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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Wynnwith Engineering Co Ltd v. Bennett & Ors [2001] UKEAT 480_00_1112 (11 December 2001) URL: http://www.bailii.org/uk/cases/UKEAT/2001/480_00_1112.html Cite as: [2002] IRLR 170, [2002] Emp LR 525, [2001] UKEAT 480_00_1112, [2001] UKEAT 480__1112

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APPEARANCES

 

For the Appellant	MR TOM LINDEN (of Counsel) Instructed by: Engineering Employers Federation Broadway House Tothill Street London SW1H 9NQ
For the First and Second Respondents	MATTHEW SMITH (of Counsel) Instructed by: Messrs Lampkin & Co Solicitors 82b High Street Connah's Quay Deeside Flintshire CH5 4DD
For the Third Respondent	MATTHEW SMITH (of Counsel) Instructed by: Messrs Horwich Farrelly Solicitors National House 38 St Ann Street Manchester M60 8HF
For the Fourth Respondent	No appearance or representation by or on behalf of the Respondent


 


JUDGE D PUGSLEY

1. This is an appeal against the majority Decision of the Employment Tribunal sitting in Shrewsbury against their Decision that there had been a relevant transfer from the Appellant to the Fourth Respondent within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981. The Chairman was the dissenting member, as far as that part of the Decision was concerned.
2. The relevant factual background can be most conveniently set out by quoting from paragraphs 4 - 13 of the Decision itself

"4 The applicants worked for the first respondent at its aircraft manufacturing plant at Broughton in North Wales in skilled positions for varying, lengthy periods until they volunteered for redundancy in 1993 - 5 when the first respondent experienced a significant downturn in business and needed to shed labour. The applicants were then over 50 years of age and were thus entitled to take early retirement and receive a pension. The first respondent operated a Special Early Release Programme (SERP).

5. In 1996 the first respondent experienced an upturn in its business cycle which necessitated a considerable programme of recruitment. In order to bring back into the business the skills it required at short notice the first respondent re-engaged on short-term contracts some of the people who had earlier been made redundant, including about 30 of those who had taken early retirement under the SERP scheme. The present applicants all fall into that category. The applicants were all re-engaged by the first respondent in 1996 on short-term contracts, or initially 3 months' and then 6 months' duration, which were extended so as to form a continuous series. They came to be known as the 'SERPS' employees.

6. There was some resistance from the recognised trade unions to the re-engagement of workers who had already received redundancy packages and were in receipt of a pension. During 1997 the first respondent entered 2 agreements. Together with the Joint Trade Union Committee it entered into an Employment Security Agreement (Page 126), including at Appendix I a Temporary Employees Agreement. Central to this agreement was the undertaking by the first respondent to engage all temporary labour through a preferred agency or agencies. No commencement date for the agreement was specified within it but no issue was taken about that. Secondly, the first respondent, together with the second respondent, entered into an Agreement for the Supply of Temporary Labour, (Page 185 ff) which provided that it should continue in force for a period of 3 years from 10 November 1997. The second respondent was the sole preferred, and therefore exclusive, agency for the provision of temporary labour to the first respondent from that date. Before 10 November 1997 the first respondent informally used an agency called MPI for a similar purpose, though not exclusively.

7. The evidence of Mr Clarke, which was accepted by the Tribunal, was that any worker who had accumulated 2 years or more service under short-term contracts would be treated as a permanent 'core worker'. Such a worker would not transfer to the preferred agency, in this case the second respondent. The recognised trade unions were strongly against any 'SERPS' workers gaining the status of 'core' workers and Mr Clarke went on to say that it was the intention of the first respondent that none should and, in fact, none did. It was against this background, and with a view to securing the continued support of the recognised trade unions during what was a recruitment crisis for the first respondent, that the first respondent ensured that all 'SERPS' workers had their short-term contracts terminated and transferred to an agency before they had accumulated 2 years' service.

8. By variously dated letters (pp 29A, 67 and 111) the first respondent purported to terminate the short-term contracts under which these three applicants were then working by giving notice of 1 week in the cases of Mr Dowell and Mr Bennett and 1 month in the case of Mr White, to take effect on varying dates. At the same time as terminating the applicants' short-term contracts, the first respondent invited the applicants to register with an agency with a view to their continuing to provide their services to the first respondent through the intermediary of that agency. Because the agreement between the first respondent and the second respondent, due to commence on 10 November 1997, was not actually in force at the time of Mr Dowell's purported dismissal, he was in the first instance invited to register with MPI with a view to his transferring to the preferred agency once it was in place. Mr Bennett and Mr White were invited to register with the second respondent forthwith. As invited, Mr Dowell did register with MPI and subsequently with the second respondent, and Mr White and Mr Bennett did register immediately with the second respondent. In no case was there any break between the applicants' contracts being purportedly terminated by the first respondent and their resuming the performance of the same duties through the intermediary of the agency; nor was there any break in Mr Dowell's case between his ceasing his relationship with MPI and registering with the second respondent.

9. The chronology so far as relevant, of each applicant's service is as follows:

(i) Mr White commenced a series of short-term contracts on 22 April 1996. That series ended with the letter of purported termination (pages 111) on 13 February 1998. He resumed the performance of his duties, having registered with the second respondent, on 16 February 1998 until his engagement, to use a neutral term, was ended on 12 March 1999, (page 124).

(ii) Mr Bennett commenced a series of short-term contracts on 1 April 1996. That series was brought to an end on 19 December 1997 by the letter of purported termination (page 29A). On 21 December 1997, having registered with the second respondent, he resumed the performance of his duties until his engagement was brought to an end on 28 February 1999 (page 30).

(iii) Mr Dowell commenced a series of short-term contracts on 2 October 1996. That series was brought to an end on 26 September 1997 (not 23 September 1997 as stated), by the letter of purported termination (page 67). On 29 September 1997, having registered with MPI, he resumed the performance of his duties. He subsequently registered with the second respondent and continued without a break to perform the same duties until his engagement was brought to an end by the letter at page 71.

10. It was the intention of the second respondent, and their case before us, that the 'SERPS' employees registering with it were self-employed contractors and not employed by it. Accordingly, the second respondent prepared a form of contract for services (page 221 ff) for signature by each temporary worker in the 'SERPS' category. There was no evidence that any of the applicants ever signed such a contract; indeed the evidence of the applicants, though not of the most definite, was that they could not recall ever receiving such a form. The second respondent never chased the applicants for their signature. The second respondent also prepared a form of Contract Confirmation Note (page 223 Aff). Similarly, there was no evidence of signature by any applicant and no clear evidence of receipt. The tribunal considered carefully the contents of these 2 documents but we do not recite those contents here. Their effect is discussed below.

11. The second respondent took the view that the applicants' signatures were not essential so long as they, having been told of the terms, proceeded to work in accordance with them. There is no doubt that the applicants knew the terms on which they were working for the second respondent and that those terms were in almost all respects the same as when they were contracted to the first respondent. The only significant differences were that they were no longer eligible for profit-related pay and that payroll and personnel matters were now handled by the second respondent and not the first. The arrangements under which the engagement of the 'SERPS' employees was to be continued were discussed and well understood within the first respondent's plant where a number of meetings had been held to discuss the issues. That may, in part, explain why the applicants were less than sure about whether they had received the contractual documents from the second respondent, and why the second respondent did not follow the matter up. It was clearly understood that once the applicants had registered with the second respondent, or MPI, they would continue to perform exactly the same duties in exactly the same place and in exactly the same way as during their series of short-term contracts with the first respondents. The only reason applicants registered with the second respondent, or MPI, at all was so that their work for the first respondent might continue. This was not the typical case of unemployed people registering with an employment agency and being willing, within reason, to take any work that agency might put their way.

12. The initial expressed intention of the first respondent in re-engaging 'SERPS' workers, and in continuing their engagement through the intermediary of the second respondent, was that they should transfer their skills to the permanent 'core' workforce and that their services should then be dispensed with. With some reluctance, the trades unions recognised the necessity for that. They contemplated a fairly short engagement for the 'SERPS' workers and then expected them to be 'managed out', in the words of Mr Hamilton. In fact, their engagement was more protracted than the first respondent initially contemplated and than the trades unions found palatable. In some cases, at least, the first respondent used the 'SERPS' workers not specifically to train up permanent replacements but simply extra hands to get necessary work done. This gave rise to some tensions in labour relations which very probably contributed significantly to the departure of the 'SERPS' workers when it finally came.

13. The thirty or so 'SERPS' workers who registered with the second respondent were to be found in all parts of the first respondent's Broughton plant, where the total workforce grew from about 2,000 in 1996 to some 4,000 by early 1999. They covered a wide range of skilled trades and occupations. They did not work as one group within the plant, but rather alongside other 'core' workers, new recruits and other temporary workers recruited by the second respondent and placed with the first respondent."

3. After directing themselves as to the relevant issues of law, the Employment Tribunal asked itself the following questions :-

(1) Were the Applicants employees of the First Respondent?

(2) Was the Applicants' employment with the First Respondent terminated and if so, when?

(3) Did the Applicants become employees of the Second Respondent or were they self-employed contractors?

(4) Did the Transfer of Undertakings (Protection of Employment) Regulations 1981 apply to the transfer of the Applicants and the employment of the First Respondent to the employment of the Second Respondent?

4. On the first three of these questions, the Tribunal unanimously concluded:-

(a) that the Applicants were the employees of the First Respondent from the date on which they were re-engaged on short term contracts.

(b) That in the case of all the Applicants, the relationship between the First Respondent and each of the Applicants was effectively terminated by the letters of termination referred to. Accordingly the period of each Applicant's employment by the First Respondent came to an end on the expiry of the notice given in the letters of termination.

(c) That the Applicants, during the time they worked for the Second Respondent were employees.

This appeal is solely concerned with the conclusion of the majority of the Employment Tribunal about the fourth question, namely: "(4) Did the Transfer of Undertakings (Protection of Employment) Regulations 1981 apply to the transfer of the Applicants and the employment of the First Respondent to the employment of the Second Respondent?"

5. The Tribunal was not unanimous on this issue. Both lay members answered the question in the affirmative, while the Chairman dissented. The argument centres on whether there can be identified in this case an economic entity which was transferred and which maintained its identity after that transfer.

The majority view

6. The lay members took the view that:-

"21… the economic entity consists of a contract, assets and an identifiable group of workers. The contract is to provide a wide range of specialist workers to the first respondent. The organised grouping of persons consists of all employees of the first respondent employed on fixed term contracts, of whom the 'SERPS' employees were a sub-set."

The majority view was that:-

"….the group is thus identified by its employment relationship with the first respondent, rather than the more usual case of its function within the business. The assets which transfer comprise the skills and knowledge of those employees, which, when utilised by the first respondent, facilitate the primary economic purpose of the first respondent. The group retained its identity after, as before the transfer to the second respondent. They did precisely the same work, and in all material respects did it precisely the same way and under the terms and conditions of employment, which were in all material respects as nearly identical as it was possible to achieve. Accordingly the majority find that the transfer of the 'SERPS' employees from the first respondent to the second respondent amounts to the transfer of an undertaking within the meaning of the Regulations of 1981.

22. The Chairman takes a different view. He regards it as particularly significant that the thirty or so 'SERPS' employees were scattered throughout the first respondent's very large plant and performed a wide range of different function. Whilst he recognises that it is possible to identify precisely the 'SERPS' employees as a group he does not consider that, taken together, either they or the various functions they performed could be said to amount to an economic entity. No identifiable function within the first respondent's plant, such as, for example, cleaning, or catering, or the manufacture of a particular component, was being transferred to the second respondent. The Chairman does not consider this case to be analagous to labour-intensive sectors such as cleaning. The applicants cannot be said to be engaged in labour-intensive work. But even if the analogy were well made, the Chairman nevertheless considers that it would be necessary to identify something more than a disparate group of employees. Furthermore, the activity of the 'SERPS' workers remained integrated in the first respondent's business throughout the period under consideration, and could at no time be said to be identifiably separate from that business."

He therefore took the view that there was no economic entity which could be said to transfer from the first respondent and therefore he would conclude that there was not a transfer of an undertaking within the meaning of the Regulations of 1981.

7. Mr Linden, who appears for the Appellant, argues that there is a fundamental error of law in the approach adopted by the majority of the Tribunal. He points out that it is well established that in determining whether there had been a relevant transfer for the purpose of the TUPE, the Employment Tribunal should first look at the position before the alleged transfer, and ask whether there was an identifiable economic entity being carried out by the alleged transferor. He points out that the concept of an identifiable economic entity has been defined both by the European Court of Justice on a number of occasions, and in the amendment to Directive 77/187 (the "Acquired Rights Directive") which were introduced by Directive 98/50 in an attempt to clarify the law. Cases such as Suzen [1997] ICR 662 and 670H defined an economic entity as "an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective." The language of the amended Acquired Rights Directive, Article 1.1 provides that:

"there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity."

We hope we do not do violence to Mr Linden's argument by saying that he cites passages from Francisco Hernandez Vida SA v Gomez Perez [1999] IRLR 132; Sanchez Hidalgo v ASASCN [1999] IRLR 136; Allen v Amalgamated Construction Co Ltd [2000] IRLR 119 and the Oy Liikenne case 2001 IRLR 171 for his central proposition that the term "economic entity" refers to:-

"an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective to be exercised. Whilst such an entity must be sufficiently structured and autonomous, it would not necessarily have significant tangible or intangible assets in certain sectors such as cleaning and surveillance the activity is essentially based on manpower. Thus, an organised grouping of wage earners who are specifically and permanently assigned to a common task may, in the absence of other factors of production, amount to an economic activity."

See paragraphs 26 and 27 of Hidalgo.

8. Mr Linden's central contention is that there is absolutely no unity in the tasks that any of the 'SERPS' employees did. In a sentence, the contention of Mr Linden is that the function carried out by various employees is one of the hallmarks of whether it is an economic entity, and to accept as the majority did that an "economic entity" can be defined purely from the employment status of certain operatives is a misdirection of law.
9. Mr Linden points out that Mr Dowell retired from British Aerospace in June 1993; Mr White in October 1993, and Mr Bennett in March 1995. Mr Bennett restarted in April 1996, as did Mr White, though on a different date. But Mr Dowell did not start again until October 1996. The Employment Security Agreement was signed between British Aerospace and the trade union in 1997. In September, Mr Dowell started with the agency MPI; in December 1997, Mr Bennett started with Wynnwith; in February 1998, Mr White started with Wynnwith, and in April 1998, Mr Dowell started with Wynnwith. The effective date for termination in the case of Mr Bennett was February 1999; in the case of Mr White, March 1999 and in the case of Mr Dowell, April 1999. Mr Linden points out that in their Originating Applications, the Applicants were playing down the suggestion that they were all engaged on exclusively training posts, and he submits that the disparate nature of their employment history is eloquent of the fact that these operatives were not engaged on a common function and that there was no economic entity to be transferred.
10. Mr White, who appears for the Appellants, accepts that at the Tribunal hearing, he did not in terms argue that he was suggesting that the Appellant's constituted an economic entity by virtue of their training function. His argument is more broadly based. He has referred us to such cases as Argyll Training Ltd v (1) Sinclair and (2) Argyll and the Islands Enterprise Ltd [2000] IRLR 630 EAT, in the judgment of Mr Justice Lindsay, and to another decision of Mr Justice Lindsay Cheesman & Others v R Brewer Contracts Ltd [2001] IRLR 144 EAT. Mr Justice Lindsay points out that paragraph 10 of the Argyll case sums up the position thus:

"As to whether there was anything here that could properly have been recognised by the Tribunal as a national fact finding body, as an undertaking, a stable economic entity, the breadth of approach sanctioned by the authorities in the ECJ makes it difficult to identify errors in law in particular cases."

He has also referred us to the Cheesman case in which Mr Justice Lindsay pointed out that each of the facts required to be taken into account is no more than a single factor, with none to be considered in isolation.

"If none is to be considered in isolation, it must follow (the decisive criteria apart) that none, in itself, is to be determinant. "

11. The nub of Mr Smith's submission is that despite the fact that the 'SERPS' workers were all involved in disparate disciplines, they were united by one economic activity, namely training and passing on their skills. The fact that not all those who were involved in passing on their skills were 'SERPS' workers does not prevent them from being considered as a subset, that was itself an economic activity. Where the majority stated:

"The group is thus identified by its employment relationship with the first respondent rather than the more usual case of its function within the business."

Mr Smith points out it would have been better to state that the group was identified by its employment relationship and its function.

12. The difficulty with this approach is that the majority very clearly thought it was sufficient to be able to identify this group by their economic status. As Mr Smith has very openly conceded, he did not pursue this case, when he appeared for one of the Applicants, on the basis that there was an economic entity which could be defined by reference to their training function. There may well be cases in which a group of employees, defined by their gender or race, on the facts of a particular case are also defined by their function. An obvious example would be one in which, historically, women who have done low paid jobs, were employed on a particular function which was within the ambit of being an economic entity.
13. On the facts of this case, as found by the Tribunal, we cannot see that the majority Decision can be upheld as it is, in our view, clear that they are applying a test merely of seeking to identify this group of employees by their employment status. Mr Linden has urged that we do not remit this case. At first blush, that is an audacious submission. However, having considered the matter, we have come to the view that it would be inappropriate to remit this case because on the facts, as found by this Tribunal, it is quite clear that there is no way in which these 'SERPS' employees were carrying out any function which comes within the definition of an economic entity.
14. It is commonly the case that on a redundancy exercise, a management imposes, either expressly or implicitly, a requirement that they retain certain employees in order that their skills, and their capacity to hand on those skills to new employees in the future can be retained. That would not mean that the employees would be designated as trainers. In this case we do not consider that there is any point in remitting this case, since we cannot see that there can be any differing conclusion, namely that these were not a group of employees whose employment was transferred in the way suggested by the majority. We therefore allow the appeal and substitute our conclusion that there was no transfer of employment within the terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981.
15. We note from Mr Smith's Skeleton Argument that there are still contractual issues which arise in the applications, as far as Wynnwith are concerned. We therefore direct that this case be remitted for a directions hearing before a Chairman as to the future disposal of those matters.