Appeal No. UKEAT/0198/06/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal
On 1 September 2005

Before
HIS HONOUR JUDGE McMULLEN QC
MR B R GIBBS
MRS M McARTHUR FCIPD

MRS CELIA NICHOLAS	APPELLANT

MRS TINA GRANT T/A SANDANCERS CAFÉ	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR SIMON FORSHAW
(of Counsel)
Instructed by:
Messrs Curwens Solicitors
Crossfield House
Gladbeck Way
Enfield 
Middlesex EN2 7HT	
For the Respondent	No appearance or representation by or on behalf of the Respondent	

SUMMARY

Transfer of Undertakings: Continuity of Employment 

Employment Tribunal Judgment on a preliminary point that employee did not transfer overturned as it did not consider and apply the European Court of Justice Judgment in Botzen [1986] 2 CMLR 50.  Claimant was assigned exclusively to the Respondent’s predecessor’s café and her contract of employment was transferred. She had continuous employment.

  

HIS HONOUR JUDGE McMULLEN QC

1.	On the central parade in the North Kent seaside resort of Herne Bay is a popular café known as Sandancers where the Claimant worked as a griddle cook.  This case is about the application of the TUPE regulations and the Employment Rights Act 1996 when the café was transferred from one licensee to another.  The judgment represents the judgment of all three members.  We will refer to the parties as Claimant and Respondent.  

Introduction
2.	It is an appeal by the Claimant in those proceedings against a judgment on a preliminary point of an Employment Tribunal sitting at Ashford, Kent (Chairman: Mr D A Druce) registered with reasons on 20 December 2005.  The Claimant was represented there and here by Mr Simon Forshaw of Counsel.  The Respondent was represented there by her husband, but solicitors acting for her have indicated that they would play no part in today’s proceedings, neither by argument nor attendance.

3.	The Claimant made various claims including unfair dismissal which occurred, she said, three months into the new employment. The claims depend, in one way or another, on her having continuous employment preceding the transfer.  The Respondent contended that she did not.

4.	The essential issue as defined by the Employment Tribunal was whether the Claimant was employed immediately before the transfer.  The Employment Tribunal decided not.  She appeals.  Directions sending this appeal to a full hearing were given in Chambers by HHJ Peter Clark.  

The legislation
5.	The relevant provisions of the legislation are not in dispute.  By regulation 3, the Transfer of Undertaking (Protection of Employment) Regulations 1981 apply to the transfer of an undertaking from one person to another.  Regulations 5(1) and 5(2) make provision for the transfer of employment rights and obligations.
“5.	Effect of relevant transfer on contracts of employment, etc
(1)	Except where objection is made under paragraph (4A) below, a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking of part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee.  
(2)	Without prejudice to paragraph (1) above but subject to paragraph (4A) below, 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 to the transferee; and 
(b)	anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee”.  

6.	In addition, continuous employment is provided for by the Employment Rights Act 1996, s218 which is as follows:
“218 Change of employer 
(1)	Subject to the provisions of this section, this Chapter relates only to employment by the one employer. 
(2)	If a trade or business, or an undertaking (whether or not established by or under an Act), is transferred from one person to another— 
(a)	the period of employment of an employee in the trade or business or undertaking at the time of the transfer counts as a period of employment with the transferee, and  
(b)	the transfer does not break the continuity of the period of employment”. 

There is no issue in this case as to the application of the provisions of TUPE by which an employee may object to going over.  They do not seem to have been mentioned in this case.  

The facts
7.	The Employment Tribunal made the following findings.  
4.	The facts are that the Claimant started working as a griddle chef at the Sandancers Cafe in April 2004. Her employer was a Mr Farrow. The cafe is in an amusement arcade owned and operated by a Miss Ashley. She granted licences to operate the cafe as a concession. The property and equipment belonged to Miss Ashley and the operator paid a licence fee for their use. It was the practice of Miss Ashley to grant concessions for 12 months at a time.
5.	In April 2004, Mr Farrow had the concession. In February 2005 he indicated that he wanted to give up the concession. Mrs Grant had worked for Mr Farrow and had expressed an interest in taking over the concession should it ever become available.  She negotiated a new agreement with Miss Ashley and took over the concession on 14 February 2005. Mr Farrow brought is licence agreement to an end on 13 February 2005.
6. In our judgment, the cafe was a stable economic entity. It comprised the premises, fixtures and fittings, goodwill in the form of regular customers, contacts with various suppliers, and some stock. The fact that Miss Ashley was the owner of all these assets does not prevent there being an undertaking capable of being transferred, as it was the right to use these assets that comprised the undertaking.
7. This undertaking transferred from Mr Farrow to Mrs Grant on 14 February 2005…The issue was whether the Claimant was employed immediately before the transfer.
8. The Claimant had spoken to Mr Farrow. He continued to operate other premises and was willing to continue the Claimant's employment with him at those premises. The Claimant did not want to work anywhere else than Sandancers Cafe and wanted to stay there. She had a meeting with the Respondent at the Respondent’s home and discussed future employment at the cafe. The Claimant agreed new terms at the same hourly wage but reducing her hours from the 40 per week she had worked for Mr Farrow to 35 per week. The Claimant wrote to Mr Farrow on 7 February 2005 saying:
‘Please accept one week's notice to terminate my employment with you at the above address.’
The letter was written to coincide with the end of Mr Farrow's licence to operate the cafe which ceased at close of business on 13 February 2005.
9. The Transfer of Undertakings Regulations implement the European Council Directive to safeguard employees' rights in the event of a transfer of an undertaking and give protection to workers against dismissal by reason of the transfer. The fact that an undertaking transfers to a new owner does not automatically terminate the contract of employment. Here, however, there was no employment right to be safeguarded. Mr Farrow was willing to continue to employ the Claimant under the existing contract at his other business. The other full time employee of Mr Farrow working at the Café remained in his employment at the other location. The Claimant did not wish to work there and as a result she resigned from Mr Farrow's employment. The Respondent alleged in the Notice of Appearance that the Claimant had resigned before the transfer but this was vehemently denied by the Claimant in her original witness statement. It was only when the Respondent was able to produce a copy of the resignation letter dated 7 February 2005 that the Claimant amended her evidence to explain that the letter was intended only to mean that she did not wish to move to Mr Farrow's other location. We do not accept the evidence of the Claimant in this respect and accept the (evidence of the Respondent about the prior meeting to discuss new terms which came into effect at the start of business on 14 February 2005. The Claimant resigned form Mr Farrow's employment and was not dismissed by him by reason of the transfer.
10. In our judgment the Claimant was not, therefore, employed in the undertaking immediately before the transfer within the meaning of the Regulations. She could either be an employee of Mr Farrow, in which case Mr Farrow would have required her to work at his other location, or she had resigned from that employment, in which case she was free to take up employment with the new operator of the cafe under the new terms that had been agreed. The Claimant chose the latter course.
11. We therefore find that the relevant contract of employment with the Respondent started on 14 February 2005 and the Claimant had not worked one complete year of continuous employment on 22 May 2005. She does not have the right to complain of unfair dismissal”. 

On that basis, therefore, the Claimant’s case was dismissed on a preliminary point.

Submissions and conclusions
8.	Since the Respondent is content to rely on the Employment Tribunal’s reasons as being correct, we will deal with the legal principles to be applied as we consider the Claimant’s case as put forward by her Counsel.  In a lengthy Skeleton Argument, Mr Forshaw submitted that the Employment Tribunal had erred in law in the following respects.  

9.	First, the place of work issue:  The Tribunal failed to apply the correct approach set out in the judgment of the European Court of Justice in Botzen [1986] 2 CMLR 50 which provides, in relevant part, as follows:
“an employment relationship is essentially characterised by the link existing between the employee and the part of the undertaking or business to which he is assigned to carry out his duties. In order to decide whether the rights and obligations under an employment relationship are transferred under Directive 77/187 by reason of a transfer within the meaning of Article 1 (1) thereby, it is therefore sufficient to establish to which part of the undertaking or business the employee was assigned.”

The application of Botzen in the domestic environment came first in Gale v Northern General Hospital NHS Trust [1994] IRLR 292 where the phrase “human stock” appears to have been used for the first time by Sir Thomas Bingham MR.  

10.	The Tribunal, in the passages we have cited above, does not seem to have considered whether the Claimant was assigned to carry out her duties at the café or was assigned elsewhere.  In our judgment, Mr Forshaw is correct in pointing out that the Tribunal has failed to consider that part and thus has committed an error of law.  That ought to be sufficient for this case to be resolved on a preliminary basis in the Claimant’s favour.  The findings of fact of the Employment Tribunal point to us making a judgment ourselves to correct the error of the Tribunal.  The Claimant was engaged and was working at the café on 13 February 2005 under the management of Mr Farrow.  When Mr Farrow turned in the licence to the owner of the Arcade, it was immediately handed by her to the Respondent and the Respondent took over the café, its customers, its stock and everything else the next day.  So, there can be no doubt that the Claimant was engaged as part of the human stock of the café on the day immediately before the transfer and, as it happened, continued working there for three months afterwards.  Thus, she meets the terms both of TUPE regulation 5 and Employment Rights Act 1996 s218.  

11.	Although the Tribunal defined the issues, the essential issue in the case was to determine whether she had continuity of employment for statutory purposes.  This is not aptly described as a right or an obligation and so does not fit within regulation 5.  Continuity is a statutory construct. It is the gateway to the jurisdiction of the Tribunal, in the three issues under review here.  The Claimant resigned from the Respondent’s employment in May 2005, so, unless there were a relevant transfer, she had less than one year’s service required to present an unfair dismissal claim and also lacked relevant time served for the purposes of holiday pay.  

12.	With respect to the Tribunal, the resolution of whether there was a transfer for the purposes of the Regulations can only be described as an aid to what was the essential task of determining whether there was continuity of employment for the purposes of the 1996 Act.  In our judgment, there was.  There will rarely be cases which do not satisfy both but, in any event, we hold that using the language of TUPE regulation 5 and of s218, the Claimant was in the employment of the café at the time that the transfer came about. That is the simple solution to this case.

13.	Other points have been argued before us, which we will deal with briefly.  The Claimant resigned before the transfer.  In our judgment, this is irrelevant unless an issue is taken under the provisions entitling the Claimant on a transfer to object to the new employer which, as we have said, does not arise.  Applying the judgment of the EAT in West v Kneels Ltd [1986] IRLR 430, the week’s notice which the Claimant gave to her former boss, Mr Farrow, on 7 February expired on 14 February.  Thus, on this analysis, she continued to be an employee as at the date of the transfer.  

14.	Even if West v Kneels were wrongly decided - there is no challenge of course today - she would still have been employed on the day immediately before the transfer, 13 February. That she was in the process of resigning is neither here nor there.  

15.	In any event, the letter of resignation does not point to a clear conclusion that the Claimant wished to have nothing to do with employment at the café.  On the contrary, her whole case has been about her wish to stay working and providing the no doubt excellent fare in the Arcade.  

16.	That then brings in the third argument, which is whether there was a mobility clause.  The Tribunal found that her previous employer could require her to move, but we accept the submission that there was no evidence of this.  There certainly was no written contract, nor any document pointing at all in that direction.  The fact that Mr Farrow had other premises where he might have asked the Claimant to work takes the issue no further, not only because the Claimant was assigned to the café, but also because there is no evidence of a contractual right of Mr Farrow to get her to move.  Even if there were, she has succeeded on the first assignment point and therefore her mobility clause does not arise for consideration and the Tribunal was wrong to be seduced into thinking it did.

17.	In those circumstances, we uphold the submissions made by Mr Forshaw.  We were concerned to find whether the argument under the Employment Rights Act 1996 had been raised below pursuant to Part XIV of the Act and were assured that the point was raised and an authority was brought by Mr Forshaw to the hearing in order to address this point.  In any event, the point was squarely made in the argument of the Respondent, at least relying on s212.  That failed to address s218, and of course we were concerned because the Respondent is not here.

18.	In our judgment, this case was correctly decided to be a relevant transfer for the purposes of TUPE. The Claimant was employed at the relevant time and her contract of employment went over.  We would have made the same decision if it were necessary for us to do us under s218, but in deference to the fact that this point was not made in the Skeleton Argument, it is proper that we give only a provisional view about that rather than come to a firm conclusion.  So, the appeal succeeds.

19.	We have heard submissions about where this case should go next, based upon the guidelines in Sinclair Roche & Temperley v Heard [2004] IRLR 763 EAT.  We understand that Mr Druce has retired as a full-time Chairman and gives his services now part-time.  There is no utility in constraining this case to be heard by the same three-person constitution and there may be some delay in trying to do that.  We also accept that the application made in the Skeleton Argument was for the case to be remitted, if successful, to a differently constituted Tribunal and we have heard no arguments against it.  

20.	Mr Forshaw pointed out that findings as to the Claimant’s credit were made (see Reasons paragraph 9 above) and since this was a preliminary point, we see every reason for this to be given to a freshly constituted Employment Tribunal so that it can decide the issues of unfair dismissal and holiday pay which occurred three months after the issue relating to the transfer.  

21.	We would very much like to thank Mr Forshaw for his helpful arguments which has made it unnecessary for us to deal in more detail coming, as we do, to the conclusion that the Tribunal erred.  

22.	We understand that this case is now fully prepared and ready to be heard by a different Tribunal and we have drawn attention to the approach to be taken on a claim where the employer invokes s98A of the Employment Rights Act 1996. Similarly, all three of us consider that this is a case which might benefit from the services of an ACAS officer in the new circumstances, that the Claimant has obtained alternative employment. We direct the parties most urgently to consider conciliation and to report to the Employment Tribunal on the steps taken, but not the substance, in order to comply.