Appeal No. EAT/918/94

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 24th January 1995
	Judgment delivered 5 April 1995

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (PRESIDENT)

	MR S M SPRINGER MBE

	MRS M E SUNDERLAND JP

(1) MRS J MILLIGAN	APPELLANTS
(2) MRS D BAILEY

SECURICOR CLEANING LTD	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR BRIAN LANGSTAFF QC
Bronwyn McKenna
UNISON
1 Mabledon Place
LONDON WC1H 9AJ

For the Respondents	MR TOBY J A HOOPER
(of Counsel)
Harry Pool
Securicor Management Services Ltd
Sutton Park House
15 Carshalton Road
Sutton
Surrey SM1 4LD

MR JUSTICE MUMMERY (PRESIDENT)             The key question is: Is an employee, who is dismissed because of a transfer of an undertaking, entitled to claim unfair dismissal if he or she has less than two years' continuous service prior to the dismissal?

	This question of far-reaching significance turns on the interaction and construction of 
	(a)  The Transfer of Undertakings (Protection of Employment) Regulations 1981 ("the 1981 Regulations");
	(b)  The Acquired Rights Directive EC/77/187 ("the Directive"); and
	(c)  Part V of the Employment Protection (Consolidation) Act 1978 ("the 1978 Act").

	Although these provisions of national law and Community Law have been in force for many years, this is the first case in which the point has arisen for decision.  It was agreed that the comments of the EAT in Macer v. Abafast Ltd [1990] ICR 234 at 241D that the employee dismissed on a transfer will only have a remedy "... if the qualifying period under that Act can be established" were obiter.  The point is not referred to in Harrison Bowden Ltd v. Bowden [1994] ICR 186.  

Factual background
	Neither Applicant had two years' continuous service at the time of termination of employment.  Mrs Milligan began her employment as a caretaking and cleaning operative with the North Yorkshire County Council on 16th October 1992.  That employment ended on 5th June 1993.  Mrs Bailey began her employment as a school cleaner with the Council on 3rd September 1992 and that ended on 16th July 1993.

	In an Originating Application presented on 1st September 1993 Mrs Milligan claimed unfair dismissal on the ground that there was a relevant transfer of an undertaking.  The putative transfer was of building cleaning work by the Council's Direct Services Organisation (DSO) to Securicor Cleaning Ltd, the Respondent.  Securicor were not prepared to offer Mrs Milligan wage rates and conditions of employment comparable to those of the Council.

	Mrs Bailey made a similar complaint in an Originating Application presented on the same day.

	The response of Securicor in the Notice of Appearance dated 1st October 1993 was to deny that
	(a)  they had ever employed the Applicants;
	(b)  the 1981 Regulations and the Directive applied; and
	(c)  the Applicants were entitled to make a claim for unfair dismissal as, on their own admission, they had less than two years' continuous service with either Securicor or the Council.

Decision of the Industrial Tribunal
	The Industrial Tribunal unanimously dismissed the application for Full Reasons notified to the parties on 2nd August 1994.  The decision was confined to the preliminary issue on the two years' service point.  By consent, two assumptions were made for the purposes of determining the preliminary issue:-
	(a)  that there was a transfer of an undertaking as between the Council and Securicor; and
	(b)  that the ending of each of the Applicant's employment was for a reason connected with that transfer.

	The Tribunal referred to Article 4 of the Directive and Regulation 8 of the 1981 Regulations, summarised the competing contentions on construction (on which they recognised the merits of the arguments on each side) and concluded that, on the construction of Regulation 8, the complaint of unfair dismissal could not be proceeded with unless the employee had the qualifying period of two years' service set out in S.64 of the 1978 Act.   
	The initial reaction of the Appeal Tribunal was that the decision of the Industrial Tribunal was clearly correct.  We have, however, had the benefit of an argument of exceptional interest, subtlety and clarity from Mr Brian Langstaff QC who has persuaded us that the Industrial Tribunal does in fact have jurisdiction to entertain these two claims, even though the Applicants have less than two years' continuous service.

The relevant legislative provisions
	As both Mrs Milligan and Mrs Bailey claim unfair dismissal, the convenient starting point is Part V of the 1978 Act headed "Unfair Dismissal".

	Section 54 confers a right on an employee not to be unfairly dismissed by his employer.
		"(1)  In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by his employer.

		 (2)  This section applies to every employment except insofar as its application is excluded by or under any provisions of this Part ..."

	Sections 64 to 66 deal with situations concerning the exclusion of S.54.  Section 64(1)(a), as amended, provides that -
		"Section 54 does not apply to the dismissal of an employee from any employment if the employment -

			(a)  was not continuously employed for a period of not less than two years ending with the effective date of termination ..."

	Even if an employee satisfies that qualifying period, he can only make a claim of unfair dismissal against his employer.  The right conferred by S.54 is "the right not to be unfairly dismissed by his employer".  There is no right under the 1978 Act or at common law not to be unfairly dismissed by the transferee of the undertaking in which he was employed.  On the transfer of an undertaking his contract of employment with his employer terminated.  It was not transferred.

	That position under the domestic law of the United Kingdom was altered by the 1981 Regulations made under the authority of S.2 of the European Communities Act 1972 (not under the 1978 Act) for the purpose of implementing the Directive.

	The preamble to the Directive stated:
		"Whereas it is necessary to provide for the protection of employees in the event of the change of employer, in particular, to ensure that their rights are safeguarded; 

		 Whereas differences still remain in the member States as regards the extent of the protection of employees in this respect and these differences should be reduced;

		 Whereas these differences can have a direct effect on the functioning of the Common Market and

		 Whereas it is necessary to promote the approximation of laws in this field while maintaining the improvement described in Article 117 of the Treaty."
Article 4 was in these terms -
		"(1)  The transfer of an undertaking, business or part of the business shall not in itself constitute grounds for the dismissal by the transferor or transferee.  This provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.

		 Member States may provide that the first sub-paragraph shall not apply to certain specific categories of employees who are not covered by the laws or practice of Member States in respect of protection against dismissal."
(It is common ground that the Directive is not directly enforceable by the Applicants against Securicor.  Neither side seeks a reference to the ECJ under Article 177.)
 
	Regulation 5 of the 1981 Regulations deals with the effect of a relevant transfer on contracts of employment:
		"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.

		(2)  Without prejudice to paragraph 1 above ... on the completion of the relevant transfer -

			(a)  all the transferor's rights, powers, duties and liabilities and or in connection with any such contract shall be transferred by virtue of this Regulation to the transferee; and

			(b)  anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee."

	Regulation 8 deals with the dismissal of an employee because of a relevant transfer.  It provides -
		"(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 V of the 1978 Act and Articles 20 to 41 of the 1976 Order (unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal.

		 (2)  Where an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after relevant transfer is the reason or principal reason for dismissing an employee

			(a)  Paragraph (1) above shall not apply to his dismissal; but

			(b)  without prejudice to the application of S.57(3) of the 1978 Act or Article 20(10) of the 1976 Order (Test of Fair Dismissal) the dismissal shall for the purposes of S.57(1)(b) of that Act and Article 22(1)(b) of that Order (Substantial Reason for Dismissal) be regarded as having been for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

		(3) ...

		(4)  Paragraph (1) above shall not apply in relation to the dismissal of any employee which was required by reason of the application of S.5 of the Aliens Restriction (Amendment) Act 1919 to his employment."

Submissions of Securicor
	  Securicor resisted the appeal on the grounds that the reasoning of the Industrial Tribunal on the scope and effect of the legislative provisions was correct.  The following particular points were made.
	(1)  It was pointed out that under the second paragraph of Article 4.1 of the Directive the United Kingdom, as a member State, had a discretion to provide that the first sub-paragraph "shall not apply to certain specific categories of employees who are not covered by the laws or practice of the member States in respect of protection against dismissal."

	(2)  The United Kingdom exercised that discretion under Regulation 8 of the 1981 Regulations in providing that an employee "shall be treated for the purposes of Part V of the 1978 Act" as unfairly dismissed if the transfer or reason connected with it is the reason or principal reason for his dismissal.  The reference in Regulation 8(1) to Part V of the 1978 Act meant that the exclusions or exemptions from the right to complain of unfair dismissal under the provisions of Part V should apply in respect of the dismissal of an employee by reason of a relevant transfer within the meaning of the Regulations.  As was said by the Industrial Tribunal in paragraph 15 of the decision -
		"... by reference to Part V of the 1978 Act there is implied the exclusions from the right to complain of unfair dismissal in the domestic law contained in Part V, the particular exclusions in the cases we are considering being the requirement for two years' service in S.64".
	(3)  This approach was strengthened (in the submission of Mr Hooper on behalf of Securicor) by reference to the obligation of member States under the Directive as stated in paragraphs 27 and 28 of the decision of the European Court of Justice in Rask and Christensen v. ISS Kantineservice A/S [1993] IRLR 133 at 136.
		"... The Directive is intended to achieve only partial harmonisation, essentially extending the protection guaranteed to workers independently by the laws of the individual member States to cover the case where an undertaking was transferred.  It is not intended to establish a uniform level of protection throughout the Community on the basis of common criteria.  Thus the Directive can be relied on only to ensure that the employee concerned is protected in his relations with the transferee to the same extent as he was in his relations with the transferor under the legal rules of the member State concerned.

		 Consequently, insofar as the national law allows the employment relationship to be altered in a manner unfavourable to employees in situations other than the transfer of an undertaking, in particular as regards their conditions of pay, such an alternative is not precluded merely because the undertaking has been transferred in the meantime and the agreement has therefore been made with the new employer. ..."

	The two year qualifying period for the entitlement to make a complaint of unfair dismissal was just such a permissible feature of the national law of the United Kingdom as was recognised by the European Court of Justice in that case.  Reference was also 
	made to Commission of the European Communities v. UK [1994] ICR 664 at 711G and 715F to support the proposition that the Directive achieves only partial harmonisation of the rules for the protection of employees in the event of a change of employer and that there are permisible differences in Member States as regards the extent of protection.

	(4)  There is no express provision in the Directive limiting the right of a member State to provide, by way of its general employment law and its application to transfer cases, for a qualifying period for making a complaint of unfair dismissal.

Conclusion
	We recognise the merits of the points made in Mr Hooper's argument and we fully understand the reasons why the Industrial Tribunal accepted his submissions.  At the end of the day, however, we have been persuaded by Mr Langstaff QC that his is the correct construction of the relevant provisions.  We accept his contention that, if an employee of the transferor or transferee is dismissed, he is treated as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal, irrespective of the length of his service with the transferor or the transferee.

	We have reached this conclusion by the following route mapped out by Mr Langstaff QC in his careful submissions.

	(1)  It is not disputed that the 1981 Regulations must be construed in the light of the wording and the purpose of the Directive.   As Lord Templeman observed in Litster v. Forth Dry Dock Co Ltd[1989] ICR 341 at 353E
		"... The courts of United Kingdom are under a duty to follow the practice of the European Court of Justice by giving a purposive construction to directives and to regulations issued for the purpose of complying with Directives."
	Lord Oliver expressed similar sentiments on p.354D-E:
		"The approach to the construction of primary and subordinate legislation enacted to give effect to the United Kingdom's obligations under the EEC Treaty have been the subject matter of recent authority in this House (see Pickstone v. Freeman's Plc [1988] ICR 697) and is not in doubt.  If the legislation can reasonably be construed so as to conform with those obligations - obligations which are to be ascertained not only from the wording of the relevant directive but from the interpretation placed upon it by the European Court of Justice at Luxembourg - such a purposive construction will be applied even though, perhaps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use."

	(2)  The starting point is Article 4 of the Directive which provides that the transfer of an undertaking shall not in itself constitute grounds for dismissal.  In other words, an employee has a right not to be dismissed by reason of a transfer and to have his rights - whether contractual or statutory - safeguarded in the event of a transfer.  That provision, in mandatory form, protects the position of the employee on a transfer.  The purpose is to protect the employee against adverse effects in member States by reason of a change in the identity of the employer.  The employee's position is preserved, not improved or diminished, on the occurrence of an event (the transfer) outside his control.  It is a more limited right than a general right not to be unfairly dismissed.  It is only a right that the transfer itself should make no difference to the continuity of his employment.  The right is subject to the second sentence of the first paragraph of Article 4.1 which states that the provision does not stand in the way of dismissals that may take place "for economic, technical or organisational reasons entailing changes in the workforce".

	(3)  The second paragraph of Article 4.1 envisages that, prior to the Directive, certain employees were not protected against dismissal either by the laws or practice of Member States.  The provision assumes that the prohibition against dismissal by reason of a transfer in the first paragraph will have effect despite the fact that in member States certain employees were not protected against dismissal.  In other words, Mr Langstaff QC argued, the dismissal of an employee by reason of a transfer is prohibited, even though that employee would have had no rights in domestic law to prevent dismissal for any other reason.  Any law within a member State denying or restricting the right to claim for dismissal by reason of a transfer is subject to the prohibition in the first paragraph of the Article.

	(4)  By way of an exemption to the first paragraph of Article 4.1 a member State has a discretion to provide that it shall not apply "to certain specific categories of employees".  Thus, if the member State wishes to make an exemption, provision that the first paragraph shall not apply must be in relation to "certain specific categories of employees".  The provisions in the domestic law of a member State must specifically identify the category of employee or employees removed from protection of the prohibition and make it clear that the Directive does not apply to them.

	(6)  Regulation 8(1) of the 1981 Regulations does not in terms exempt any specific category of employees from the operation of Article 4 of the Directive or of the Regulations.  Regulation 8(4) does make an exemption in respect to a certain specific category of employees namely, those whose dismissal is required by reason of the application of the Aliens Restriction (Amendment) Act 1919 (now repealed).  There is  no comparable provision in the Regulations in relation to employees with less than two years' service.

	(7)  Mr Langstaff QC identified the crucial question as whether the words in Regulation 8(1) "that the employee shall be treated for the purposes of Part V of the 1978 Act as unfairly dismissed" have the effect of excluding employees with less than two years' qualifying service from protection.  He submitted that those words do not have that effect and, in the context of the Directive, were not intended to have that effect.   The Directive requires not simply a provision which can be construed so as to confer an exemption.  It requires a provision enacted for that particular purpose.  We agree with his argument that the language of Regulation 8(1) was not employed for the purpose of excluding or exempting specific categories of employees from protection (compare the language of Regulation 8(4)).  The purpose of Regulation 8(1) was to make it clear what right was being conferred, to clarify what is meant by the statutory concept "unfair dismissal" as applied to an employee dismissed before or after a relevant transfer.  The transfer was not to constitute a ground for dismissal.

	(8)  The structure and language of Regulation 8(1) was not apt to confer an exemption on a specific category, such as employees with less than two years' qualifying service.  The language was couched as a deeming provision, treating dismissal by reason of a transfer as unfair dismissal, so as to lead to the consequences of such dismissal identified in Part V of the 1978 Act, regardless of whether the dismissal is actionable as unfair under those provisions.  The use of the deeming provision is consistent with the purposive approach to the interpretation of the Directive, namely, to provide absolute protection against dismissal to all employees in the event of a change of employer and to safeguard their rights to the extent that they are not qualified by express exemption or by disapplication in the case of dismissals for an economic, technical or organisation reason.  Dismissal for any of these reasons is regarded as having been for a substantial reason justifying dismissal and is expressly made subject to the application of S.57(3) of the 1978 Act.      

	(9)  The construction favoured by the Industrial Tribunal is open to various legal objections.  The Directive requires, for exemption, a specific reference to the particular category to be exempted.  The construction favoured by the Tribunal confers exemption by implication rather than expressly.  Further, it treats the expression "for the purposes of Part V of the 1978 Act" as if it read "subject to the provisions of Part V of the 1978 Act".  The two expressions are different.  In essence, Mr Langstaff QC argued that the phrase "for the purposes of Part V of the 1978 Act' is an economical reference to the fact that there is a right to compensation, reinstatement or re-engagement awarded on the footing that the employee concerned has been dismissed and that the dismissal is to be treated as unfair, so that there is no need to consider the detailed requirements of S.57.  The phrase was not apt to render the right not to be dismissed by reason of a transfer subject to any qualifying period.

	For these reasons the appeal is allowed and the matter is remitted to the Industrial Tribunal which has jurisdiction to entertain the applications on their merits.

	Leave to appeal is granted.