the respondents’ position that the employee had not so transferred. There ensued a period of communication between the legal representatives of the employee and the respondents. He purported to raise a grievance with the third respondent, and the first respondent initiated disciplinary proceedings against him. Ultimately the employee resigned. He presented a number of claims before the employment tribunal alleging, inter alia, that his employment had been transferred to the third respondent pursuant to the regulations. The tribunal held that he had not been so transferred on the basis that he had ceased, as a matter of practical reality, to work in the SQM business where there had been no further work for him. The employee appealed. At a preliminary hearing on the appeal one of the issues that fell to be determined was whether there was an arguable case that the tribunal had erred in dismissing the claim in relation to the question of whether the employee had been transferred pursuant to the regulations. The appeal tribunal ruled: In the instant case, it appeared that the tribunal had dismissed the relevant claim on the basis that an employee who would otherwise have been treated as belonging to the assigned undertaking could, nevertheless, be treated as not having been so assigned only because, for some particular reason, there had been no actual work for him at the moment of transfer. Moreover, the tribunal had indicated that the views of the transferor and transferee as to whether the employee should be transferred were relevant. In those circumstances, it was arguable that the tribunal had erred in its approach to the question of whether the employee had been transferred to the third respondent pursuant to the regulations. Accordingly, there was an issue that required consideration at a full hearing. Power v Regent Security Services Ltd The defendant employer was the transferee of an undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794 (TUPE) (which implemented the EC Acquired Rights Directive 1977/187 (the Directive)) applied. Prior to the transfer, the claimant employee had a contract of employment providing for a retirement age of 60. On the completion of the transfer, the transferor’s rights, powers, duties, and liabilities, including those relating to the retirement age of the employees, was transferred to the defendant. Subsequent to the transfer, the claimant signed a letter sent to him by the defendant agreeing to be bound by the defendant’s terms of employment, which provided that his retiring age would be 65. The defendant notified the claimant of its intention to retire him on his 60th birthday. The claimant resisted that attempt, maintaining that his contractual retirement age was 65. The defendant dismissed the claimant at 60. The claimant presented a claim before the employment tribunal claiming that he had been unfairly dismissed. The tribunal found, inter alia, that the purported variation of the contractual retirement age from 60 to 65 was void because it was entered into in connection with a relevant transfer, and that he had reached his normal retiring age when he had been dismissed. The claimant appealed to the Employment Appeal Tribunal (EAT), which allowed his appeal on the basis that the consensual variation in the contractual retirement age was not void; and that it would be inconsistent with the aim of protecting the workforce to refuse them benefits contractually conferred by the transferee. It therefore concluded that the defendant was not entitled to refuse to give effect to the contractually agreed retiring age of 65, and that the normal retiring age was therefore 65. The defendant appealed against that decision. It submitted that the tribunal had been correct in law in holding that following the transfer of the undertaking in which the claimant was employed to the defendant, the consensual variation of the claimant’s contractual retiring age from 60 to 65 was void. The appeal would be dismissed. The aim of the Directive and of the implementing TUPE Regulations was to safeguard the acquired rights of employees on the transfer of an undertaking. Safeguarding the acquired rights of employers was not the aim. Allowing a transferee employer to rely on TUPE in order to prevent a transferred employee from taking the benefit of a varied term agreed by the employer by reason of the transfer was not required either by the aim, or by the provisions of the Directive and TUPE. An employee’s rights on a transfer were not being safeguarded if he or she was prevented from taking the benefit of a term that was agreed with a transferee on or after the transfer. The safeguarding of an employee’s acquired rights on the transfer of an undertaking meant that a transferred employee, who wished to take the benefit of the original retiring age of 60 agreed with the transferor, was entitled to do so as against the transferee. If the retiring age was then varied by agreement with the transferee, the employee had to be treated as obtaining an additional right not as waiving an acquired right. His acquired right to retire at the original retiring age of 60 was transferred by TUPE. The acquired right could not be removed by his agreement on the transfer of the undertaking or by reason of it. The defendant’s submissions could not be squared with the fundamental interpretive requirement that the Directive had to be read to promote the protective purpose for which it was made. The EAT had plainly been correct in its findings. The claimant’s reliance on the retiring age of 65 agreed with the transferee, was not contrary to the prohibition on employees contracting out of the protection and safeguards of TUPE. The agreed variation of his retiring age to 65 could not deprive him of the transferred acquired right to retire at 60. The claimant had not contracted out of his acquired right to retire at 60. Rather than contracting out of, excluding, or limiting his transferred acquired right he had contracted into and obtained a right to continue working after the age of 60 and up to the age of 65. There had been no contracting out of, or exclusion, or limitation of the claimant’s right to retire at 60, which could be rendered void by TUPE, or disentitle him from relying on the varied retiring age. The EAT had been right in finding that there was an error of law in the tribunal’s decision, and in allowing the claimant’s appeal. GMB and another v Holis Metal Industries Ltd Regulation 13 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, provides, as far as material: ‘(1) In this regulation and regulations 14 and 15 references to affected employees, in relation to a relevant transfer, are to any employees of the transferor or the transferee (whether or not assigned to the organised grouping of resources or employees that is the subject of a relevant transfer) who may be affected by the transfer or may be affected by measures taken in connection with it; and references to the employer shall be construed accordingly. (2) Long enough before a relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees, the employer shall inform those representatives of—(a) the fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it; (b) the legal, economic and social implications of the transfer for any affected employees; (c) the measures which he envisages he will, in connection with the transfer, take in relation to any affected employees or, if he envisages that no measures will be so taken, that fact; and (d) if the employer is the transferor, the measures, in connection with the transfer, which he envisages the transferee will take in relation to any affected employees who will become employees of the transferee after the transfer by virtue of regulation 4 or, if he envisages that no measures will be so taken, that fact. (3) For the purposes of this regulation the appropriate representatives of any affected employees are—(a) if the employees are of a description in respect of which an independent trade union is recognised by their employer, representatives of the trade union; or (b) in any other case, whichever of the following employee representatives the employer chooses—(i) employee representatives appointed or elected by the affected employees otherwise than for the purposes of this regulation, who (having regard to the purposes for, and the method by which they were appointed or elected) have authority from those employees to receive information and to be consulted about the transfer on their behalf; (ii) employee representatives elected by any affected employees, for the purposes of this regulation, in an election satisfying the requirements of regulation 14(1)’. The appellant was a company incorporated in the United Kingdom. The first respondent union was recognised by the appellant for collective bargaining purposes as it represented a large number of the appellant’s employees. The second respondent was a company based in Israel. In February 2006, the appellant’s employees were notified that the UK site was going to be closed and the undertaking transferred to the second respondent. None of the transferred employees moved to Israel and the second respondent dismissed them. The union presented complaints against the appellant and second respondent to the employment tribunal relating to alleged breaches of the duty to inform and consult representatives under reg 13 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246, implementing EC Council Directive 2001/23 (on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event oftransfers of undertakings, businesses or parts of undertakings or businesses) and the collective redundancy consultation obligations in s 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. The companies applied to strike out the union’s claim. The tribunal chairman held, on a preliminary ruling, that the Regulation and Directive applied to a transfer of a business, being a transfer based outside the UK and the European Union, and refused the companies’ application to strike out the union’s complaint. The issue for the appeal tribunal’s determination was, inter alia, whether reg 3(1)(a) of the Regulations could apply to transfers of businesses outside the jurisdiction, and particularly outside the EU. The union submitted that reg 3 had been drafted in relation to transfers of undertakingsthat were situated, immediately before the transfer, in the UK, but with a complete absence of restriction as to where the undertaking should be situated post transfer. Similarly, the wording of the Directive safeguarded the rights of workers working within the EU immediately prior to the transfer, but there was no restriction within the directive as to where they might be working after the transfer. The court ruled: The combined effect of the wording of the Regulation and the Directive together with the weight of European jurisprudence and academic/practitioner commentary led to the conclusion that the Regulation had the potential to apply to a transfer from the UK to a non-EU entity that on the transfer of the undertaking did not remain in the jurisdiction. Regulation 3(4) of the Regulations made it clear that an international element fell within the Regulations’ ambit and the provisions for service were clearly aimed at the modern outsourcing of service provision, particularly call centres, whether inside or outside the EU. In the context of protecting the rights of workers in the event of a change of employer, adopting a purposeful approach, employees should be protected even if the transfer was to be across borders outside the EU. The wording of both the Directive and the Regulation was precise in setting the application of the Regulation to transfers of undertakings situated immediate before the transfer in the UK. It was not a case of either the UK or the EU seeking to legislate outside of their jurisdictions without good reason. Transport & General Workers Union v Swissport (UK) Ltd (in administration) and another The first respondent provided ground handling services at Heathrow airport. The second respondent was its main customer. Prior to November 2004, the first respondent had been under financial pressure for some time, and, on 15 November, the second respondent was warned that it would be placed into administration the following day. On 16 November, all staff of the first respondent were dismissed, save for a small number of managerial, sales desk, freight and warehousing staff members. The second respondent arranged with another company, A, to provide temporary staff to perform the functions previously undertaken by the first respondent. Recruitment began on 17 November, and most of the staff provided by A were former employees of the first respondent. Also on 17 November, the second respondent leased certain ground service equipment which had previously been leased by the first respondent. That equipment was initially leased from the administrators and was subsequently purchased from them. It also took back certain of its equipment that had been held by the first respondent for use in connection with the ground handling operation. Without that leased equipment, the second respondent could not have met the demand for ground handling services. Offices that had been used by the first respondent were leased, and the first respondent’s furniture was used and subsequently purchased by the second respondent. The claimant presented a claim before the employment tribunal alleging, inter alia, failure to consult and seeking protective awards. On the hearing of a preliminary issue, the tribunal held that, having regard to the fact that a small number of the first respondent’s staff and equipment had been dedicated to the performance of the ground handling services contract with the second respondent, the provision of ground handling services by the first respondent to the second respondent had not amounted to an undertaking amounting to a stable economic entity as at 16 November 2004. Accordingly, there had been no transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794 (the regulations), which had been in force at the material time, applied. The claimant appealed. The claimant submitted, inter alia, that the tribunal had erred in only considering whether a structured and autonomous undertaking amounting to a stable economic entity had existed prior to transfer, and failing to consider whether such an entity had been recognisable immediately at the date of the purported transfer. The respondents submitted, inter alia, that the tribunal had adopted the correct approach. Alternatively, even if the tribunal had erred in its approach, the claimant could not succeed in demonstrating that there had been a transfer under the regulations because the purpose and effect of the first respondent’s insolvency and consequent administration order had rendered a transfer under the regulations impossible. The appeal would be allowed. (1) In determining the question of whether there had been a transfer of a stable economic entity, the employment tribunal was bound to consider whether what might have been an inchoate economic entity prior to transfer, had become an actual stable economic entity on transfer. In the instant case, the tribunal had failed to address that question, and, accordingly, its approach had been flawed. (2) Properly construed, the regulations were not to read so as to exclude cases of transfers occurring in insolvency situations, even where, as in the instant case, the administrators had neither carried on the business in question nor transferred any of it as a going concern. Accordingly, the mater would be remitted to a differently constituted tribunal for fresh consideration. Slater and others v Secretary of State for Trade and Industry Regulation 8 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, so far as material, provides: (6) In this regulation “relevant insolvency proceedings” means insolvency proceedings which have been opened in relation to the transferor not with a view to the liquidation of the assets of the transferor and which are under the supervision of an insolvency practitioner. (7) Regulations 4 and 7 do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.’ The employees were formerly employed by CFG Site Services Limited (the company). In July 2006, the directors of the company appreciated that the company was insolvent and decided that it should be put into voluntary liquidation. As a consequence of the company’s insolvency, the directors initiated a creditors’ voluntary winding up, which consisted of first calling a meeting of the members, who resolved to wind up the company, followed by a meeting of the creditors. Pending those meetings, a firm of accountants were appointed by the directors on 25 July, to assist the company in preparing for the winding up. On the following day a liquidator from the firm attended the premises and gave notice of redundancy to all staff. Thereafter, CFG Nationwide Site Services Limited (CFGN), who were a company formed by a number of directors of the company, purchased the business as a going concern. The transfer occurred on 27 July. Subsequently, the employees were not paid wages. On 16 August, the company was formally put into voluntary liquidation. The employees presented a claim before the employment tribunal seeking back pay and holiday pay from CFGN on the basis that it had acquired certain liabilities following the transfer. The crucial issues before the tribunal were, whether the nature of the insolvency proceedings in the instant case fell within reg (8)(6) of theTransfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246, (the Regulations) and whether the insolvency proceedings had been instituted before the transfer took effect. The tribunal allowed the employee’s claims, concluding that reg (8)(6) of the Regulations, applied and that the insolvency proceedings had been commenced prior to the effective transfer of the business. The Secretary of State conceded that if reg (8)(6) of the Regulations was inapplicable, then reg (8)(7) of the Regulations, in any event, could be applied. The Secretary of State therefore appealed only against the tribunal’s finding that insolvency proceedings had been instituted before the date of the effective transfer. It fell to be determined whether insolvency proceedings had commenced prior to the date of the effective transfer and whether at the time of the transfer the proceedings were under the supervision of an insolvency practitioner. The appeal would be allowed. Pursuant to reg 8(6) or reg (7) the transfer would have to take place after the insolvency proceedings. Under reg 8(6) the insolvency proceedings would have to be opened in relation to the transferor prior to the transfer. The same result would be achieved with respect to reg 8(7). The bankruptcy proceedings or any analogous insolvency proceedings would have to be instituted prior to the transfer. In the instant case, there had been no insolvency proceedings in place when the business had been transferred and even if there had been, they had not been under the supervision of the insolvency practitioner. Even though the company was under the supervision of a liquidator at the time of the transfer, who was qualified to act as insolvency practitioner, he had not been acting in that capacity at the date of transfer. Moreover, assuming that the transfer had taken place on 27 July, that date would have been before the proceedings had been under the supervision of an insolvency practitioner acting in that capacity. Accordingly, liability for the debts of the employees would not lie with the Secretary of State.