P&O TRANS EUROPEAN LTD v (1) INITIAL TRANSPORT SERVICES LTD (2) T HULSE (3) A PHILLIP (4) C WILLIAMS (5) J THOMASON [2001] UKEAT 0415_01_2609

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2001] UKEAT 0415_01_2609

Case No Appeal No. EAT/0415/01

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

P&O TRANS EUROPEAN LTDAPPELLANT

(1) INITIAL TRANSPORT SERVICES LTD (2) T HULSE (3) A PHILLIP (4) C WILLIAMS (5) J THOMASONRESPONDENT

Before

Mr Recorder Langstaff

Date 26 September 2001

[1]APPEARANCES For the Appellant SIMON DEVONSHIRE (Of Counsel) Instructed by Messrs Prettys Solicitors Elm House 25 Elm Street Ipswich Suffolk IP1 3QW MR RECORDER LANGSTAFF QC This is a preliminary hearing in an appeal from the Employment Tribunal sitting at Liverpool whose Extended Reasons were promulgated on 12 February 2001.

[2]The case before the Tribunal concerned a transfer of undertaking. In essence, Shell delivered fuel using its own tanker force and had arranged for a back up delivery service for petroleum. That was provided by both the present Appellant and by the first Respondent respectively P&O and Initial.

[3]The Tribunal found that in 1998 Shell decided to contract out its in-house delivery services. It awarded the contract in its entity to P&O. This necessarily involved an end to the back up services previously provided by Initial. The Tribunal had to consider the question whether there had been a transfer of undertaking from Initial to P&O in those circumstances. Consequent upon their finding as to transfer they had to resolve whether or not the 2nd to 5 th Respondents had been fairly or unfairly dismissed.

[4]Before us today Mr Devonshire, for the Appellant has divided his grounds of appeal under three heads. The first is the transfer head, the second the objection head in which he argues that the Tribunal should have found that the objection by two employees, Mr Williams and Ms Hulse to work at the location at which the transferee directed they should work was an objection to the transfer itself and thirdly the ETO head: that in any event they could not be said to be automatically unfairly dismissed because the Tribunal should have found that there was an economic technical or organisational reason entailing changes in the work force so as to render the fairness of their dismissal at large.

[5]We have come to the conclusion that there are arguable grounds of appeal in respect of the transfer ground only. We should say little more about this save that at the time that the Tribunal reached its conclusions it did not have the advantage which subsequent courts may have had of considering the decision of the European Court of Justice in the Finnish case of Oy Liikenne AB v Liskojärvi & Anor

[2001] IRLR 171

which has led to the recent Court of Appeal authority in our own jurisdiction of ADI (UK) Ltd v Willer & Ors

[2001] EWCA 542

. We think it arguable on the basis of those authorities that there may have been a misdirection of law or misapplication of law.

[6]We turn now in greater length (because we are holding that there is no arguable basis for the appeal) to deal with the other two heads advanced before us. The objection appeal

[7]At paragraph 10 of its decision the Employment Tribunal said that they considered the provisions of Regulation 5(4) (A) of the transfer of Undertakings Protection and Employment Regulations and whether Ms Hulse or Mr Williams had objected to the transfer. They went on to say this:

"The objection relates to the identity of the transferee; it cannot relate to an objection to the location where the transferee intended to carry on the business, for a change of location is a matter for determination in accordance with the terms of the contract of employment."

[8]The essence of the argument addressed to us by Mr Devonshire was that in so saying the Tribunal had confused the effect with the motive. He pointed out that P&O were required under the terms of their new arrangement with Shell to have their base at Wythenshaw and no longer at Stanlow where Initial had operated their services. He argued that where two employees were not prepared to work at Wythenshaw, but wished effect to be given to contracts of employment providing they should work at Stanlow they were in effect objecting to working for P&O. The only work available was at Wythenshaw.

[9]The difficulty that this argument, taken on its own, would face would be that there would be no room for an employee to accept the transferee as a new employer, but also to insist that (because the effect of Regulation 5(1) of the transfer of Undertakings Regulations is to transfer his contract to the new employer) the provisions of that contract be honoured by the new employer. In circumstances where the new employer was not prepared to honour those terms and conditions then, on Mr Devonshire's approach, if the insistence came immediately following the transfer and the employee refused to accept the employer's proposed alterations to the terms and conditions the employee should be taken to be objecting to the transfer itself because the employee would not be accepting the inevitable consequences of the transfer. It seems to us that taken in isolation this argument cannot succeed. Put simply this Tribunal found that there was an objection not to the transfer but to the change in the terms and conditions of employment. Although those changes were consequent upon the transfer, it did not mean to say that the employees were objecting to the transfer. Put rather more fully, we consider that there has to be a difference between a situation in which an employee in advance of a transfer indicates that he or she objects to the transferee becoming her or his employer and one in which he does not object to the change of employer but wishes to insist on his original terms of employment.

[10]We consider that, if an employee wishes to be employed by the transferee or has no objection to it that employee is still entitled to maintain the terms and conditions of the original contract of employment. If it is argued that inevitably the transferee will cause changes to be made, the employee has whatever contractual rights he may have, or whatever industrial negotiating position may follow to do what he can in reliance upon the fact that those terms and conditions remain operative and is entitled in ordinary contract law, so far as law permits, to insist upon them. We do not see that in doing so the employee should be taken to be doing what he is not doing that is objecting to the transfer itself.

[11]Accordingly, taken on its own we consider that argument to be unsustainable and indeed we note that when pressed with these difficulties Mr Devonshire himself argued that his appeal was in reality a combination of the objection ground with his third ground the economic, technical or organisational reason ground. By running the two together one might see, he submitted, that there was here a situation in which the Tribunal should not have found that there was automatically unfair dismissal of the employees who were treated by the Tribunal as so dismissed. ETO ground

[12]So far as the economic, technical or organisational ground is concerned, what the Tribunal said was this, at paragraph 10.4:

"Regulation 8.2" (that is, of the Transfer of Undertaking Regulations) states that Regulation 8(1) does not render a dismissal automatically unfair if the principal reason for the dismissal was an economic technical or organisational reason entailing changes in the workforce. The contracts of employment of Ms Hulme, Mr Thomason and Mr Williams stipulate that their normal place of work to be at Stanlow in Ellesmere Port. To be required to work at Wythenshaw therefore represented a change in their terms and conditions of employment. This change was imposed on all administrative staff. A change of workplace is not a change to the workforce. In the absence of a mobility clause it is a fundamental breach of contract. P&O had a continuing need for workers with their skills. The ETO defence therefore fails."

[13]That approach to Regulation 8(2) is to be contrasted with the Employment Tribunal's approach in the next succeeding paragraph, 10.5. The Tribunal there considered the same provisions in respect of the employee Mr Phillip:

"In the P&O staff structure there is only one Contract Manager and Mr Phillip was interviewed for that post but was unsuccessful. In those circumstances (said the Tribunal) there was an organisational change in the workforce, P&O's need for just a single Contract Manager. Mr Phillip had no right to that job because he was a regional not a national Contract Manager."

The reason for his dismissal was therefore some other substantial reason and it was not automatically unfair.

[14]Accordingly, the Tribunal in understanding the application of Regulation 8(2) drew a distinction between a change in the function of a number of the workforce and a change in the function of the workforce as a whole, represented by the fact that there was only one Contract Manager, as compared to a change in the location of the work which they described as a change of work place not a change to the workforce.

[15]What Mr Devonshire submits is that in practical terms the only place at which work was available was Wythenshaw. The requirement that all employees should work there was therefore an economic technical or organisational reason. He goes on to add "entailing changes in the workforce". Had those last words not been there we would have been inclined for our part to have considered that there was force in his argument. He however, has to grapple with those words in Regulation 8(2). We would only give leave if we could see some arguable basis for contending that those words would cover a situation in which employees who are entitled under their contracts to work in place(a) and are in breach in contract required to work at place

(b) can be said to be facing a change, which is a change in the workforce, as opposed to a change in their terms and conditions of employment.

[16]Mr Devonshire goes on to argue that there were these misdirections: that the Tribunal confused the question of the terms and conditions of the contracts of employment with the question of whether P&O had ETO reasons for not continuing their employment. He submits, rightly in our view, that P&O could have ETO reasons entailing changes in the workforce for the purpose of Regulation 8(2) even if those changes involved breaches of the contracts of employment to the workforce. It seems to us it is certainly arguable and probably right that breaches of contracts are not an answer to the question of whether there is or is not an economic technical or organisational reason within the meaning of Regulation 8(2). He submitted centrally that "a change in the workplace is not a change to the workforce" was an inaccurate gloss upon Regulation 8(2) and that the Tribunal should have directed itself that the relocation of the workforce was an organisational reason entailing changes in that workforce.

[17]All those arguments require an understanding of what the law says about the expression "entailing a change in the workforce" which is the expression contained in Regulation 8(2). If there is any doubt about that which the law provides or if it is arguable that the authorities which explore the meaning of that section do not apply to the present situation then we should have no hesitation in granting permission to go forward. However, we cannot read the case law in that way. The leading case is Berriman v Delabole Slate Ltd

[1985] ICR 546

. The headnote says in its relevant part that:

"a change in the workforce meant a change in the overall number or the functions of the personnel employed"

That was a case in which the prime matter before the court was whether or not a reduced rate of pay in order to standardise terms and conditions between the transferred workforce and the workforce of the transferee was capable of being within the phrase "economic technical or organisational reason entailing a change in the workforce". The judgment of the court which was given by Browne-Wilkinson LJ at page 551 at C - E says this:

"In order to come within regulation 8(2) it has to be shown that that reason is an economic techincal 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 employer's plan must be to achieve changes in the workforce. It must be an objective of the plan not just possible consequence of it."

[18]The last paragraph in the judgment of the court at page 552 records that the reasons of the Court of Appeal for dismissing the appeal are much the same as those given by the Appeal Tribunal. It appears from page 550 between letters E and F that Mr Tabachnik QC who appeared for the employers did not persist before the Court of Appeal in the argument which he had unsuccessfully advanced at the Appeal Tribunal that the words 'changes in the workforce' were wide enough to cover changes in the terms and conditions of the workforce, and that he had accepted in argument that what must be shown were changes in the number of the workforce, or possibly changes in the job descriptions of the constituent elements of the workforce which although involving no reduction in numbers involved a change in those individual employees who together made up the workforce.

[19]The distinction thus appears to have been made by this Tribunal between a change in the workforce on the one hand and a change to terms and conditions of employment of members of the workforce on the other, and it appears that it was not thought arguable that this was wrong by Counsel who was then advancing an argument before the Court of Appeal which he considered stronger, (but which was itself rejected).

[20]However, the story does not end with Berriman v Delabole Slate . In Crawford v Swindon Insurance Brokers Ltd

[1990] ICR 85

this Tribunal with Knox J presiding considered the case of an employee who was one of two members of staff employed on typing and clerical work by transferors prior to the transfer of their business to the transferee. Following the transfer the headnote records:

"She lost the use of the company car, she had to work office hours and she could no longer work partly at home, and she had to change from typing and clerical work to selling insurance. She resigned and complained that she had been constructively dismissed and that her dismissal was unfair."

The complaint to the Industrial Tribunal was dismissed by that Tribunal on the basis that Regulation 8(2) did not apply. She appealed on the grounds that there had to be a change in their identity of at least one of the workforce to show a change in the workforce within the meaning of Regulation 8(2). That, in accordance with the headnote of Berriman v Delabole Slate which we have already cited, would focus upon the number of the employees constituting the workforce and ignore the function of the personnel employed. The conclusion to which this Tribunal came as recorded in the headnote is that "workforce" in Regulation 8(2) of the Regulations referred to the workforce as an entity separate from the individuals who made up the workforce and the issue was whether the reason for the dismissal involved a change in that workforce. But there could be a change in the workforce if the same people were retained but were given different jobs to do. Accordingly the Industrial Tribunal were justified in holding that there had been a change in the workforce even though the identity of the personnel remained the same. The reasoning of the Tribunal is in our view accurately summarised by that headnote. Mr Devonshire took us in particular to page 92 between letters C and E in which this Tribunal says this:

"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 they 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. Accordingly, we are not persuaded by Mr Giffin's first point that there must be a change in identity amongst the workforce for there to be an organisational reason entailing a change in the workforce."

[21]The judgment continues. At page 93 between letters G and H reviewing paragraph 24 of the Tribunal's decision Mr

Justice Knox said:

"The other way of reading paragraph 24 is to interpret it as a statement of the effect of Berriman's case as including changes in function in the expression "changes in the workforce."

This is a sentiment with which we have earlier expressed our agreement." It appears therefore to us, albeit at a preliminary stage, that it can be said to be well settled that the meaning of "entailing changes in the workforce" means a change either to the number or to the function of the workforce. Although as we see from Crawford v Swinton Insurance Brokers Ltd the employee in that case had changes to her terms and conditions of employment, it was not those upon which this Tribunal focussed to decide that the Employment Tribunal was correct in concluding that the employer there could rely upon a regulation 8(2) defence. Those appear in practical terms to have been changes consequent upon her change of function rather than giving rise to any separate argument that a change to terms and conditions could constitute a change in the workforce.

[22]If in this present case there had been any tenable argument that the employees concerned were changing their function we would have been inclined and bound to think that there was an arguable point. However, the highest that we see the case that has been put is that there was here a change of terms and conditions consequent upon the transfer. A change to the terms and conditions of the employees not involving a change in numbers or a change in functions does not on the authorities to which we have been referred constitute a change in the workforce. We therefore conclude that there is here no proper arguable basis on which this case could proceed. There is no indication from Mr Devonshire that there is here a tenable argument that could be pursued to the highest authority that Berriman v Delabole Slate was decided on some wrong principle of law.

[23]Directions - half a day. Category B. Skeleton Arguments with photocopies, please of any cases to be relied upon - Fourteen days beforehand. If possible, agreement to be reached between the parties as to the relevant cases. Although I do not want to restrict the parties unduly it often helps in a TUPE case that there be one authority if it covers the effect of several others rather than having all of them.