1) PERRY’S MOTOR SALES LTD 2) PERRY’S BURNLEY LTD v MRS K LINDLEY [2008] UKEAT 0616_07_0205

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: UKEAT 0616_07_0205Case No Appeal No. UKEAT/0616/07Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
1) PERRY’S MOTOR SALES LTD 2) PERRY’S BURNLEY LTDAPPELLANTMRS K LINDLEYRESPONDENT
Before
Mr Justice Wilkie Ms J L P DrakeDate 30 May 2008
[1]APPEARANCES For the Appellant MR MATTHEW SHERIDAN (of Counsel) Instructed by: Messrs Hewitsons LLP 7 Spencer Parade Northampton NN1 5AB For the Respondent MR DANIEL NORTHALL (of Counsel) Instructed by: Messrs Meloy Whittle Robinson Solicitors 5-7 Cannon Street Preston PR1 3PY SUMMARY Transfer of Undertakings Where, in connection with a transfer, the transferee directs the transferor to dismiss an employee in the claim that she had previously taken the transferee to an Employment Tribunal, the employee has a claim under s104 of the Employment Rights Act 1996 against the transferee. THE HONOURABLE MR JUSTICE WILKIE This is an appeal by the two appellants against a decision of an Employment Tribunal held at Manchester on 26 September 2007 contained in a reserved judgment sent to the parties on 25 October 2007. The unanimous judgment of the Tribunal was that:(i) the principal reason for the Claimant's dismissal was that she had previously brought proceedings for constructive dismissal against Perry's Motor Sales Ltd (the first Appellant);(ii) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 the first Appellant was treated as the Claimant's employer for the purposes of the current dismissal;(iii) the current dismissal was unfair. The facts found by the Tribunal[2]The Claimant was employed by the first Appellant between 1 March 2004 and 31 March 2006. She resigned from that employment but submitted an Employment Tribunal claim against the first Appellant claiming that she had been constructively dismissed. That claim was defended but was eventually settled on terms that the first Appellant agreed to pay her £6000.[3]The Claimant was out of work until 2 October 2006 when she commenced employment with Vantage Garages (Burnley) Ltd, a company owned by VG Holdings Ltd.[4]The first Appellant purchased all the shares in VG Holdings Ltd on 1 March 2007 thereby becoming owners of Vantage Garages (Burnley) Ltd. On 6 March 2007 the name of Vantage Garages was changed to Perry's (Burnley) Ltd (the second Appellant).[5]On 23 March Mrs Oram an employee of the second Appellant was told by the senior management team of the first Appellant that she was to dismiss the Claimant and she was so dismissed by the second Appellant on 27 March.[6]On 27 April 2007 the first Appellant acquired the assets and business of the second Appellant as well as the second Appellant's holding company VG Holdings Ltd. This operated as a relevant transfer of an undertaking.[7]The Tribunal, having heard the witnesses, came to the clear view that the principal reason the Claimant had been dismissed by the second Appellant was because she had previously brought Employment Tribunal proceedings against the first Appellant during the time of her employment with them.[8]The question which arose for the Tribunal, and which arises for us, is whether, in the light of that history, the Tribunal was correct in law to conclude that the first Appellant was liable for having automatically unfairly dismissed the Claimant by reason of its having instructed the second Appellant to do so, where the reason for the dismissal was that the Claimant had previously taken the first Appellant to the Employment Tribunal and where the dismissal by the second Appellant was in connection with the subsequent transfer to the first Appellant of the undertaking of the second Appellant. The law[9]Section 94 of the Employment Rights Act 1996 provides that:
"i) An employee has the right not to be unfairly dismissed by his employer."
Section 95(1) provides:
"For the purposes of this part an employee is dismissed by his employer if and…only if (a) The contract under which he is employed is terminated by the employer (whether with or without notice)."
Section 104(1) provides:
"An employee who is dismissed shall be regarded for the purposes of this part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee - (a) brought proceedings against the employer to enforce a right of his which is a relevant statutory right… (4) The following are relevant statutory rights for the purposes of this section – (a) any right conferred by this Act of which the remedy for its infringement is by way of a complaint or reference to an Employment Tribunal."
Section 108 – "Qualifying period of employment" provides:
"(1) Section 94 does not apply to the dismissal of an employee unless he has been continuously employed for a period of not less than one year ending with the effective date of termination. (3) Sub-section (1) does not apply if – (g) sub-section (1) of section 104…applies."
[10]Because the Claimant had not been employed by the second Appellant for longer than a year her only potential claim for unfair dismissal arising out of these events was a claim under section 104 of the 1996 Act. We agree with the submissions of both parties that, central to that question, was whether the first Appellant was her "employer" for these purposes. That is to say was the "employer," against whom she had a potential claim for unfair dismissal arising out of the current dismissal, the same "employer" against whom she had previously brought proceedings in the Employment Tribunal so as to make her current dismissal automatically unfair? Whether that is so depends upon the proper construction of the Transfer of Undertakings (Protection of Employment) Regulations 2006 and their application to the facts of this case.[11]Paragraph 4(1) of these regulations provides, amongst other things, as follows:
"…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 employee 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),…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 of 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…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…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)… Paragraph 7(1) provides: 7(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 X of the 1996 Act (Unfair Dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is – (a) the transfer itself; or (b) a reason connected with the transfer that is not an economic technical or organisational reason entailing changes in the work force."
[12]The 2006 Regulations seek to give effect to the Acquired Rights Directive (2001/23/EC). Paragraph 3 of the preamble to that directive provides as follows:
"It is necessary to provide for the protection of employees in the event of a change of employer in particular to ensure that their rights are safeguarded."
[13]Chapter II of that directive is entitled "Safeguarding of Employee's Rights". Article 3(1) provides:
"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…."
Article 8 provides:
"This directive shall not affect the right of member states to apply or introduce laws, regulations or administrative provisions which are more favourable to employees or to promote or permit collective agreements or agreements between social partners more favourable to employees."
Discussion and conclusions[14]It is not in dispute that the effect of regulation 4(1) of the 2006 Regulations is that, after the transfer, the contracts of employment between transferor and its employees have effect as if originally made between the employee and the transferee thereby, for the purposes of part X of the 1996 Act, making the transferee the employer.[15]Nor is it in dispute that the effect of regulation 4(3) is that where, as here, the Claimant was dismissed prior to the transfer for a reason connected with the transfer, regulation 4(1) applies to her as well so that, after the transfer, her contract is deemed to have effect as if originally made between her and the first Appellant, thereby making the first Appellant her "employer".[16]It is not in dispute that the effect of regulation 4(2)(b) is that any act, prior to the transfer, of the transferor in respect of the contract between the Claimant and the transferor shall be deemed to have been an act of the transferee. Thus, the act of the second Appellant in dismissing the Claimant is, by virtue of this provision, deemed to have been the act of the first Appellant.[17]The Claimant argued, and the Tribunal agreed, that the effect of these provisions was that the first Appellant, as the Claimant's employer, dismissed her, and that the principal reason was that she had brought proceedings against the first Appellant, as her then employer, to enforce a statutory right in the Employment Tribunal. That meant that she had been automatically unfairly dismissed by the first Appellant in circumstances by virtue of s. 104 of the 1996 Act and that she was entitled to bring such a claim notwithstanding the fact that she had not been employed by the second Appellant for a period of one year or more.[18]The first Appellant contends that that was an erroneous conclusion. It contends that regulation 4(2)(b) has to be read in conjunction with regulation 4(2)(a). If read together, 4(2)(b) operates as a mechanism by which, amongst other things, the liabilities of the transferor pass to the transferee. Applying that to the facts of this case the second Appellant, by dismissing the Claimant, did not have any liability to her for automatic unfair dismissal under section 104 as it had not, as her employer, previously been the subject of a complaint made at the Employment Tribunal. Accordingly no such liability could pass to the first Appellant on transfer. Were it otherwise, the effect of the Regulations would be to create in the Claimant a new right whereas the purpose of the regulations was to preserve existing rights not create new ones.[19]We reject that contention. In our judgment Regulations 4(2) (a) and (b) stand separately. The transferor, by its actions prior to the transfer, can, by Regulation 4(2)(b), cause to crystallise, on the transfer, a liability in the transferee, whose actions they are deemed to be, which was not a liability of the transferor prior to the transfer, which does not transfer under 4(2)(a), but which, nonetheless, is a liability of the transferee as the employer of the Claimant.[20]The first Appellant seeks to support its argument by reference to the purposes of the Acquired Rights Directive . Its purpose is to protect employee rights upon transfer not to create new ones. Mr Sheridan draws our attention to a number of authorities where the Court of Appeal has emphasised the limited nature of the purpose of the Acquired Rights Directive . In Morris Angel and Son Ltd v Hollande [1993] ICR 71 Lord Justice Dillon declined to accept that the purpose of the Regulations could be to turn the obligations in a contract of employment between, initially employee and transferor, into different and wider obligations when the contract, by statute, became one made between the employee and the transferee. Such enlarged obligations would not have been in contemplation when the agreement was initially entered into. He could see no reason why the Regulations should have so changed the burden, in that case, on the employee.[21]In Whitehouse v Charles A Blatchford and Sons Ltd [2000] ICR 542 in the judgment of

Lord Justice Buxton he said, amongst other things:

"The directive does not create new rights for the employee but only ensures that a transfer of the undertaking employing him does not destroy his existing rights."
[22]In Jackson v Computershare Investor Services plc [2008] IRLR 70 it had been argued, on the part of the employee, that she had the benefit of a severance scheme operated by the transferee to an extent consistent with her having been employed by the transferee for the entirety of the period during which, in fact, she had been employed first by the transferor and then, after a certain date, by the transferee. The lynchpin of that argument was that regulation 4(1) (as it now is) contained the word "originally". That argument was resoundingly rejected by the Court of Appeal. We observe that it could hardly have been otherwise as such a construction would have run wholly counter to the provisions of regulation 4(2)(a) which expressly requires the rights powers duties and liabilities of the transferor to be transferred to the transferee. This would be the opposite to what was being argued for on behalf of the employee in the case of Jackson .

Lord Justice Mummery delivering the judgment of the court said as follows:

"30. The TUPE and Acquired Rights provisions aim at preventing an employee in an undertaking from being prejudiced as a result of the transfer of the undertaking…it is not, however, their objective to confer additional rights on the employee or to improve the situation of the employee… 31. So, the true effect of the deeming provision in regulation 5(1), on which the ET relied, is not to give a transferred employee access to employment benefits other than those to which the employee was entitled before the transfer of the undertaking. (The transferee) is substituted for (the transferor) as the contracting party and the prior obligations of (the transferor) and the rights of Mrs Jackson continue to have effect after the transfer…. 33. In brief, I totally reject the attempt to make artificial use of TUPE in a contextual fashion for the purpose of interpreting (the transferee's) contract for enhanced severance pay terms in a way which displaces the ET's undoubtedly correct finding of fact that Mrs Jackson joined (the transferee) after 1 March 2002 and miraculously transforms her from being a post 2002 new entrant into a pre 2002 joiner."
[23]The Claimant does not dispute the general proposition that the Acquired Rights Directive has as its purpose the protection of employee rights and their safeguard in the event of a change of employer, and does not create new rights in employees where none such existed. What she argues, however, is that, on the particular facts of this case, what the first Appellant caused the second Appellant to do was to seek wholly to destroy her rights as an employee on the occasion of the transfer, with its consequential change of employer. By having her dismissed they sought to prevent her becoming their employee again because she had previously done an act, protected by section 104, when their employee.[24]The first Appellant further argues that, if the Tribunal in this case were correct, then it might have the effect that, in a slightly different situation, where the transferor had previously been taken to the Tribunal by an employee and dismissed her in anticipation of a potential transfer, the employee would be deprived of her section 104 claim which otherwise she would be able to pursue against the transferor and, after the transfer, the transferee. The Claimant counters that argument by saying that, in such a case, she would have a case against the transferor itself or the transferor's liability under section 104 would have sufficiently crystallised under regulation 4(2)(a) to be transferred to the transferee. In either event, by a different mechanism the employee would have her section 104 rights protected.[25]We are, of course, principally concerned with the correct construction of the statutory provisions to the facts of this case. As an aid to construction it may be of assistance to consider their application to a different situation, especially as we must have regard to the purposes for which they were enacted and, in particular, to give effect to the Acquired Rights Directive . In our judgment, for the reasons given by the Claimant, it is unlikely that a Claimant in the situation envisaged would be bereft of a remedy.[26]As to the main thrust of the argument, in our judgment, for the reasons set out in paragraph 19 above, the Employment Tribunal was correct in its construction of these statutory provisions. In our judgment, by reason of a combination of the operation of Regulations 4(1), (3), and (2)(b) the first Appellant was the "employer" of the Claimant which dismissed her for the purposes of section 94 of the 1996 Act. Furthermore, the reason the first Appellant as "employer" dismissed her was, as the Tribunal found, that she had brought proceedings against the first Appellant, her "employer", to enforce a relevant statutory right. Accordingly, she was automatically unfairly dismissed pursuant to section 104 and was not debarred from bringing a claim by reason of her not having been employed by the second Appellant for one year or more.[27]In our judgment this conclusion is not only correct as a matter of literal statutory construction, it is also in accordance with the purpose of the Regulations, to safeguard employees' rights on the occasion of a change of employer arising out of a transfer of an undertaking. In this case the first Appellant engineered it so that, in connection with the transfer, the employment rights of the Claimant were entirely overborne by having her dismissed. This is not, as with the cases to which we were referred, an attempt by an employee, illegitimately and artificially, to extend the ambit of the Regulations so as to gain benefits on the footing of an artificial creation of a long running contract of service between her and the transferee. In our judgment, the circumstances of this case fall four square within the purposes of the Regulations and, accordingly, the construction placed upon them by the Tribunal is both correct, as a matter of literal construction, and advances the purpose for which they were enacted.[28]Accordingly we dismiss this appeal.