Appeal No.	 EAT/1285/96

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 20 June 1997

Before
HIS HONOUR JUDGE PETER CLARK
MR D CHADWICK
MR P R A JACQUES CBE

SENIOR HEAT TREATMENT LTD	APPELLANTS

MR T BELL & OTHERS	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR JONATHAN SWIFT
(of Counsel)
Messrs Edge & Ellison
Solicitors
Rutland House
148 Edmund Street
Birmingham B3 2JR	
For the 1st and 2nd Respondents

For the 3rd Respondent	MR BRUCE CARR
(of Counsel)
Messrs Rowley Ashworth
Solicitors
247 The Broadway
Wimbledon
London SW19 1SE

MR BRUCE CARR
(of Counsel)
Messrs Pattinson & Brewer
Solicitors
30 Great James Street
London WC1N 3HA	

	JUDGE PETER CLARK:     This is an appeal by an employer, Senior Heat Treatment Ltd (Senior) against a decision of an Industrial Tribunal sitting at Bristol on 1 October 1996, that the Respondent employees, Messrs Bell, Hand and Hipwood, had more than two years continuous employment at the time of their dismissal by Senior on 15 March 1996, so as to bring their complaints of unfair dismissal and/or entitlement to redundancy payments.  Extended Reasons for that decision are dated 15 October 1996 (the reasons) and supplemental reasons were further provided by the Tribunal on 26 November 1996 (the supplemental reasons).

The Facts

	Before the Industrial Tribunal Senior was represented by Mr Baverstock, a personnel adviser; Mr Hipwood, a member of the AEEW, was represented by an official of his union, Mr Evans; and Messrs Bell and Hand, members of the TGWU, by their official, Mr Treharne.

	The evidence before the Tribunal came solely from the employer’s side.  Senior called Mr White, a Consultant engaged by Lucas Bryce (Lucas) as Project Manager of a programme to outsource that Company’s heat treatment activity, then based at Lucas’ plant at Hucclecote, near Gloucester, and Mr Lane, who at the relevant time was the Plant Manager of Senior at their Cheltenham plant.  In addition, Senior put a bundle of documents before the Industrial Tribunal.  The employees’ side called no evidence.

	The Industrial Tribunal felt that it had been overburdened with irrelevant evidence and was economical in its recitation of the facts.  We have before us all the evidence, both oral and documentary, which was before the Tribunal.  Since no evidence was called on behalf of the employees we feel able, with some confidence, to set out the undisputed story in a little more detail than did the Industrial Tribunal, including where necessary, material findings of fact made by the Tribunal.  We regard it as important to indicate the factual matrix against which the issues of law raised in this appeal have come to be decided.

	The business of Lucas Bryce was originally carried on as part of the Hawker Siddeley Group.  In 1958 it moved to leased premises in Hucclecote.  In 1961 Lucas Industries acquired the business, and it became Lucas Bryce.

	Each of the Respondent employees was employed by Lucas in the Heat Treatment Department at Hucclecote.  Mr Bell was a leading operator, who commenced employment on 16 June 1978; Messrs Hand and Hipwood were operators in that department, who began their employment in February 1978 and September 1989, respectively.

	The lease on the Hucclecote premises was due to expire in 1995.  The premises would then have to be vacated.  Various options were considered by Lucas and in early 1994 it was decided to move the entire Hucclecote operation to a vacant Lucas factory in Cheltenham, six miles away.

	It was a major operation, and the process of moving plant and staff to the new Cheltenham site took from December 1994 until July 1995.

	There were approximately 400 personnel at Hucclecote.  It was anticipated that about 350 would be moved to Cheltenham.

	Lucas operated a voluntary relocation scheme involving a severance package consisting of the statutory redundancy payment or its equivalent, a further ex-gratia redundancy payment and a sum equivalent to pay in lieu of notice.  We shall call that, as did Lucas, the Relocation Severance Package (the package).

	The package was available to all Lucas employees who did not wish to transfer to the new site at Cheltenham.

	Lucas had a policy of contracting out certain activities to outside companies.  In June 1994 a feasibility study was carried out to determine the practicability of contracting out the Heat Treatment Department in which the Respondents were employed.  It was found to be a viable option and Mr White was brought in to manage a project involving a partnership between Lucas and Senior, entered into on 14 October 1994.  Senior are and were a separate, specialist heat treatment company, based coincidentally in Cheltenham.  The plan was that the Lucas heat treatment function would be gradually outsourced to Senior during 1995.  

	In October 1994 the Lucas Heat Treat Department consisted of two supervisors and nine operators, including the three Respondents.

	Initially, it was intended that Lucas Heat Treatment personnel would be seconded to Senior.  A process of consultation with the Heat Treatment staff ensued.

	It appears from Mr White’s evidence that Lucas was advised by lawyers as to the effects of the TUPE Regulations.  As a result, the Heat Treatment personnel were individually written to on 10 March 1995 by Mr Kevin Mitchell, the Lucas Personnel Manager in these terms:

“It is proposed that the Lucas Bryce Heat Treatment business now carried out at our Hucclecote site will close with effect from a date to be announced, but probably no later than the end of May 1995.  From then on the work will be contracted out to Senior Heat Treatment in Cheltenham.
As a member of the existing Heat Treatment Department, you will have three options:-
(a)  we will, if you wish, find you a new position within Lucas Bryce to which you will transfer before the proposed closure of the Heat Treatment business;
(b)  alternatively, pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981, you can transfer to Senior Heat Treatment in Cheltenham with your existing conditions of employment and with full continuity of employment;
(c)  alternatively, if neither of these are of interest to you, you have the right, in accordance with the Regulations referred to, to ‘opt out’ of a transfer to Senior Heat Treatment by notifying us that you wish to do so.  Whilst ordinarily that would not entitle you to any severance pay, Lucas Bryce will, in the event that you opt out, pay you a redundancy payment in accordance with the voluntary redundancy scheme available to all Lucas Bryce employees in connection with the closure of the Hucclecote site.”

	The employees were asked to complete a form stating their preferred option.  Each of the Respondents signed that form and ticked the third box, which we shall refer to as option (c).  It reads:

“I do not wish to transfer to Senior Heat Treatment pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981 and would like details of the redundancy payment which the Company proposes to make to me as part of the scheme available to all employees with the closure of the Hucclecote site.”

	Mr Bell signed that form on 15 March; Mr Hand on 16 March and Mr Hipwood on 29 March.

	Mr Lane, the Senior Plant Manager, had been kept abreast of developments at Lucas.  The fact that Lucas Heat Treatment personnel were offered option (c), with an attractive severance package (around £10,000 in the cases of Messrs Bell and Hand, and £6,000 in Mr Hipwood’s case) proved irresistible to most of the Lucas staff.

	Mr Lane needed the staff to cope with the extra work, and he recruited these Respondents and some of their colleagues under contracts of employment signed, by Mr Bell on 15 March, Mr Hand on 10 April and Mr Hipwood on 29 March.

	Each Senior contract showed the employment commencement date as 1 May 1995.

	It was the evidence of both Mr White and Mr Lane that they explained to the Respondents that if they chose option (c) they would not be able to count their service with Lucas as continuous with that with Senior.

	No evidence was called on behalf of the Respondents to challenge those assertions.  However, in both their original and supplemental reasons the Industrial Tribunal indicate that they did not accept the evidence of Mr White and Mr Lane on this point.  Quite why the Industrial Tribunal rejected the evidence on that point, in the absence of evidence to the contrary, is not explained.

	What is quite clear from the Tribunal’s findings of fact is that the three Respondents moved “seamlessly” from Hucclecote to Senior’s Cheltenham site and carried on working as before.  Although the documentation indicated a gap between the last day worked at Lucas and the start of work with Senior, the Industrial Tribunal found as a fact that there was no gap.

	Significantly, Mr Baverstock accepted in his closing submissions that there was a relevant transfer of part of the business from Lucas to Senior; that is the heat treatment department, and that the Respondents were employed in that part of the business immediately before the transfer.

	Those concessions are reflected in the Industrial Tribunal’s findings.

	Before leaving Lucas all three Respondents signed Lucas Termination of Employment forms; indicating the reason for their leaving as “Voluntary Relocation Severance”.  They also signed for their severance package payments.

	All three Respondents continued working for Senior until each was dismissed on 15 March 1996.

	Following their dismissals they presented Originating Applications claiming a redundancy payment and/or unfair dismissal compensation.

	By their Notices of Appearance the Appellant gave redundancy as the reason for dismissal, but contended that the Respondent’s continuous employment began on 1 May 1995, and accordingly they did not qualify for redundancy payments nor for unfair dismissal protection.  Hence the preliminary issue before the Industrial Tribunal on 1 October 1996.

The Industrial Tribunal Decision

	The preliminary issue on which this Industrial Tribunal was asked to adjudicate is identified in paragraph 1 of the reasons thus:

“In this decision we confine ourselves to the preliminary issue of continuity of employment and the linked issue of whether the applicants had worked for a period of at least 2 years to allow them to bring their claims for unfair dismissal and redundancy.”

	The Tribunal’s decision reads:

“The unanimous decision of the Tribunal is that the applicants have worked for at least 2 years continuously prior to their termination of employment and can proceed with their claims.”

	We therefore conclude that the Tribunal decided that each Respondent had at least two years continuous service for the purpose of bringing their claims both of unfair dismissal and redundancy.

	In reaching that conclusion the Industrial Tribunal made the following findings:

(1)  that there was a relevant transfer of part of the business of Lucas, the Heat Treatment part, to Senior.  That is not in dispute.

(2)  that the Respondents were employed in that part immediately before the transfer.  That was conceded on behalf of the Appellant below, and Mr Swift does not seek to go behind that concession.

(3)  that the Respondents were not taken out of the protection afforded by Regulation 5 of TUPE by reason of their having objected to becoming employed by Senior within the meaning of Regulation 5(4A) and (4B).  They make this finding in paragraph 5 of their reasons in these terms:

“In fact we make a finding of fact that the applicants did not opt out as such:  one has to look at the practical facts in this case and these lead to the inevitable conclusion that they transferred to the new employers and started with that new employer the very next working day.  They ceased working on a Friday and commenced working on a Monday.  It was a seamless move.”

(4)  contrary to the evidence given by both Messrs White and Lane, the Respondents were not told that if they took option (c) they would lose their continuity of employment on taking up employment with Senior.  Mr Swift challenges both that finding, and its relevance to the issue raised by Regulation 5(4A) and (4B).  We accept, as Mr Carr concedes, that such a finding is irrelevant to that issue.  See Hay v George Hanson [1996] IRLR 427 paragraph 9.

(5)  the payments received by the Respondents in the form of the Lucas severance package included a statutory redundancy payment.

(6)  at the next, merits hearing, the Industrial Tribunal may wish to take cognizance of the payments, presumably that is the statutory redundancy payments as found by this Industrial Tribunal, which were made to the Respondents by Lucas.

The Appeal

	This comes down to essentially two points.

(1)  did the Industrial Tribunal err in law in not finding that the Respondents objected to becoming employed by Senior, in which case Regulation 5 did not apply and they were dismissed by Lucas and cannot rely on the transfer provisions as against Senior.

(2)  having found that the Respondents received a statutory redundancy payment, the Industrial Tribunal were bound to conclude that continuity was broken by Section 214(2) of the Employment Rights Act 1996.  Alternatively, the Respondents submit that the Industrial Tribunal was wrong to find that the Respondents did receive statutory redundancy payments so that Section 214(2) does not disapply continuity.

Objection

	Mr Swift submits that the acceptance of option (c) by the Respondents amounted to an objection by them to being employed by Senior as a result of the transfer.

	We reject that submission on two grounds.  First, we do not see any scope for construing the words of Regulation 5(4A) as meaning more than that the employee who informs either the transferor or transferee that he objects to being employed by the transferee before the transfer date will not be treated as having been dismissed by the transferor, and his employment will not be automatically transferred to the transferee.

	Regulation 5(4A) and (4B) was inserted into TUPE by the provisions of TURERA 1993 in order to implement Article 3(1) of the Council Directive 77/187/EEC in the light of the European Court of Justice judgment in Katsikas v Konstantinidis [1993] IRLR 179.  It is to deal with the case of an employee who objects to working for the new employer.  It accords with the principle that a person cannot be compelled to work for another.

	Secondly, the question of whether he objects to being employed is one of fact for the Industrial Tribunal.  We respectfully endorse that passage of the judgment of Lord Johnston in Hay where he said, at paragraph 11:

“We would pause to reflect that if the withholding of consent is, as we think it is, the proper consideration, it should not be difficult in most cases to distinguish between such withholding of consent and mere expressions of concern or unwillingness, which may still be consistent with accepting the inevitable.  Thus, to protest in advance of a transfer, which could be construed to be objecting, would not amount to an objection, in our opinion, in terms of the Regulations, unless it is translated into an actual refusal to consent to the transfer which, in turn, is communicated to the relevant person or persons, before the transfer takes place.”

	In this case the evidence before the Industrial Tribunal showed that before the relevant transfer date these Respondents had entered into contracts of employment with Senior, to take effect on 1 May 1995 and that was known to Lucas.  In these circumstances it was open to the Tribunal to find, nothwithstanding the wording of option (c), which was chosen by the Respondents, that they did not communicate an objection to becoming employed by Senior to either the transferor or transferee before the transfer date.

	It follows, therefore, that by operation of TUPE the Respondents were continuously employed for more than two years for the purpose of bringing an unfair dismissal complaint.

Redundancy Payment

	Section 214(2) of the Employment Rights Act 1996 provides:

“The continuity of a period of employment is broken where -
(a)  a redundancy payment has previously been paid to the employee (whether in respect of dismissal or in respect of lay-off or short-time), and
(b)  the contract of employment under which the employee was employed was renewed (whether by the same or another employer) or the employee was re-engaged under a new contract of employment (whether by the same or another employer).”

	In our judgment all the ingredients of Section 214(2) are here made out, subject to this question.  Were the Respondents entitled to a statutory redundancy payment from Lucas?  We accept the reasoning expressed by the Employment Appeal Tribunal in Rowan v Machinery Installations (South Wales) Ltd [1981] ICR 386, that “redundancy payment” must mean a statutory, not a voluntary redundancy payment.  Mr Swift accepts that proposition.

	Section 94 of the Employment Protection (Consolidation) Act 1978 provided that where a change occurs in the ownership of a business, and the first employer terminates the employee’s contract of employment if, by agreement with the employee, the new owner renews his contract or re-engages him, then the provisions of Section 84 (now Section 138 of the 1996 Act) have effect as if the renewal or re-engagement had been by the original employer.

	The effect of Section 138 (formerly Section 84 of the 1978 Act) is that there is no dismissal, and consequently there can be no statutory right to a redundancy payment which depends upon dismissal within the meaning of the Act.

	When Parliament effected alterations to TUPE by TURERA, it repealed Section 94 of the 1978 Act.

	We have concluded that Section 94 was then repealed because, where a relevant transfer takes place, there is no dismissal, and thus the provisions of Section 94 are superfluous.  Accordingly we hold that these Respondents are in the same position under TUPE as they would have been under Section 94 of the 1978 Act.  That is to say, they were not dismissed so as to be entitled to a statutory redundancy payment.

	It follows that Section 214(2) does not operate to disapply continuity for the purposes of the redundancy claims, and the Industrial Tribunal were correct in deciding that the Respondents had sufficient continuous service to bring those claims, either under TUPE, or under Section 218(2) of the 1996 Act, on the basis that if they were employed immediately before the transfer for the purposes of the former, then they were employed at the time of the transfer for the purposes of the latter - Brook Lane Finance Co Ltd v Bradley[1988] IRLR 283.

	It follows that this appeal is dismissed.  We should add only this, in the light of the Industrial Tribunal’s observation at paragraph 6 of the reasons, that the Industrial Tribunal hearing the merits of the applications may want to consider the payments made by Lucas as part of the severance package.  As at present advised we know of no statutory provision which allows the transferee in the circumstances of this case, to set off voluntary severance payments made by Lucas against any statutory entitlement to a redundancy payment due from Senior, which will be calculated on the basis of the whole of the Respondent’s continuous service with both Lucas and Senior.