Harris v Bulmas Plastics Ltd & Anor [1996] UKEAT 418_95_0502

EAT
Harris v Bulmas Plastics Ltd & Anor
[1996] UKEAT 418_95_0502 · 1996-02-05
MR JUSTICE TUCKER: This is an employee's appeal from a decision of the Industrial Tribunal sitting at Leeds on 13 February 1995. It was the unanimous decision of the Tribunal that all the originating applications were dismissed. We are only concerned with the application made by Mr William Harris, which was for compensation on the grounds of unfair dismissal. This claim was made against the Administrative Receivers of his former employers Bulmas Plastics Ltd and against the transferees of Bulmas's business Fourfold Precision Tool Co Ltd., who are the second Respondents to this appeal.The Appellant had been Chairman and Managing Director of Bulmas since it came into existence in October 1997. Its business was injection moulding in the plastics industry, which it carried on from premises at Silsden, Nr Keighley, Yorkshire. Unfortunately the business was badly hit by the recession and it suffered a cash flow problem. The National Westminster Bank called in the Receivers who took over from 31 March 1994. Bulmas only had a small work force, some of whom were immediately made redundant. That left the Appellant, his daughter who was Financial Director, another lady responsible for administration and twenty-one production workers.The second Respondent showed an interest in acquiring the business which had been advertised for sale on 8 April. On 25 April the second Respondents made a written offer to purchase the business. On that day or soon after, two of Bulmas's major customers had notified Bulmas that they intended to remove their mould tools. Those customers accounted for 80% of the current turnover.On 30 April the Appellant was made redundant, as no funds were available to pay his salary for the following month. On 4 May a revised offer was received from the second Respondents. On that day and the next, the final orders for the two major customers were completed and the remaining production workers were dismissed as redundant.The Tribunal had to consider the effect of the Transfer of Undertakings Regulations 1981 , and in particular, the provisions of Regulation 8 which so far as is material, are as follows:
"(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 a relevant transfer is the reason or principal reason for dismissing an employee__

(a) paragraph (1) above shall not apply to his dismissal."

The first question for the Tribunal to resolve was the reason for the Appellant's dismissal. At paragraph 11 of their decision they say this:
"In the letter of dismissal the receivers state clearly that the reason for terminating Mr Harris's employment was that they could not pay him his salary in the month of May. The surrounding circumstances indicate that this was true... The receivers had known, at any rate since 25 April, that Fourfold was not prepared to assume any liabilities of employees."
The majority of the Tribunal have certain views which they set out in paragraph 12 as follows:
"It seems to the majority of the tribunal that, had Mr Harris not been dismissed, his name on the payroll of the company would have been a serious embarrassment to Mr Wilson who might very well have then refused to proceed. The majority take the view that the dismissal of Mr Harris was effected in connection with the transfer. Accordingly the dismissal of Mr Harris by the receivers must, under Regulation 5, be deemed to have been done by the transferee Fourfold."
However, the Tribunal were unanimous in their opinion as set out in paragraph 14 that, the principle reason for the dismissal of the Appellant was an economic one, in that the company were unable to pay his salary at the agreed rate. That was not challenged before the Tribunal and therefore is not challenged before us. The Tribunal expressed the view that the negotiations for the sale of the business proceeded on the basis that the Appellant had left the service of the company when the money ran out.That the principle reason for dismissing an employee as an economic one, is however only one of the elements which has to be considered under Regulation 8(2) when deciding whether or not paragraph 1 of that Regulation applies to the dismissal. The Tribunal would have been wrong to conclude that Regulation 8 paragraph 2 applied on that ground alone. Despite the rather unfortunate wording of paragraph 15, we do not think that the Tribunal fell into that error. They immediately said this:"... The principal reason for the dismissal being an economic one; did it entail a change in the workforce?"...So the Tribunal did consider that question and they answered it in these words:"In our view it clearly did. It removed the guiding hand of the company."...It is this conclusion which is challenged by Mr Graham on behalf of the Appellant. He cites two authorities to us, Berriman v Delabole Slate Ltd [1985] ICR 546 and Crawford v Swinton Insurance Brokers Ltd [1990] ICR 85 . Mr Graham relies on a passage in the judgment of Lord Justice Browne-Wilkinson, as he then was, in the Berriman case at page 551 C-F, which reads as follows:"Then, in order to come within regulation 8(2), it has to be shown that that reason is an economic, technical or organisational reason entailing changes in the workforce. The reason itself (i.e. to produce standardisation in pay) does not involve any change either in the number or the functions of the workforce. The most that can be said is that such organisational reason may (not must) lead to the dismissal of those employees who do not fall into line coupled with the filling of the vacancies thereby caused by new employees prepared to accept the conditions of service. In our judgment that is not enough. First, the phrase "economic, technical or organisational reason entailing changes in the workforce" in our judgment requires that the change in the workforce is part of the economic, technical or organisational reason. The employers' plan must be to achieve changes in the workforce. It must be an objective of the plan, not just a possible consequence of it.Secondly, we do not think that the dismissal of one employee followed by the engagement of another in his place constitutes a change in the "workforce." To our minds, the word "workforce" connotes the whole body of employees as an entity: it corresponds to the "strength" or the "establishment." Changes in the identity of the individuals who make up the workforce do not constitute changes in the workforce itself so long as the overall numbers and functions of the employees looked at as a whole remain unchanged."There is a passage in the judgment of Mr Justice Knox in the Employment Appeal Tribunal in Crawford which is also relied upon. It appears at page 92 C-E of the report:"What, in our judgment, has to be looked at, is the workforce as an entity, that is to say, as a whole, separate from the individuals who make it up and it then has to be seen whether the reason in question is one which involves a change in that workforce, strength or establishment and we are satisfied that there can well be a change in a workforce if the same people are kept on but they are given entirely different jobs to do. We would regard a workforce that was engaged in a different occupation as being, for the purposes of Regulation 8(2) changed if that happened as a result of an organisational change on a relevant transfer."...In reliance on those cases, Mr Graham submits that the economic reason for the Appellant's dismissal did not entail changes in the workforce of the kind envisaged in the two judgments to which we have referred. He submits that the economic change referred to by the Tribunal has nothing to do with change in the workforce, and that the Appellant's dismissal was not dependent upon any such plan or objective, and was only coincidental with any change of the workforce. He further submits that the Tribunal did not address the point that the change in the workforce must be part of the economic reason. We do not agree with these submissions.We believe that Mr West for the second Respondents is right, when he argues that the workforce was being reduced and that the reason for that was economic. The dismissal of the Appellant was, in our opinion, part of a plan to reduce the workforce, eventually down to two. There was nothing left for a Managing Director to do when the company was about to be wound up, given the loss of a major part of the order book due to customers removing their moulds. The cases of Berriman and Crawford are distinguishable from the facts of the present case. In Berriman the employee was offered a reduced rate of pay in order to put him on the same pay basis as existing employees. The reason in that case was to produce standardisation in pay. So to in Crawford . The numbers of the workforce remained the same. The other reason was reorganisation.In the present case it was clear to the Tribunal, as it is to us, that the purpose of the dismissal was to put into effect a plan to reduce the workforce from what had been required in an ongoing business, to the minimum necessary to achieve a handover. This is an entirely different situation to those in the cited cases. The reason given by the Tribunal in paragraph 15 for their finding was that the dismissal removed the guiding hand of the company. True they did not in that paragraph refer to the running down of the workforce, but they had already done so in an earlier passage at paragraph 7. In any event, we agree with Mr West's submission that, it was not necessary for the Tribunal to look at the whole body of the workforce in a situation such as this, where there was a clear intention to reduce the size of that workforce. In our opinion, therefore, the Tribunal came to a correct decision and accordingly this appeal is dismissed.