J Curry and K Justynski v Croome International Transport Ltd: 2304607/2024 and 2306911/2024
JUDGMENT
[1]The claimants were employees of the respondent.[2]The claimants were TUPE transferred to Alcaline UK Ltd.[3]The complaints of unfair dismissal, non-payment of redundancy pay and non-payment of notice pay are not well-founded and are dismissed.REASONS
[1]The claimants complain of: 1.1. Unfair dismissal 1.2. Non-payment of redundancy pay 1.3. Unpaid notice pay[2]The issues for the tribunal are: 2.1. What was the employment status of the claimants? 2.2. Was there a TUPE transfer of the business or part of it? 2.3. Were the claimants unfairly dismissed? 2.4. Were the claimants entitled to notice pay? 2.5. Were the claimants entitled to a redundancy payment?Evidence
[3]The tribunal had before it the following documentary evidence: - main documents bundle (209 pages) split up into 4 bundles (B1 (1-70), B2 (71-128), B3 (129-166), & B4 (167-209)), a separate documents bundle (B5) for the second claimant (56 pages); - witness statement of Michael Croome, email response to Mr Croome’s witness statement from John Curry, - closing submissions from Michael Croome.[4]The tribunal heard evidence on oath from Michael Croome, John Curry and Krysztof Justynski.[5]Number references in brackets with the prefix “B” are to the documents bundles.[6]Only findings of fact relevant to the issues, and those necessary for the tribunal to determine, have been referred to in this judgment. It has not been necessary, and neither would it be proportionate, to determine each and every fact in dispute. The tribunal has not referred to every document it read and/or was taken to in the findings below, but that does not mean it was not considered if the tribunal was taken to the document in evidence or as part of a reading list.The Law
[7]Employee Status Regulation 2(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 defines “employee” as: “any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract of services.” (My emphasis) There is no authority on the question of what is meant by “otherwise” in this sentence. The Acquired Rights Directive, from which the TUPE regulations originate, states that: ”The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.” (My emphasis). Whilst the Directive has been updated, it still refers to “employment relationship” by saying that: “This Directive is without prejudice to national law as regards the definition of employment or employment relationship”. The Employment Tribunal judgment in Dewhust v Revisecatch Ltd (t/a) Ecourier) [2019] 10 WLUK, whilst not binding authority, sets out a detailed analysis of the law and concludes that the TUPE definition includes workers. Section 230 of the Employment Rights Act 1996 states:(1) In this Act “employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.(2) In this Act “contract of employment” means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.(3) In this Act “worker” … means an individual who has entered into or works under (or, where the employment has ceased, worked under)- (a) a contract of employment; (b) any other contract whether express or implied and (if express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker’s contract shall be construed accordingly. Case law has developed tests to use when considering whether a contract of employment (otherwise known as a contract of service) exists. The settled approach is to use a “multiple test”, which is a flexible approach that considers all the relevant circumstances. The starting point is the case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1 All ER 433, QBD where Mr Justice MacKenna stated that a contract of service exists if three conditions are fulfilled: 1) the worker must have agreed to do the work personally in return for remuneration; 2) the worker must be subject to a sufficient degree of control for the relationship to be one of employer and employee; 3) the other terms of the contract must not be inconsistent with a contract of service. Autoclenz Ltd v Belcher & Others [2010] IRLR 70 CA provides at §34 per Lord Clarke JSC: “… the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem”. Mutuality of obligation is required for there to be an employment relationship. That means an obligation on the putative employer to pay the putative employee, and an obligation on the putative employee to undertake some minimum amount of work. This does not mean that the putative employee is required to work whenever asked by the putative employer. It permits some refusal. A factual assessment will be needed to determine whether any refusal was so extensive as to deny the existence of an obligation even to do a minimum of work – Khan v Checkers Cars Ltd EAT 0208/05. Other tests that may be used to determine the relationship include personal performance, integration of the putative employee, and control.[8]Transfer of Undertakings (TUPE) The relevant parts of the Transfer of Undertakings (Protection of Employment) Regulations 2006 read as follows: Regulation 3 - A relevant transfer :(1) These Regulations apply to- (a) A transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity; (b) A service provision change …(2) In this regulation “economic entity” means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary. … Regulation 4 - Effect of relevant transfer on contracts of employment (1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee. (2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer – (a) all the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and (b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee.(3) Any reference in paragraph (1) to a person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to a relevant transfer, is a reference to a person so employed immediately before the transfer, or who would have been so employed if he had not been dismissed in the circumstances described in regulation 7(1), including where the transfer is effected by a series of two or more transactions, a person so employed and assigned or who would have been so employed and assigned immediately before any of those transactions.(4) Subject to regulation 9, any purported variation of a contract of employment that is, or will be, transferred by paragraph (1), is void if the sole or principal reason for the variation is the transfer.(5) Paragraph (4) does not prevent a variation of the contract of employment if (a) the sole or principal reason for the variation is an economic, technical, or organisational reason entailing changes in the workforce, provided that the employer and employee agree that variation; or (b) the terms of that contract permit the employer to make such a variation. (5A)… (5B) … (5C) …(6) …(7) Paragraphs (1) and (2) shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it of an employee who informs the transferor or the transferee that he objects to becoming employed by the transferee.(8) Subject to paragraphs (9) and (11) where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor.(9) Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.(10) No damages shall be payable by an employer as a result of a dismissal falling within paragraph (9) in respect of any failure by the employer to pay wages to an employee in respect of a notice period which the employee had failed to work.(11) Paragraphs (1), (7), (8) and (9) are without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice in acceptance of a repudiatory breach of contract by his employer. To establish whether there has been a transfer of an undertaking, business or part of an undertaking or business where there is a transfer of an economic entity that retains its identity, two questions need to be answered: 1) was there a relevant and sufficiently identifiable economic entity, and 2) was there a relevant transfer of any such entity – see Cheesman and ors v R Brewer Contracts Ltd 2001 IRLR 144 EAT. The Cheesman case lays down guidelines for determining whether an economic entity that retains its identity is in existence. Of particular relevance are the following:• There needs to be a stable economic entity, which is an organised grouping of persons and assets enabling or facilitating the exercise of an economic activity that pursues a specific objective.• In order to be such an undertaking, it must be sufficiently structured and autonomous but will not necessarily have significant tangible or intangible assets.• A similar economic activity must be continued or resumed by the new company.Findings of Fact
[9]John Curry and Krysztof Justynski were International Lorry Drivers with the respondent. Croome International Transport Ltd (CITL) was a small company, who at all material times specialised in the haulage of high value Italian fashion goods.[10]Mr Curry started work with the respondent early in 1996. He left for a period from February 2006 and recommenced work with the respondent on 1.5.2006[11]Mr Justynski started work with the respondent on 30.10.2006. Working relationship[12]The claimants had contracts of employment with the respondent. Mr Curry’s is dated 1.10.2001 (B2 p14) and Mr Justynski’s is dated 30.10.2006 (B2 p11). The contracts refer to “employment” throughout and provide for notice periods for termination of employment. They provide for holidays, sickness, pension, disciplinary rules and procedure, and grievances.[13]The claimants were skilled drivers and were required to drive the vehicles personally. They could not send another driver in their place. Due to their skills and working on the road, they had a certain amount of autonomy.[14]They were integrated into the respondent organisation and had to work by the respondent’s rules and follow the respondent’s procedures.[15]They were paid monthly through PAYE, whereby the respondent deducted tax and national insurance. They were in the respondent’s pension scheme.[16]They were entitled to paid holidays of 20 days plus bank holidays from the respondent. However, they could take as many unpaid holidays as they wished. On average, Mr Curry took 12 weeks holiday per year and Mr Justynski took 15 weeks.[17]They were only offered work when work was available. If there was no work, they did not work for the respondent. They were only paid when they worked, (apart from when they took their paid holiday entitlement). However, work was regular and the claimants depended on it to make a living.[18]The drivers had significant flexibility. Their work was paid by the job. Whilst they could start and finish the day when they chose to, in practice they worked full days to get the lorry loads of goods to their destinations as quickly as possible.[19]They did not have to accept any particular job. However, in practice, the claimants generally accepted what work was provided to them by the respondent.[20]The tribunal was referred to one specific occasion when Mr Justynski refused to take over a load of high value Prada goods coming from Italy and drive them from the respondent’s Lenham yard to Dublin. There were a few occasions when he refused to take exports with more than 2 or 3 deliveries. However, overall the extent of any refusal of work was low.[21]Mr Curry preferred to load for a particular customer in Prato. Mr Coome’s evidence was that Mr Curry sometimes refused to load from other places such as Verona or Milan. Mr Curry said he never refused work. If Mr Curry refused any work, it was to a minimal extent.[22]Although the claimants were free to take employment elsewhere, there was no evidence presented to the tribunal that they did so whilst working for the respondent. If they did, the respondent was nonetheless their main source of income. Transfer[23]The combined effects of Brexit and Covid 19 hit CITL hard financially and they started operating at a loss. After a particularly bad quarter, ending December 2023, Mr Croome, the Managing Director, began discussions with a view to Alpi UK taking over CITL.[24]Mr Croome wrote to the drivers and other staff on 22.2.2024 (B2 p20) detailing the problems and giving them notice that the company would cease operations on 31.3.2024. He explained he was in takeover talks with Alpi UK. In the end, the talks with Apli UK came to nothing.[25]Mr Croome then began takeover talks with Alcaline UK Ltd. He had a conversation with their Managing Director, Lorenzo Zaccheo, on 29.2.2024 and followed it up with an email that day setting out his proposal. In it he stated “All our drivers are long term” (B2 p6). He put forward several proposals ranging from £500,000 to £300,000, which all included 8 vehicles and drivers (B2 p8).[26]After further correspondence Mr Croome met with Mr Zaccheo and others on 4.3.2024[27]At that meeting Mr Croome confirmed that the drivers were all employed on UK contracts and that CITL was responsible for paying their PAYE and NIC, but in his opinion they were “workers” since they were paid by the day and there was no obligation either for them to work or for CITL to provide them with work.[28]It appeared that Alcaline paid their drivers more than CITL did.[29]On 5.3.2024 Alcaline emailed with an offer for the equipment. It was not clear what this covered.[30]On 6.3.2024 Mr Croome responded accepting the offer to cover: (B2 p13) 8 road train vehicles Extra boxes and trailer The transfer of the 8 drivers Take over of customer base[31]Mr Graham (on behalf of Mr Zaccheo) emailed back that day saying Alcaline UK Ltd did not want the business, just the vehicles (B2 p13).[32]Mr Croome spoke with Mr Zaccheo that evening and told him the vehicles without the drivers was impossible. This was because they were specialist vehicles which could not be driven by most HGV drivers without extensive training, and they were designed for his customers as Hanging Garment Vehicles, so the 3 items were inseparable.[33]On 7.3.2024 Mr Croome emailed Dominic Graham (copying Mr Zaccheo) (B3pp20-21) expressing disappointment at the price but saying: …I wish to look after my drivers …and help them carry on doing the job they love… … I want to help my customers who I talk with every day and who have been loyal to me for 30 years If you are in agreement with the above…then I am minded to accept your offer. …That I think is the best outcome for your company, and my drivers and customers. …if you confirm agreement… then I will raise an invoice for £145,000 + VAT for the sale of our newest 8 road-trains…to cover the transfer of the 8 drivers to your company. I will work with your nominated colleagues to ensure a successful migration of our customers.[34]The same day Alcaline emailed back (B3 p22) saying: …We very much appreciate your acceptance of our offer at £145,000 …We do not feel it would be in anyone’s interest for us to pay for the vehicles before we have taken delivery. …We also require time to onboard your drivers ...[35]On 8.3.2024 Mr Croome emailed an invoice to Alcaline UK Ltd (B3 p25). It confirmed a TUPE Driver Transfer to them of the drivers and set out the 8 drivers names, including the claimants. It stated: “The sale to include the transfer of the above drivers under TUPE regulations.”[36]The same day Mr Zaccheo replied (B3 p27): “All noted, thank you.”[37]Payment was made in instalments in March.[38]On 11.3.2024 Mr Croome sent an email to drivers (B2 p26) saying he had reached agreement with Alcaline UK Ltd for the sale of CITL’s vehicles and the transfer of their employment under TUPE regulations. Their work should continue as normal as he had similarly transferred the existing customers. The sale and transfer was to take effect from 31.3.2024.[39]There was another email saying the company would be closed on 31.3.2024[40]From the payment of the first invoice on 8.3.2024 until final payment on 28.3.2024 there were many emails between CITL and Alcaline UK Ltd dealing with, amongst other things, driver payroll details, nationality, work permits and dates of driver/vehicle arrivals. Alcaline UK Ltd did not query the stated TUPE transfer in any of these emails.[41]The workshop manager and transport manager of CITL were not transferred. Those few employees that remained (excluding directors) were paid redundancy.[42]CITL ceased day to day operations on 31.3.2024. Mr Coomes remained MD of CITL and the company itself was not transferred. It remained registered on companies house whilst Mr Croome waited for a large Italian Vat payment before creditors could be paid in full and the company then wound up formally.[43]There is no evidence that either of the claimants objected to their transfer and nor is there any evidence that they resigned. Accordingly, I find that they did not object and did not resign. Post 31.3.2024[44]The claimants started work with Alcaline UK Ltd around the beginning of April 2024. They were offered new employment contracts through Borealis Driver Services Ltd on 16.4.2024, some of the terms of which they objected to.[45]On 16.4.2024 Mr Croome received an email from Alcaline UK Ltd saying: “To clarify the agreed terms of our recent business transaction and to clear up any ambiguity on the employment of your former drivers. As discussed at our offices and confirmed subsequently on a number of occasions, Alcaline have not taken on your drivers under any agreement, let alone a TUPE transfer. Our understanding has always been that your drivers were always employed by Croome International on Zero hours contracts and that there was no guarantee that they would join our company. It was made very clear, as a gesture of goodwill and because we were buying your vehicles, that we would look to take on your drivers under new Alcaline UK employment contracts (via Borealis Driver Services). … It transpires that you have informed your former drivers that they were being transferred under a TUPE agreement, which is untrue. … Whilst we have provided all this information to the drivers … they are still adamant that they have joined us under TUPE. As the previous employer we feel it is your responsibility to reinforce the fact that these drivers have not been taken on under a TUPE agreement and that they are employed under new contracts of employment.”[46]Mr Croome wrote back on 17.4.2024 saying: “…because you are not trading with my customers as Croome – but as Alcaline … it’s definitely not a TUPE transfer …”[47]In fact Alcaline UK Ltd were operating the CITL vehicles in full CITL livery.[48]Mr Croome’s evidence was that he wrote this to try and bridge the gap between Alcaline and CITL, because Alcaline owed CITL a large sum of money. Submissions[49]Claimants submit that they were employees not workers. They say they were not TUPE transferred and were dismissed by way of redundancy by the respondent.[50]The respondent says that the claimants were workers. Mr Croome says the transfer of the vehicles and customer base was at below market rate to cover the potential cost/liability of TUPE transfer of the drivers to Alcaline UK. Discussion and Conclusions Employment statusDiscussion and Conclusions
[51]Considering the multiple test and all the relevant surrounding circumstances, the Ready Mixed Concrete tests appear to be met. The claimants did the work personally for remuneration, they were under sufficient control of the respondent to have an employer/employee relationship, and there is nothing in the other terms of the contract that is inconsistent with a contract of service.[52]It is clear that the claimants relied on their work with the respondent to earn a living and they were fully integrated into the organisation. The terms of their contracts of employment reflected an employee/employer relationship and they were paid after deduction of tax and NICs.[53]The fact that the claimants (or at least Mr Justynski) occasionally refused work, and that the respondent did not have to supply work, is insufficient to depart from the employee/employer relationship.[54]Therefore, I conclude that the claimants were employees of the respondent. Transfer of undertaking Whether there was an economic entity[55]Most of the business was transferred as an ongoing enterprise, namely the operational vehicles, their drivers and the customers. This was a stable, organised grouping of persons, assets and customers, pursuing the economic activity of haulage of fashion goods.[56]It was identifiable as an economic entity under the respondent’s management, and it continued functioning as such with the same economic activity under the new ownership.[57]I therefore, find that an economic entity that retained its identity existed. Whether there was a relevant transfer[58]There was a change in the legal person responsible for running the business.[59]The correspondence demonstrates that both the respondent and Alcaline UK Ltd intended the vehicles and their drivers, including the claimants, to be transferred.[60]The transaction took place and Alcaline UK Ltd was invoiced. The CITL invoice referenced a TUPE transfer, which is evidence of intention. This was not challenged by Alcaline UK Ltd at the time.[61]It was only later that Alcaline UK Ltd disputed the transfer of the employees. This was after the event when the claimants complained about the new contracts Alcaline UK Ltd had introduced.[62]The claimants did not object to the transfer.[63]Accordingly, I find that a TUPE transfer took place, which included the claimants.Conclusion
[64]The claimants were employees who were TUPE transferred. They were not dismissed or made redundant by the respondent. The respondent’s liabilities were transferred to Alcaline UK Ltd. Therefore, the claimant’s complaints against the respondent are not well-founded and are dismissed.