WILLIAM WEST & SONS (ILKESTON) LTD v (1) MR W FAIRGIEVE & OTHERS (2) EXEL/BRS LTD [1999] UKEAT 701_98_0106

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [1999] UKEAT 701_98_0106

Case No Appeal No. EAT/701/98

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

WILLIAM WEST & SONS (ILKESTON) LTDAPPELLANT

(1) MR W FAIRGIEVE & OTHERS (2) EXEL/BRS LTDRESPONDENTS

Before

Mr Justice Morison

Date 1 June 1999

[1]APPEARANCES For the Appellants MR A SENDALL (of Counsel) Messrs Robinsons Solicitors 83 Friar Gate Derby DE1 1FL For the First Respondents For the Second Respondents MR T LINDEN (of Counsel) Messrs Pattinson & Brewer Solicitors 30 Great James Street London WC1N 3HA THE SECOND RESPONDENT NEITHER BEING PRESENT NOR REPRESENTED MR JUSTICE MORISON (PRESIDENT) : Owing to admirably succinct and clear arguments presented on both sides for which we are genuinely grateful, it is possible for us to give an immediate decision on what could have been regarded as a complicated and important appeal. This is an appeal against a decision of an Employment Tribunal held at Nottingham on 25th and 26th February 1998. The decision was sent to the parties on 20th March 1998.

[2]EXEL/BRS Ltd is a company which had transferred part of its business to William West & Sons (Ilkeston) Ltd. We call parties the transferor and the transferee respectively.

[3]A number of applicants brought complaints before an Employment Tribunal and it was the determination of those complaints, which has given rise to this appeal.

[4]In a nutshell, what the complainants were saying was that they were entitled to the benefit of increases in pay negotiated between the transferor and a recognised trade union, the TGWU, which had been negotiated after the date of the transfer. It was the transferee's position that after the transfer the employees were not entitled to the benefit of negotiations between the transferor and the trade union. That is the essential question which falls for determination in this case. Were the tribunal right to uphold the applicant's case?

[5]Under their contracts of employment with the transferor, the employees' particulars, terms and conditions were summarised in Clause 1:

"In accordance with the Trade Union Reform & Employment Rights Act 1993, BRS Ltd (a subsidiary of the NFC Plc) issues this statement covering the main terms and conditions of your employment. Details of the terms and conditions of employment are contained in a series of agreements made with the appropriate Trade Union and copies of these Agreements, or summaries of such parts as relates to your present employment, will be made available to you for reference upon application to your immediate superior/manager."

[6]As a result of the transfer it seems to us quite clear that that clause is to be regarded as rewritten to substitute for the words "BRS Ltd (a subsidiary of the NFC Plc)" the name of the transferee. That gives effect, as it seems to us, to Regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 .

[7]The negotiating machinery, which is referred to inferentially in Clause 1 of the contract of employment, is contained in documentation which is before us. That documentation refers to agreements made between the transferor and the relevant trade unions. The agreement was to apply the appropriate rates of pay and conditions of service to all existing staff and to full time staff recruited in future except as was provided by certain exceptions.

[8]The agreement had a duration, I think, of six months. It was terminable on six months notice. There were procedure agreements also in operation which provided for the mechanisms by which new rates were negotiated between the parties.

[9]It was the submission on behalf of the appellants (transferees) that the result of the tribunal's decision could be described as somewhat bizarre and commercially unreal.

[10]It seems to us important to make the point that it is not unknown for employers to make agreements with their employees by which the employees rates of pay, for example, are determined by a third party over whom they have no or no effective control.

[11]Mr Linden on behalf of the respondents to this appeal, pointed out that an employee might under his contract be entitled to rates of pay agreed between a trade union and his employer, whether or not he was a member of the union and whether or not he agreed with the way the matter had been negotiated. An employer might be bound to pay rates negotiated through machinery which did not give him a seat at the negotiations or if he had a seat at those negotiations, where his view was in a minority. Those are examples of cases where people may become bound by deals made over which they have no control at all or no real control so that they may become bound against their will.

[12]It seems to us, therefore, that any suggestion that such an arrangement is to be regarded as bizarre or commercially unacceptable is to be rejected. But Mr Sendall said in this case that it would be particularly odd because the person who would be most capable of deciding the terms and conditions of the transferees' employment was the transferor who was in a rival business. Thus, hypothetically, the business rival, the transferor, knowing, if it did, of the transferees' particular areas of weakness could reach agreements which would be calculated to drive the transferee out of business.

[13]It seems to us that the effect that the Transfer of Undertakings Regulations may have upon the commercial viability of a transfer, is not something that we can properly take into account. That is a political question, as it seems to us. We must apply the Regulations to the facts of every case and if the consequence is that some transferees will find their purchase unattractive or possibly be deterred from taking a transfer in future, so be it, if that is the effect of the law.

[14]The real issue, as it seems to us in this case, is what is the proper construction of Clause 1 of the contracts of employment after the transfer has taken place. Does it amount to a case where the transferee and employees are bound by determinations made between third parties as to new rates of pay and conditions or is it to be construed in a different way.

[15]Regulation 6 of the Transfer of Undertakings Regulations causes collective agreements to be transferred so that as on the day immediately after the transfer the collective agreements, to which we have referred, would simply have the name of the transferee substituted in them wherever the name of the transferor appeared.

[16]In that sense, therefore, what it seems to us Clause 1 means is this - We will read it in the light of the new position after the transfer:

"In accordance with the Trade Union Reform & Employment Rights Act 1993, William West & Sons (Ilkeston) Ltd issues this statement covering the main terms and conditions of your employment. Details of the terms and conditions of employment are contained in a series of agreements with the appropriate Trade Union and copies of these Agreements, or summaries of such parts as relates to your present employment, will be made available to you for reference upon application to your immediate superior/manager."

Therefore, if an employee immediately after the transfer had asked to see the documents referred to in the second part of Clause 1, William West would have made available to them those documents to which we have referred containing the name of William West wherever the name BRS Ltd had previously appeared.

[17]In those circumstances, it seems to us perfectly clear, that under Clause 1 if William West had reached agreement with the TGWU for a future pay increase the transferee employers, would have become bound by any such agreement in accordance with Clause 1.

[18]Mr Linden argued, with his usual skill, that in fact in this case the Clause should be read as maintaining that the employees who were transferred had future terms and conditions of their employment determined as a result of negotiations between BRS Ltd and the relevant trade unions. He maintained that the employees of William West would be bound by any such agreements that were made and, furthermore, that it would not have been open to William West to have concluded agreements with the TGWU without altering Clause 1.

[19]We have to say that we reject Mr Linden's case. It is clear, as we see it, that the intention of the Regulations and the wording of Clause 1 produce a result which is entirely in accordance with the purpose of the Acquired Rights Directive, that is that immediately after the transfer employees contracts of employment should continue in exactly the same way as they had before but with the substitution of the name of transferee for that of the transferor. That did give William West the opportunity under that contract to reach agreements with the TGWU which would become automatically incorporated into the terms and conditions of service of their newly acquired employees.

[20]The converse equally applies. Namely, that if they did not make any such agreement with the TGWU, but that the TGWU made a different arrangement with the transferor, then the employees of the transferee would not be effected by the agreement which had been made between the union and another organisation.

[21]Accordingly, it seems to us manifestly clear that having regard to the provisions of Regulations 5 and 6 and the provisions of Clause 1 of the contracts of employment referred to in paragraph 33 of the tribunal's decision, that the answer to the question before the Employment Tribunal was that the employees are not bound by negotiations and agreements made between BRS Ltd and the TGWU. It follows, therefore, that they were not entitled to the benefit of any increase that was so negotiated.

[22]In those circumstances we respectfully disagree with the interpretation set out by the Employment Tribunal in paragraph 34 and 35. There is nothing in this contract to suggest that the parties were agreeing that terms and conditions of employment should be determined by an organisation over which they had no control or through a machinery over which they had no control, whilst admitting the possibility that that can be so in certain cases. That being so, the appeal must be allowed in relation to that issue.

[23]That leaves over only the question of the one individual, Mr Lutack. The Employment Tribunal did not have the benefit of Wilson and Meade as expounded by the House of Lords. We do not criticise them in any way for the way they have approached Mr Lutack's case, but we consider that the House of Lords judgments would have assisted them.

[24]It appears to us that the question at issue in Mr Lutack's case was whether the change in his terms and conditions was transfer related or connected. That was what they had to ask themselves. It appears to us that there are arguments either way on that issue. We are not the right people therefore to determine that issue. The matter will therefore have to be remitted back for a further consideration of Mr Lutack's position. The appeal therefore in relation to Mr Lutack is also allowed but remitted back either to the same tribunal or to a differently constituted tribunal as the parties would wish.