Enterprise Managed Services Ltd v Dance & Ors (Transfer of Undertakings : Dismissal or automatically unfair dismissal) [2011] UKEAT 0200_11

	[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Enterprise Managed Services Ltd v Dance & Ors (Transfer of Undertakings : Dismissal or automatically unfair dismissal) [2011] UKEAT 0200_11_2109 (21 September 2011) URL: http://www.bailii.org/uk/cases/UKEAT/2011/0200_11_2109.html Cite as: [2011] UKEAT 0200_11_2109, [2011] UKEAT 200_11_2109

Appeal No. UKEAT/0200/11/DM

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 21 September 2011

Before

HIS HONOUR JUDGE McMULLEN QC

BARONESS DRAKE OF SHENE

MRS D M PALMER

ENTERPRISE MANAGED SERVICES LTD APPELLANT

MR S C DANCE AND OTHERS RESPONDENTS

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellant

MR TIMOTHY CROSS

(Representative)

Vista Employer Services Ltd

Regent House

Heaton Lane

Stockport

SK4 1BS

For the Respondents

MR MICHAEL SALTER

(of Counsel)

Instructed by:

O H Parsons & Partners

3^rd Floor, Sovereign House

212-224 Shaftesbury Avenue

London

WC2H 8PR

SUMMARY

TRANSFER OF UNDERTAKINGS – Dismissal/automatically unfair dismissal

The majority Employment Tribunal inconsistently decided the dismissal of the Claimants was in order to harmonise conditions and as a consequence productivity was improved, and at the same time decided the move for productivity had been instituted prior to and not connected with the transfer in respect of the transferee’s existing workforce. The Employment Judge’s minority reasons did not make that error. Appeal allowed and case remitted to a different Employment Tribunal.

HIS HONOUR JUDGE McMULLEN QC

1. This case is about unfair dismissal following a relevant transfer of an undertaking pursuant to the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006. This is the Judgment of the court to which all members appointed by statute for their diverse specialist experience have contributed. We will refer to the parties as the Claimants and the Respondent.

Introduction

2. It is an appeal by the Respondent in those proceedings against a majority Judgment of an Employment Tribunal under the chairmanship of Employment Judge Coles sitting over four days including a day in chambers, registered with Reasons on 9 February 2011. The Claimants were represented throughout by Mr Michael Salter of counsel, and the Respondent by Mr Timothy Cross, an employment consultant. The Claimants contended they were automatically unfairly dismissed for a reason connected with the transfer of the undertaking in which they had been employed up to 24 April 2009. The Respondent contended that the reason was not connected with that transfer, but was for sound business reasons.

The issue

3. The essential issue was to determine the reason for the acknowledged change in the terms and conditions of employment and the dismissal of the employees. The Employment Tribunal divided in the result; Employment Judge Coles decided that the reason was not connected with the transfer, and Mr Brina and Mr Aslam decided it was. The Respondent appeals. Directions sending this appeal to a full hearing were given by HHJ Richardson, whose view was that there were difficulties in certain of the paragraphs and that the case was reasonably arguable that a change that could have been made pre‑transfer, and was made for the Respondent’s existing employees’ pre‑transfer, could have been made thereafter by the Respondent when it inherited the current Claimants.

The legislation

4. The legislation is not in dispute. TUPE 2006 provides:

“7(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for this dismissal is:-

(a) the transfer itself;

(b) a reason connected with the transfer that is not an economic, technical or organizational reason entailing changes in the workforce.’”

5. Unfair dismissal pursuant to the Employment Rights Act 1996 is not the subject of a specific appeal, for the Tribunal decided that the Claimants were not dismissed unfairly contrary to section 98 in its ordinary sense. There is no appeal against that, nor is there a defence based upon what is known as an ETO reason under Regulation 7(2), so the issue on appeal draws simply from Regulation 7(1). It is only the background of TUPE that makes the dismissals unfair.

The facts

6. The Tribunal introduced the parties to us in this way:

“7. The respondent is a large organisation based in Lancashire with approximately 9,500 employees providing utility and building maintenance services. Prior to April 2009, it held a contract with Modern Housing Solutions (MHS) for the provision of appliance maintenance services (eg Central Heating, cookers etc) in accommodation provided by the Ministry of Defence for service personnel, including in the south west of England. All of the respondent’s contracts with MHS were due to expire in March 2009.

8. From about October 2008, meetings took place between MHS and its contractors, including the respondent, which highlighted the deficiencies in the standard of accommodation provided by the MOD to service personnel and the need for improved performance by the contractors who provided maintenance services. The meetings also emphasised the budgeting constraints being faced by Defence Estates (which was responsible for service accommodation) and the requirement that any contractors providing services in the future would not only have to do so at reduced cost but at the same time improve service delivery, efficiency and productivity. MHS emphasised that if existing contractors could not achieve the performance required, contracts would have to be retendered.

9. The contractors involved also included Williams, the Company which employed the claimants before they transferred to the respondent in April 2009 and which provided building maintenance services.

10. Furthermore, MHS confirmed that in future it was looking to award contracts for appliance and building maintenance services together and by geographical area, as opposed to separate contractors for each service provision.”

7. Both Williams and the Respondent were dependent upon MHS for the supply of work. In advance of the cessation of the contract the Respondent engaged in workforce meetings in October 2008 following intervention by MHS, which had highlighted the need for improvements in service delivery, efficiency and performance. In January 2009 the Respondent reviewed the terms and conditions for its group of workers, who are appliance engineers (that is, they fix hardware in the buildings). It introduced performance‑related pay and different hours. These were accepted by those appliance engineers in February and March 2009.

8. No changes were effected by Williams for its relevant staff. Williams lost the contract; its contracts of employment were transferred by operation of TUPE on 24 April 2009. The Respondent therefore had two groups of employees, divided by craft: appliance and building engineers. The Respondent recognised from even before the date of the transfer that it would review the inherited business, and if there were to be any necessary changes, there would be full consultation with the employees. This is pursuant to a letter dated 16 April 2009, which was introduced by the following: “The Company, however, do propose to take three measures in respect of the transfer […].” In due course there was full consultation with the Claimants and their trade union, UCATT, about proposed changes. They could not be agreed for the present cohort of about 20 employees, other employees having accepted them, and their contracts of employment were terminated. They were dismissed but they continued to work on on the new terms.

9. The Tribunal heard evidence from the leading light of the Respondent:

“17. Mr Jones on behalf of the respondent told the Tribunal that, following the transfer, management undertook a review of business performance in respect of building fabric maintenance and soon recognised that in order to meet the requirements of MHS under the contract productivity would need to improve to the same extent as it had in respect of appliance maintenance. It was felt that the continuation of existing working arrangements would not produce the required improvements in performance. Based on the respondent’s previous experience with the appliance engineers, it was believed that such improvements would materialise from the introduction of performance related pay.

18. Accordingly, the result was essentially a repetition of the process which had previously been carried out in respect of the terms and conditions of the maintenance engineers. The proposed changes and the basis for them were communicated to the claimants during presentations on 21 May and 2 June 2009. Thereafter, the respondent wrote to the claimants on 9 June 2009 outlining the proposed changes and inviting employees to accept them.”

10. The Tribunal noted that in general terms the Claimants were better off under the new regime, but the overall finding by the Tribunal is as follows:

“27. There was a transfer of an undertaking in April 2009 and accordingly by reason of the Regulations the claimants’ contracts of employment automatically transferred to the respondent, with their terms and conditions remaining intact. Although the implementation of the new terms and conditions of employment may well have brought about an overall higher level of remuneration, the claimants were on the face of it entitled to insist that old terms and conditions of employment were more suitable and acceptable to them, notwithstanding increase remuneration. Insistence upon a move to performance related pay could properly be regarded by the claimants as a change resulting in less favourable terms.”

11. Realistically it may be that the employees in fact are better off, but the finding by the Tribunal that the terms were changed to less favourable terms is not here challenged. The Tribunal rather whimsically reflected upon the evidence that it had been given about why Williams lost the contract, and said this:

“28. The Tribunal was somewhat concerned that it did not receive evidence about the circumstances under which Williams lost the contract with MHS or whether this was because MHS would not have renewed the contract with Williams unless Williams introduced similar terms and conditions of employment to those which had been implemented by the respondent in respect of its appliance engineers in February 2009. Nor was it told why building maintenance would be susceptible to the same efficiency regime as appliance maintenance.”

12. It decided not to speculate further, and in fairness Mr Cross points out that he was not able to present evidence about the problems with Williams. This is understandable. Williams lost the contract to the Respondent and there may not have been any love lost between them. The Tribunal concluded in favour of the Respondent in the following way:

“29. Having regard to the facts and the legal interpretation of those facts, the unanimous view of the Tribunal was that the sole or principal reason for the dismissals was not the transfer itself.”

13. That is not the subject of an appeal either. The real issue is whether the dismissals were connected with the transfer, and as to this, and we reproduce the relevant passages in full because they have been the subject of careful scrutiny by the advocates before us:

“30. The majority view of the Tribunal was, however, that the respondent had simply decided as the changes to the terms and conditions of employment of the maintenance engineers had been successful, to vary the terms and conditions of the building fabric engineers in the same way. This amounted, in the majority view of the Tribunal, to a wish on the part of the respondent to achieve harmonisation of the claimants’ terms and conditions with those of existing employees which, having regard to the Berriman [v Delabole Slate Ltd [1985] ICR 546] case, did not entail changes in the workforce and therefore did not fall within the exemption under Regulation 7(1)(b).

[…]

32. The majority view was, therefore, that the principal reason for the variation of the claimants’ terms and conditions of employment was to achieve harmonisation with those of the respondent’s existing employees. The fact that it was anticipated that this would achieve improved performance and efficiency and thereby properly service and retain the contract with MHS would have been a consequence of harmonisation but not the principal reason for the variation.”

14. The minority view was given by the Judge:

“33. Employment Judge Coles, in the minority, took a different view on the question of causation. He took the view that there had been adequate evidence presented by the respondent, in particular in the form of the evidence from Mr Jones, which satisfied him that the principal concern of the respondent was that, if it did not vary the terms and conditions of the building engineers so as to achieve similar productivity and efficiency that had been achieved when the terms and conditions of the appliance engineers had been changed, there was a very serious risk that the contract with MHS would not be renewed at all or would, even if it was renewed, ultimately be lost because of the inability of the respondent to perform under the contract as required by MHS. The minority view of Employment Judge Coles, therefore, was that the principal reason for the variation was to achieve improved performance and efficiency and thereby properly service and retain the contract with MHS. The fact that this would result in harmonisation with the terms and conditions of existing employees would have been a correspondence of the variation but not the principal reason for it.”

The Respondent’s case

15. The Respondent’s case could not be more simply put. The change that the Respondent introduced into the terms and conditions was driven by the Respondent’s need for productivity and efficiency, and it had already done that and proved to its own satisfaction that the changes were necessary long before the transfer, and therefore were not connected with it. Mr Cross submits that those changes were necessary. The evidence of Mr Jones before the Tribunal appears to have been accepted by it in the finding in paragraph 17, notwithstanding the apparently divergent conclusion in paragraph 28. Reading across from the success of the changes effected in the Respondent’s business for its indigenous population pre‑transfer to the incoming employees of Williams, he contends that the Tribunal was told by Mr Jones that it was necessary to effect changes for the Williams cohort because those changes had been so successful in respect of the indigenous group. The Respondent had indeed won the contract not only to continue with the appliance maintenance but also to take the contract off Williams. Mr Cross contends that the finding in paragraph 30 is inconsistent with the finding in paragraph 32. There was no simple intention by the Respondent to tidy up the terms and conditions of employment so that everybody looked the same; it was driven by, and not simply the consequence of, the need for productivity, and therefore the need for productivity came before harmonisation. There was no empty wish to harmonise; it was firmly rooted in the Respondent’s experience of changing terms and conditions pre-transfer.

The Claimants’ case

16. On behalf of the Claimants it is firmly argued by Mr Salter that a question of fact arises here, and it has been decided, albeit by a majority, based upon evidence before it. The language used by both the majority and the minority is rooted in findings of evidence, and this Tribunal has made a decision on the facts as to what was in the mind of the Respondent at the time. In those circumstances the EAT should not intervene.

The legal principles

17. The legal principles in a situation such as this are best exemplified in the Judgment of the Employment Appeal Tribunal in Scotland, presided over by Lord Johnston, in Carlton Care Ltd v Rooney and Ors EAT/112/00, where there is this:

“5. It therefore must be the case in our view that where certain relevant circumstances, principally economic, are prevalent before a transfer which could result in legally valid variations of the contract taking place, if such take place after the transfer, the transfer itself is not causally linked to the fact of the variations in the contracts of employment. However, it also has to be said that while the authorities such as they are and in particular both Daddy’s Dance Hall supra and Wilson supra support this proposition in particular where the variations are validly imposed by national law, the fact that they are so validly imposed is not enough to establish an immediate link with an admitted transfer of an undertaking in terms of the Regulations. Such must be established upon the evidence.”

18. The Tribunal addressed itself in relation to Berriman. Although Mr Salter accepts that the target of that Judgment in the Court of Appeal, which upheld the Judgment of the EAT overturning the Judgment of an Employment Tribunal, was as to the availability of an ETO defence, nevertheless the point about factual decisions is made.

Discussion and conclusions

19. We bear in mind as we approach this decision that the Tribunal decided the reason for the decision by management was based on evidence; that is, the language of the majority and the minority. The Judge decided it was a question of causation, which might in certain circumstances lead to a question of law, but we accept Mr Salter’s proposition that what needed to be decided here was the reason in the minds of the management for invoking proposals to change the terms and conditions and, on resistance by the workers, to dismiss them. We also bear in mind that this is a majority Judgment, and since the members and the Judge all rely on evidence it cannot be said that there was no evidence for the view taken by either division. The Judgment is written by the Judge, and of course he has discharged his functions impeccably in recording his own disagreement with the lay members, but we bear in mind that that is a delicate task and we will not be pernickety about the way in which various parts of the Judgment are phrased.

20. We recognise that the questions of fact to be determined are in line with the approach in Carlton; however, the basic flaw in this Judgment arises from the juxtaposition of paragraphs 30 and 32. It is clear to us that even the majority did not accept that there was a simple wish to harmonise out of tidiness, for example. Such harmonisation was driven by the success of the productivity changes that pre‑dated the transfer in the Respondent’s business. The majority in paragraph 32 puts the sequence the other way round (that is, that there was harmonisation and, as a matter of fact, as a consequence there was an intention to improve productivity). That cannot stand next to the finding by the majority in paragraph 30 that the purpose was to vary the terms and conditions of the building engineers in the same way. In our judgment there is a straight line linking what occurred in the Respondent’s business in the early part of 2009 to effect productivity and what occurred in it post‑transfer for those who as it happens were inherited from Williams who were not on the productivity scheme. The language of the unanimous Tribunal is all to that effect: see, for example, paragraph 18, “a repetition of the process” that had occurred earlier, and paragraph 14, “in a similar way”. It seems to us that since it is open to an employer to effect productivity changes in accordance with the ordinary law, this does not become unlawful when there has been a relevant transfer if the reason is connected to that drive for productivity changes.

21. Having identified that flaw in the reasoning of the majority, we turn to the approach of the Judge, and it seems to us that that is the correct approach to this case. It explains fully the reasons for it and is based upon what the Judge describes as causation. We hold that the majority erred in its approach to the essential question.

Disposal

22. The issue for us now is whether or not we should decide the case or it should be remitted. It is common ground that it cannot go back to this divided Employment Tribunal out of fairness to it. Having heard argument from the advocates, we consider it would be difficult for us to make the decision. In principle we think Judge Coles takes the correct approach, but that is primarily a question of fact to be decided by a three‑person Tribunal, and it would not be right for us to decide the matter, albeit with the benefit of a reasoned Judgment of the Judge in the minority. We are heartened to hear that the issues will be much shorter, there being no issue in relation to ordinary unfair dismissal, and there will be a direction in line with this Judgment that a fresh Employment Tribunal consider the issue again as to whether the dismissal of the Claimants was for a reason connected with the transfer on 24 April 2009.

United Kingdom Employment Appeal Tribunal