MR G DICKSON v COMPACT GROUP (UK) LTD [2000] UKEAT 1037_99_1802

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2000] UKEAT 1037_99_1802

Case No Appeal No. EAT/1037/99

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

MR G DICKSONAPPELLANT

COMPACT GROUP (UK) LTDRESPONDENT

Before

Mr Justice Lindsay Miss A Mackie

Date 18 February 2000

MR. JUSTICE LINDSAY (PRESIDENT) We have before us a preliminary hearing the appeal of Mr G Dickson in the matter Dickson against the Compact Group UK Ltd. Mr Dickson appears before us today by Mr Linden.

On the 20 th April 1999, Mr Dickson lodged his IT1 complaining of "unfair dismissal (TUPE)." That was a complaint against Compact. He had worked as a site at Waltham Abbey, Hertfordshire, owned and operated by a company called Abbeyvale Foods Ltd. Abbeyvale carried on a food business which required a particularly scrupulous attention to hygiene. Mr Dickson was a Night Hygiene Operator. He was not employed by Abbeyvale but, at the material times, he was employed ISS Food Hygiene Ltd. Abbeyvale had contracted with ISS for the special cleaning of the Abbeyvale premises.

On the 17 th February 1999, (so read Mr Dickson's IT1) he went to work that night at the Abbeyvale premises as an employee of ISS but was refused entry and was told that Abbeyvale had engaged another contractor to do the special cleaning. It was his case that he had been "TUPE transferred" to the new contractor, which was Compact, and that his dismissal was therefore to be taken to by Compact and to have been ultimately unfair under Regulation 8 (1) of the Transfer of Undertakings Protection of Employment regulations 1981. 8.1 says:

"Where either before or after a relevant transferor 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 20-41 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."

8.1 is disapplied in the particular circumstances referred to in (8) 2 which are usually called "ETO reasons". (8) 2 says:

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 a reason or principal reason for dismissing an employee (a) paragraph (1) above shall not apply to his dismissal:

Then there are provisions in subparagraph (b)

Compact, on learning of the IT1 that Mr Dickson had lodged, responded with an argument that they had never employed Mr Dickson and that there had not been no TUPE transfer. A Tupe transfer or relevant transfer for the purposes of today's business is a reference to Regulation 3 of the Regulations. I shall read 3(1) (2) and (4). Thus: -

3.(1) Subject to the provisions of these regulations, these regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one which is so situated,

(2) Subject as a foresaid, these Regulations so apply whether the transfer is effected by sale or some other disposition or by operation of law.

4. It is hereby declared that a transfer of an undertaking or part of one -

(a) may be affected by a series of two or more transactions; and

(b) may take place whether or not any property is transferred to the transferee by the transferor."

If there is a relevant transfer, then contracts of employment made with the transferor in relation to the undertaking or the part of it, which is transferred, are, by the relevant transfer, in general and by operation of law treated as if made by the transferee see Regulation 5 which I shall not take time to read.

But the whole notion of such transfers are not the creature only of our domestic law but have grown out of the European Community Council Directive of the 14 th February 1977 on the approximation of the laws of member states relating to the safeguarding of employees' rights in the event of transfers etc. As approximation of the laws is the aim of the Directive, it is especially important to bear in mind European Court of Justice decisions on the subject and we shall to return to one of them. But to go back to the employment tribunal, the main questions before it were in outline:

Was there a TUPE transfer, ISS to Compact, such that Mr Dickson was to be treated as if employed by Compact.

If there was, secondly, whether economic, technical or organisational reasons

("ETO reasons") entailing changes in the workforce were the only or principal reason for Compact dismissing Mr Dickson.

If there was a TUPE transfer, was the dismissal of Mr Dickson by Compact as the transferee implies automatically unfair?

Those were the main but not the only questions. Other questions might arise depending on how those three were answered. But if the answer to the first question - whether there was a TUPE transfer - was no then Mr Dicksons' case would fail at the very threshold. There was a hearing at London South under the Chairmanship of Mr I.S. Lamb on the 1 st July 1999 and the unanimous decision later sent to the parties was as follows:

"The unanimous decision of the tribunal is that the applicant was not unfairly dismissed by the respondent."

The Tribunal posed the questions before it with admirable economy what they said in their paragraph one was this:

"This is a compliant of unfair dismissal. It is put on the basis that the dismissal was automatically unfair because the reason or principal reason for it was a transfer of undertaking: Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE), Regulation 8."

Then they quote regulation 8 or refer to it:

"The Respondent contends that there was no relevant transfer of undertaking and in any event the dismissal was for an economic, technical or organisational reason entailing a change in the workforce."

We do not need to set out all the facts which were found but we shall need to refer to some of them. Thus in paragraphs 4 and 5 on our page 4 the Tribunal described the nature of the work involved here:-

"The business carried on at the premises is the preparation of chilled foods, such as dips and salads, and the customers of Abbeyvale include Sainsburys and Kentucky Fried Chicken. Clearly, the requirement for hygiene is necessarily exacting and of the highest importance.

"Towards the end of 1998, Abbeyvale Foods began to have concerns about the quality of the work done by ISS. It entered into discussion with the respondent and by the 5th March, there was heads of agreement under which the respondent into a contract with Abbeyvale Foods for 2 years to meet the cleaning requirements of the factory. "

ISS had employed 21 people in its contract with Abbeyvale. None of them was kept on when the cleaning contract was acquired by Compact, although later two of those 21 were recruited by Compact. The Compact employees engaged in the Abbeyvale contract were highly skilled and intensively trained by it after a probationary period of three months. Not only were the Compact cleaners doing the Abbeyvale work, different people (as for 19 of the 21) from the earlier ISS cleaners, they were drawn from geographically quite different area. There were brought in, at first, to Waltham Abbey by Compact from Grimsby, although later the 14 Compact cleaners to which ultimately, the number were reduced, 7 from Grimsby and 7 locally recruited and trained up to the required Compact standard.

So as far as concerns any transfer of assets the Tribunal said in their paragraph 8:

"The heads of agreement provided that the provision of equipment and materials was divided between Abbeyvale and the respondent."

There is no finding of any transfer of assets by ISS to Compact. There is indeed no finding of any deal done between ISS and Compact. We do not mean to suggest that this was, in itself, conclusive in any way but just record the fact that there is no finding to that effect. It is not said that evidence was given such as to render that paragraph an inadequate summary of the position as to assets.

The Tribunal then directed itself at some length with a highly relevant citation from the leading case Suzen

[1997] IRLR 255

. I have the report and it might be convenient to have in mind part at least of the headnote of that case at

[1997] IRLR 256

" The absence of the transfer of assets does not necessarily preclude the existence of a transfer of an undertaking where an economic entity is able to function without any significant tangible or intangible assets. The maintenance of its identity following the transaction affecting it cannot depend on the transfer of such assets. In labour intensive sectors, a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity and such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task. In those circumstances, the new employer takes over a body of assets enabling him to carry on activities of the transferor's undertaking on a regular basis."

The tribunal were also referred to and directed themselves by reference to other cases Francisco Hernandez Vidal v. Gomez Perez; Betts v. Brintel Helicopters Ltd

[1997] IRLR 361

, ECM (Vehicle Delivery Service) v. Cox

[1998] IRLR 416

and also, it seems, had some unreported notes of cases in front of them. They found as follows in their paragraph 15:

"The appearance in this case related to the change of contractor was that before and afterwards, there were people cleaning the premises. In our judgment, the reality was substantially different to that appearance. The workforce after the changeover was not only different in numbers but also different in quality, in skills, and in training. It adopted a working method which was significantly different to that which existed previously. These differences between the relative positions before and after the change of contractor were not accidental or coincidental. They were intended to remedy the situation in which Abbeyvale Foods found the performance of ISS to be lacking, and putting at risk its business with Sainsbury's and KFC."

A little later the Tribunal said:

"The true position was not that there was a transfer of an entity constituted by the workforce employed by ISS. Instead, a new entity was created, constituted by the workforce of the Respondent and its working methods."

And they concluded in their last paragraph, 17: -

"For these reasons we conclude that there was not a transfer of undertaking and therefore the employment of Mr Dickson did not transfer to the Respondents, and they could not therefore incur any liability in respect of his dismissal by ISS."

That decision was sent to the parties on the 14 th July 1999 Mr Dickson's notice of appeal is of the 23 rd August 1999 and it raises three grounds.

The first is this, which is, numerically its paragraph 5a:

"Failing to reach a finding as to whether any assets transferred from the transfer or ISS…. to the Respondent transferee. "

The only finding in this regard is at paragraph of the 8 of the reasons which states: -

"The heads of agreement provided that the provision of equipment and materials was divided between Abbeyvale and the respondent."

As I mentioned earlier, we are not told what the evidence was as to the transfer of assets. It is very hard to be critical of the Tribunal as to some alleged shortcoming when we do not know what the evidence was. We have no reason to conclude that the Tribunal omitted to make findings which they should have made. On the face of things, ISS and Compact were head on rivals and there is no reason to suppose that there were transfers of assets between them. That is, as we mentioned earlier, is not in any way conclusive, but it is hard to attach weight to a criticism that assets were not comprehensively dealt with when we cannot know what the evidence was on the subject.

The importance in this particular area to be attached to the transfer of assets, if any, is very much a matter of fact for the Tribunal as masters of fact, as the Tribunal's own long citation from the Súzen case makes it plain. We see no error of law in that first ground.

The second ground is paragraph 5B and it says:

"Failing to have any or any adequate regard to the fact that two employees who had been employed by the transferor were recruited by the transferee".

It is worthwhile looking at the language of Súzen I am looking at page 5 of the bundle that we have, which is a long citation from the Súzen case which the Tribunal drew to its own attention. What is there said is (with our emphasis):-

"Since in certain labour intensive sectors, a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, it must be recognised that such an entity is capable of maintaining its identity after it has been transferred, where the new employer does not merely pursue the activity in question but also takes over a major part in terms of their numbers and skills of the employer, especially assigned by his predecessor to that task."

There is no suggestion here that the two-later recruited former ISS employees that ultimately Compact did take over were in any sense the major part by reason of some qualitative ground reason and manifestly, being only 2 out 21, they can not have been a major part numerically. Thus we see no error of law in that part of the case. Whilst we are on the citation from Súzen, it is worth noticing that the Tribunal specifically directed itself to the following two passages namely, in order:-

"In order to determine whether the conditions for the transfer of an entity are met, it is necessary to consider all the facts categorising the transaction in question, including in particular the type of undertaking or business, whether or not its tangible assets, such as buildings and moveable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. However, all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation."

"It follows that the degree of importance to be attached to each of the criteria for determining whether or not there has been a transfer within the meaning of the Directive will necessarily vary according to the activity carried on, or, indeed, the production or operating methods employed in the relevant undertaking, business or part of a business. Where, in a particular case, an economic entity is able, in certain sectors, to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction affecting it cannot, logically, depend on the transfer of such assets."

All those were passages which the Tribunal quoted to itself and no doubt had in mind. The third of the grounds which is paragraph 5C of the notice of appeal is: –

" On the facts as found by the Employment Tribunal, reaching a perverse decision in finding that there was not a transfer of the stable economic entity, rather the creation of a new entity constituted by the workforce in the respondent and its working measures."

In our view it is quite impossible to argue that the Tribunal's conclusion was one to which no Tribunal properly instructing itself could have arrived. Mr Linden asserts that the Tribunal confused the ETO defence with the question of whether there was an undertaking which had been transferred. We are quite unable to agree that proposition.

The Tribunal, had it discussed ETO reasons would surely have said so. They say nothing to that effect at all. Mr Linden says that really one has to read the confusion between the undertaking and its transfer and the ETO defence "between the lines", so to speak, in the paragraph 15 which we have quoted.

"We are quite unable to see that to be there between the lines".

The Tribunal was rightly in argued searching to see if there was an undertaking transferred. It is, as the quotation from Súzen shows, essentially a question of fact in which no one factor is necessarily predominant or determinative. The Tribunal here seems to have made a conscientious attempt to assess the facts as they were laid before them and it concluded that there had been no TUPE transfer. We are unable to detect an error of law in their conclusion and so, even at the preliminary stage, we must dismiss the appeal.