TUPE

Jeffrey Jupp's TUPE resource

June 24, 2013
by Jeffrey
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CEVA Freight (UK) Ltd v Seawell Ltd Ct of Sess – 21 June 2013

This cases raises the same issue that arose in Eddie Stobart Ltd v Moreman and in Argyll Coastal Services v Sterling, namely that there has to be some conscious organisation of a group or team in order to fulfil the requirement of Reg 3(3)(a)(i) that there be an ‘organised grouping’ of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client.

The Facts

Seawell were a customer of Ceva. Seawell operated various North Sea oil drilling platforms. Ceva arranged for the movement of materials to Seawell’s offshore platforms. Ceva supplied similar services to a number of other customers.

M was employed by Ceva and spent his time almost wholly devoted to looking after the customer needs of Seawell, particularly as respects the supply of outbound goods to a particular offshore platform. Other employees spent varying, but more limited time, on the Seawell contract.

Seawell indicated that they intended to take the business carried out for them by Ceva back into their own management. Ceva informed Seawell that they considered that this was a service provision change (SPC). That was denied by Seawell. The work was taken back in house by Seawell on 31st December 2009. M lost his job with Ceva and was not taken on by Seawell. He brought claims against both Seawell and Ceva for unfair dismissal.

The ET

The ET held that M was assigned to the organised grouping and his employment therefore transferred to Seawell.

The EAT Decision

The EAT allowed the appeal of Seawell ([2012] IRLR 802).  The grouping within which M found himself, namely, the outbound operation, could not be said to have as its principal purpose the carrying out of activities on behalf of Seawell. Only M spent 100% of his time on that work. Other members of the grouping spent only limited parts of their time on work for Seawell. So the outbound grouping could not satisfy the requirements of Reg 3(3)(a)(i); the grouping was not organised for the purposes of the Seawell contract, nor was the Seawell work its principal purpose.    It was not sufficient to satisfy Reg 3(3)(a)(i) that M spent all of his time on Seawell’s work; nor was there any finding that Ceva formed a grouping consisting of M alone to carry out the Seawell work.

The Court of Session Decision

The Ct of Sess dismissed the appeal from the EAT, M’s employment had not transferred to Seawell.  It held that the  approach in Eddie Stobart was correct.   Paragraph 33 contains the essential reasoning:

“It appears to us to follow from the structure and wording of the regulations that where the activities are carried out by the collaboration, to varying degrees, of a number of employees who are not organised as a grouping having as their principal purpose the carrying out of the activities for the client, it is not legitimate to isolate one of that number on the basis that the employee in question devoted all, or virtually all, of his or her working time to assisting in the collaborative effort. …While the job description … indicates that [M] was employed for the purpose of enabling the contract with Seawell to be performed, we do not consider that the fact of his being so employed relevantly distinguishes him from an employee who, as one of a number engaged in carrying out the activities, de facto devotes all, or virtually all, of his or her working time to contributing to the carrying out of the activities.”

It was further observed that the definition of an organised grouping in Reg 2 as including a single employee is directed at those cases where the activities are carried out by a single individual. For example, the needs of a client of a cleaning firm for a single cleaner; or a firm of solicitors to provide a single qualified solicitor to advise full time a client such as an insurance claims handler.  The inclusion of a single employee in the definition of an organised grouping was directed to that sort of case.  But where the activities are carried out by a plurality of employees, the reference in the definition to a single employee did not warrant disaggregation of that group of employees.

Comment

This is perhaps another case which demonstrates that the increased certainty intended by the introduction of SPCs in 2006 has not been achieved and gives support for the Government’s view, expressed in the current consultation, that they have simply introduced another layer of uncertainty.

It also raises again the question of what happens if, learning of the client’s intention to take the activity back in house, the transferee introduces the necessary degree of organisation so that that by the date of the SPC there is an organised grouping of employees within Reg 3(3).

Link to Ct of Sess judgment

Link to EAT judgment

June 17, 2013
by Jeffrey
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Albron Catering BV v FNV Bondgenoten CJEU Postscript – 17 June 2013

As will be recalled, in Albron Catering BV v FNV Bondgenoten [2011] ICR 373 the ECJ held that the Acquired Rights Directive applied to workers assigned to an undertaking that transferred even though they were not employed by that undertaking before the transfer.  The Dutch Supreme Court has now given its decision in the case which raised the same issue under the Dutch Civil code as will arise under TUPE.

The Facts

The employee, R, was employed by Heineken Nederlands Beheer BV (‘HNB’).   HNB was the employer of all workers in the Heineken Group, and its staff worked for various Heineken Group Companies.  R was employed by HNB from 17 July 1985 to 1 March 2005 as a staff member in the ‘catering’ department. He was assigned by HNB, along with about 70 other staff members in that department, to Heineken Nederland BV (‘Heineken Nederland’), a company which, until 1 March 2005, supplied catering at various locations to employees of the Heineken group.    A  collective agreement between  HNB and the FNV union applied to R’s employment..

The catering activities carried out by Heineken Nederland were transferred to Albron on 1 March 2005.  FNV and R brought an action against Albron before the Dutch Court for a declaration that the transfer of the catering business which took place on 1 March 2005 between Heineken Nederland and Albron constituted the transfer of an undertaking within the meaning of the Directive  and that employees of HNB who were assigned to Heineken Nederland automatically became staff members of Albron as from that date.

The FNV and R also sought an order against Albron that the latter be required to comply with the collective agreement between HNB and FNV.

The Decision of the ECJ

The ECJ held that:

  • Under Article 3(1) of the Directive the protection conferred  on employees in the event of a change of employer concerned the rights and obligations  of the transferor arising from the existence, at the date of the transfer of the undertaking, of an employment contract or an employment relationship.   
  • Whether there was the existence or otherwise of a contract or employment relationship was (pursuant to Article 2(2)), a matter for the national law.  Further, the fact that there was a distinction in Article 3(1) of the Directive between an employment contract, and an employment relationship, at the date of the transfer suggested a contractual link with the transferor was not required in all circumstances for employees to be able to benefit from the protection conferred by the Directive.
  • It followed that the position of a contractual employer, who was not responsible for the economic activity of the economic entity transferred, could not take precedence, for the purposes of determining the identity of the transferor, over the position of a non-contractual employer who is responsible for that activity.   Therefore, if, within a group of companies, there are two employers, one having a contractual relationship with the employees of that group and the other a non-contractual relationship with them, it is also possible to regard as a ‘transferor’, the employer responsible for the economic activity of the entity transferred to which the staff are assigned despite the absence of a contractual relationship with those staff.

Postscript – The Decision of the Dutch Supreme Court

When the case went back to the Dutch Court of Appeal and the Supreme Court, Albron argued that as the Dutch Civil Code Art. 7.663 (the domestic legislation that gave effect to the Acquired Rights Directive) expressly referred  to the employee, in the context of the transfer, being employed under a ‘contract of employment’, it exceeded the permissible scope of statutory interpretation to extend this meaning to include employees who were assigned to an undertaking but not employed by it.

In April, 2013, 8 years after the case commenced, the  Dutch Supreme Court held that the Dutch Civil Code ought to be interpreted in accordance with the Directive and that even if the relevant paragraph of the Civil Code did not expressly include employees who were in a non-contractual employment relationship with the transferor it should interpreted to apply to such employees.  It was held that as Art. 7.663 of the Dutch Civil Code was intended to implement the Directive the legislators, must have intended that the expression ’employer’ would have the same meaning as transferor in the Directive and  would include those in an ’employment relationship’ even if not working under a contract of employment.

A similar issue will face any Employment Tribunal looking at this issue under TUPE.   Reg 3 and Reg 4 of TUPE apply to ’employees’, and Reg 4 transfers the  rights, powers, duties and liabilities arising under or in connection with a contract of employment.    Although the definition of an ’employee’ in Reg 2 is that it means “any individual who works for another person whether under a contract of service or apprenticeship or otherwise”, it was held in  Governing Body of Clifton Middle School v Askew [1999] EWCA Civ 1892 that this wording requires a contractual relationship between the transferor and the employees.

A further issue will arise as to how a transfer-related unfair dismissal claim could be pursued if the transferor is not the employer for the purpose of the right to claim unfair dismissal under Part X of the Employment Rights Act 1996.

Link to ECJ Judgment

Link to English Summary of Dutch SC decision

May 29, 2013
by Jeffrey
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Ilab Facilities Ltd v Metcalfe EAT – 25 April 2013

Although understandable on the facts, this decision suggests a more conservative approach to identifying which employees are ‘affected’ employees for the purposes of the employer’s duty to inform and consult under Reg 13 in the context of insolvency.

In this case an insolvent company had two discrete parts to its business.  One part was sold by the liquidator and the other wound up.  Employees assigned to the part of the business that was wound up were not consulted about the transfer of the part that was sold.  They claimed they ought to have been on the basis that at an early stage before the transfer it was suggested that the part of the business to which they were assigned would also be transferred.  Their claims were upheld by the ET.  However the EAT held that there was no requirement  to consult as they were not affected by the transfer.

In reaching this conclusion Underhill P also considered the scenario where the transfer of part of a business leads to another part of the business being closed down, perhaps because it was loss making and was being kept afloat by the solvent part that was transferred.  Whilst appearing to accept that at first blush the employees in the part that was closed down would be affected by the transfer he held that the Reg 13 was not apt to apply to ‘this kind of indirect effect, where the transfer as such has no impact on the employees’.

This raises the question  – when is the effect direct and when is it  indirect?  What if both parts of the business share the main customers who then decide to take their business elsewhere when they learn of the transfer, causing the retained part to fold?  Is the effect on the employees direct or indirect?

It was also held that an employer could never be in breach of the requirement to inform and consult if the transfer never in fact took place.  The reason for this is that the obligation is to inform and consult ‘long enough’ before the transfer.  If the transfer never takes place then how can it be said that the employer would definitely not have consulted?

Link to judgment

May 29, 2013
by Jeffrey
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Bangura v Southern Cross Healthcare Group plc EAT 12 March 2013

The issue in this case was whether an employee who is dismissed before the transfer nevertheless transfers if he has an appeal that is outstanding at the date of transfer.

In G4S v Anstey (2006) the employees were dismissed by the transferor before the transfer.  They lodged appeals against dismissals before the transfer.  The transfer took place and the employees did not transfer.  The appeals were successful and the employees were reinstated.  It was held that having been reinstated they were then employed by the transferee. Reinstating the employee following a successful appeal has the effect that there has been no break in his employment and that if there has been a transfer his employment transfers.

By contrast the appeal by the employee in this case had not been heard.  He therefore remained dismissed. As he was dismissed before the transfer for a reason not connected to the transfer his employment did not transfer to the transferee.  G4S was distinguishable as in that case there had been a reinstatement.

An argument that Regs 11 and 12 gave support to the employee’s case (that there was a transfer pending his appeal) was rejected by the EAT.

Link to judgment

May 29, 2013
by Jeffrey
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Kavanagh v Crystal Palace FC (2000) Ltd EAT – 20 November 2012

This case concerns the application of ETO reasons when the transferor is in administration.

The Facts

CP FC was put into administration in January 2010.   The objective of the administrator was to sell the club as a going concern.   A potential buyer was identified in February 2010 but negotiations stalled because the stadium was owned by another party and the potential buyer wanted to both the club and the stadium.   Because of serious cash flow difficulties, the administrator decided to mothball the club over the close season with the intention to revive negotiations later.  The club’s administrative staff, which included the Claimants, were made redundant in May 2010.

The ET held that there was an economic, technical or organisational (“ETO”) reason entailing changes in the workforce and therefore the dismissals were not unfair (Reg 7(1)(b)).  The ETO reason was that the the Administrator  “could no longer afford to pay all the Club’s employees and he had to reduce the workforce and wage bill in order to mothball the Club in the hope that a purchaser would be found”.

The EAT decision

The EAT considered  Spaceright Europe Ltd v Baillavoine  [2011] EWCA Civ 1565 and judgment of Mummery LJ at paragraph 47:

“For an ETO reason to be available, there must be an intention to change the workforce and to continue to conduct the business, as distinct from the purpose of selling it. It is not available in the case of dismissing an employee to enable the administrators to make the business of the company a more attractive proposition to prospective transferees of a going concern.”

The EAT held that this paragraph posits two alternative positions: first, where the reason for a dismissal was the intention to change the workforce and to continue to conduct the business; second, and distinguished from that position, was where the dismissal was part and parcel of a process, with the purpose of selling the business. In the former case, there could be a dismissal for an ETO reason, but in the latter case there could not.

Here the ET had erred in deciding that the reason for the dismissals was that the administrator could no longer afford to pay the employees. The EAT agreed that the administrator wanted to save costs by making redundancies, but this was to preserve the business so that it could be sold in the future. In light of Spaceright this was not an ETO reason and, as such, the dismissals were automatically unfair and liability for those dismissals passed to the purchaser under TUPE.

Comment

In order for Administrators to rely on an ETO reason they will essentially have to establish that dismissals were necessary to avoid liquidation rather than to make the business more attractive to sell.

 Link to judgment

May 29, 2013
by Jeffrey
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Shields Automotive Ltd v Langdon EAT 21 March 2013

This case usefully illustrates the approach to be taken in the assessment of awards for breaches of Regs 13 and 14 (information and consultation and election of representatives).  As is well-known, the award is punitive and the starting point is 13 weeks’ pay for cases where there has been no information provided and no consultation.  The employer must mitigate down from this.

The default concerned the election of employee representatives.  A ballot was held at very short notice. One employee,  B, was absent and another, L, concerned about the short timescale decided not to vote in the election.   The outcome of the ballot was that there was one clear winner and a tie for the second representative position.  The Managing Director arbitrarily selected one of these two employees to be the representative on the basis that the other employee did not work on Thursdays when the consultation meetings were scheduled.

There were two criticisms of the process which were upheld.  The first was the that the timescale was too short and did not give all employees the opportunity to vote.  The second was the failure to deal properly with the tie break.  The ET awarded L, (who was present and elected not to vote), 2 weeks’ pay and B, (who was absent and knew nothing about the election), 7 weeks’ pay.  The ET observed that the employer’s default was not as severe as that in Todd v Strain [2011] yet in the case of B made an award of the same amount as was made in that case.

The EAT did not interfere with the award to L, but reduced the award to B to 3 weeks’ pay.  In doing so Langstaff P held:  (i)  the test on appeal for reducing an award is whether the award is manifestly excessive  rather than perversity (para 28) and (ii)   the purpose of the award is to ‘ensure that employers generally are mindful of their obligations to consult and inform, particularly in circumstances in which there will inevitably be pressures often of time upon the employer to do the opposite’ (para 12).

Link to judgment

May 29, 2013
by Jeffrey
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Eddie Stobart Ltd v Moreman EAT 17 February 2012

Stobart operated a logistics depot which it used to store processed and unprocessed meat which it would then deliver to suppliers.  In 2009 when it closed the depot there were two customers F and V.  Stobart believed the work it did for V would be taken on by FJG and this would be a Service Provision Change (‘SPC’) within Reg 3(1)(b).   It identified those employees who spent most of their time working on the V contract and told those employees that they had transferred to FJG.  FJG refused to accept that they had transferred.

At issue was whether the group of employees fulfilled the necessary conditions for an SPC as set out in Reg 3(3) and particular whether immediately before the SPC:

There is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;

In many cases employees will spend all of their time servicing a particular contract because of the way their employer has organised its business.  In such cases the individuals may receive specific training about the requirements of that particular client.  They may be identified separately by team name etc.

In Stobart, although the evidence showed that the employees concerned spent most of their time on the V contract, this was coincidence or serendipity and it was not the product of any organisation by Stobart but rather a function of the time of day that V’s customers chose to place their orders. The employees did not consider  themselves as being assigned to one contract. These factors meant that there was no reasonable prospect of success in establishing the existence of an organised grouping of employees.

The EAT held (para 18) that the requirement of an organised grouping:

“necessarily connotes that the employees be organised in some sense by reference to the requirements of the client in question.  The statutory language does not naturally apply to a situation where, as here, a combination of circumstances – essentially, shift patterns and working practices on the ground – mean that a group (which, NB, is not synonymous with a “grouping”, let alone an organised grouping) of employees may in practice, but without any deliberate planning or intent, be found to be working mostly on tasks which benefit a particular client.  The paradigm of an “organised grouping” is indeed the case where employers are organised as “the [Client A] team”, though no doubt the definition could in principle be satisfied in cases where the identification is less explicit.”

As with all cases context is everything and it will always be a question of fact and degree as to whether the grouping is the product of organisation.

Comment

This case does raise the issue of what is the position if in the weeks leading up to the transfer the the employer introduces the necessary degree of organisation so that that by the date of the SPC there is an organised grouping of employees within Reg 3(3).

 

 

Link to judgment

May 29, 2013
by Jeffrey
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Parkwood Leisure Ltd v Alemo-Herron AG ECJ 19 February 2013

The issue in this long running case is whether collective agreements have a dynamic or static interpretation on transfer.  Put another way do they freeze in time at the point of transfer or are employees who transfer entitled to rely on subsequent changes to them even though their new employer is not and was never intended to be a party to the collective agreement.

The employees were originally employed by the London Borough of Lewisham. Their pay was determined by a collective agreement between the employer and the National Joint Council for Local Government (the “NJC”). Following two TUPE transfers, Parkwood became the new employer. Subsequently, a new collective NJC agreement was negotiated, without any participation by Parkwood. The new agreement increased pay scales.  Parkwood refused to implement these increases.  The employees claimed to be entitled to the new collective agreement.  Parkwood won in the ET, lost in the EAT and won in the Court of Appeal.

The Supreme Court referred the matter to the European Court of Justice (‘ECJ’).

The Advocate General (‘AG’) of the ECJ  the has given his opinion.  He is of the opinion that a dynamic interpretation is permissible.

The AG also drew attention to the fact that , the United Kingdom has not taken advantage of the exception under Article 3(3) of the Directive, whereby Member  States can restrict the length of time that collective agreements agreed prior to the transfer are effective once the transfer has taken place, albeit with a minimum limit of one year.  It should be noted that this issue is something that the Government has highlighted in its consultation to changes to TUPE.

It should be noted that the case refers to Reg 6 of the 1981 TUPE Regulations.  This is Reg 5 in the current Regulations

Link to AG’s Opinion

Link to Supreme Court Judgment

May 28, 2013
by Jeffrey
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Werhof v Freeway Traffic Systems GmbH ECJ

In this case two questions were referred to the ECJ:

(i)  When a contract of employment refers to a collective agreement (in force at the time of the transfer) to which only the transferor has signed up, is the transferee bound by subsequent collective agreements to that one?

(ii)  If the answer is no, is a transferee (who is not party to a collective agreement) bound by agreements which come into force after the transfer for as long as the transferor is bound?

The Facts

The terms and conditions of Mr Werhof’s employment were governed by a collective agreement between the metal industry trade union and an employers’ federation. His contract was transferred to Freeway Traffic Systems which was not a member of the employers’ federation.

Freeway Traffic Systems introduced a grid for grading employees. Mr Werhof waived his right to any wage increase that applied before the grading system came into force in return for a one-off payment.

Two years later the metal industry trade union and the employers’ federation negotiated a wage increase. Mr Werhof claimed the difference between the amount he had received and the sum negotiated under the new agreement. His claim was dismissed initially and the appellate court made a reference to the ECJ.

The ECJ

The ECJ answered the first question ‘yes’ and so did not need to consider the second question.  Under the normal contractual principles, obligations negotiated between two parties cannot be imposed on a third party. However, as this  could undermine the rights of employees in the event of a transfer, employees required particular safeguards to protect the terms of their contracts,  including the terms and conditions of any collective agreements in their contracts.

The ECJ held: “the rights and obligations arising from a collective agreement to which the contract of employment refers are automatically transferred to the new owner, even if … the latter is not a party to any collective agreement.”  However,  the ECJ held that the collective agreement only has to be observed until it ends or another one comes into force. The directive could not bind a transferee to collective agreements other than the one in force at the time of the transfer.   The court observed that binding transferees to observe future collective agreements would undermine their fundamental right not to join an employers’ association.

Link to judgment