Appeal No. UKEATS/0005/09/BI

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF 

	At the Tribunal
	On 4 November 2009

Before
THE HONOURABLE LADY SMITH
MISS J GASKELL
MS A MARTIN

KLT WATER ENGINEERING LIMITED	APPELLANT

MR G IRVINE	FIRST RESPONDENT
MR S OLIVER	SECOND RESPONDENT
G & K VALVE SERVICES LIMITED	THIRD RESPONDENTS (DEBARRED)

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR D STRANG
(Solicitor)
Messrs Brechin Tindal Oatts
Solicitors
48 St Vincent Street
Glasgow G2 5HS		
For the First and Second Respondents

For the Third Respondents	MR B NAPIER 
(One of Her Majesty’s Counsel)
Instructed by :
Messrs A C White Solicitors & Notaries
23 Wellington Square
Ayr KA7 1HG

No appearance or representation by or on behalf of the Third Respondents (debarred)		

SUMMARY
TUPE.  Whether claimants who resigned asserting unfair constructive dismissal could direct their claims against a company to which the business of their employers transferred some 10 months later in circumstances where no transfer was in contemplation at the time of resignation.  

THE HONOURABLE LADY SMITH

INTRODUCTION 
1.	This is an appeal from a judgment of the Employment Tribunal sitting at Glasgow, registered on 27 October 2008, Employment Judge Mr M W MacMillan, finding that the claimants were constructively unfairly dismissed by G & K Valve Services Limited.  They were first respondents in the proceedings before the Tribunal.  The judgment provides, further:

“The terms and provisions of the Transfer of Undertakings (Protection of Employees) 1981 Regulations applied to a subsequent transfer of the first respondent’s undertaking to the second respondents”. 

2.	KLT Water Engineering were second respondents in the proceedings before the Tribunal and appealed against the judgment.

3.	KLT Water Engineering Limited, to whom we will refer as “appellants”, were represented by Mr D Strang, Solicitor, before us but were not represented before the Tribunal.  The claimants, to whom we will continue to refer as “claimants”, represented themselves before the Tribunal and were represented by Mr Napier, Q.C. before us.  

4.	At the start of the appeal hearing, Mr Napier indicated that it was accepted on behalf of the claimants that the Tribunal’s judgment could not stand.  He did not elaborate as to the reasons why.  We cannot, however, help but observe that one of the fundamental difficulties with the Tribunal’s judgment was that it proceeded on the basis that the facts of the case were as had been found by a previous Tribunal whose entire judgment, on the application of the claimants themselves, had been revoked.  For that reason alone, Mr Napier would have been in considerable difficulty in opposing the appeal and we surmise that that was recognised.

Background
5.	The first claimant was employed by G & K Valve Services Limited (third respondents) between 10 October 2003 and 11 December 2003.  The second claimant was employed by them between a date in September 2003 until 4 December 2003.  They were employed as fitter/welders.  They alleged that they were instructed to carry out work at the Daldowie Sewage Treatment Works near Glasgow between 4 and 6 November 2003 for the purposes of which they were issued with a certificate bearing fictitious numbers purporting to confirm that they had attended refresher training courses.  The claimants’ position is that they were not properly trained.  They alleged that they were quizzed by the Health and Safety Representative at the site who asked to check their certification shortly after which the managing director of G & K Valve Services telephoned them and said he wanted them to say they forged the certificates in order to get a job on the site to get him “off the hook”.  They were not prepared to do so and alleged that their subsequent resignations were on account of that request by the managing director.  The claimants presented claims against G & K Valve Services to the Employment Tribunal. Following a hearing on 5 January 2006, at which G & K Valve Services were neither present nor represented, by judgment dated 24 January 2006, the Employment Tribunal found that the claimants had been unfairly dismissed and awarded compensation.  That judgment also shows that the Employment Tribunal office had, by letter dated 2 August 2005, been notified that G & K Valve Services were no longer trading and that by the date of the hearing, a provisional liquidator had been appointed to them.  

6.	At a hearing on 15 September 2006 the claimants sought a review of the earlier judgment.  Their objective was to achieve revocation of the Employment Tribunal’s judgment of 23 January 2006 and to have the appellants sisted as second respondents to the proceedings.  The claimants were represented by Mr Murphy, Solicitor, but the appellants were not present or represented at that hearing.  The outcome was that the review was allowed, the judgment of 23 January 2006 was revoked and the appellants were sisted as second respondents.

7.	The hearing in the claimants’ claim for constructive unfair dismissal against the appellants took place on 20 and 21 October 2008 and resulted in the judgment which is now appealed against.  As we have indicated, the claimants accept that that judgment must be set aside.  The issue between parties is whether or not, thereafter, the case should be remitted for a rehearing.  Mr Strang, for the appellants, submitted that the case against the appellants was wholly irrelevant and, accordingly, there should be no remit.  Mr Napier resisted that submission.

Employment Rights Act 1996 s.100
8.	Both claimants were employed by G & K Valve Services Ltd for less than 12 months and did not, accordingly, have a qualifying period of employment under and in terms of s.108 of the 1996 Act.  They could only advance a claim if they could bring themselves within the provisions of s.100 which provides:

“(1)	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 –
(a)	having been designated by the employer to carry out activities in connection with preventing or reducing risks to health and safety at work, the employee carried out (or proposed to carry out) any such activities,
(b)	being a representative of workers on matters of health and safety at work or member of a safety committee – 
(i)	in accordance with arrangements established under or by virtue of any enactment, or
(ii)	by reason of being acknowledged as such by the employer,
the employee performed (or proposed to perform) any functions as such a representative or a member of such a committee,
ba.	the employee took part (or proposed to take part) in consultation with the employer pursuant to the Health and Safety (Consultation with Employees) Regulations 1996 or in the election of representatives or employees safety within the meaning of those Regulations (whether as a candidate or otherwise)
(c)	being an employee at a place where –
(i)	there was no such representative or safety committee, or
(ii)	there was such a representative or safety committee but it was not reasonably practicable for the employee to raise the matter by those means,
he brought to his employer’s attention, by reasonable means, circumstances connected with his work which he reasonably believed were harmful or potentially harmful to health or safety,
(d)	in circumstances of danger which the employee reasonably believed to be serious and imminent and which he could not reasonably have been expected to avert, he left (or proposed to leave) or (while the danger persisted) refused to return to his place of work or any dangerous part of his place of work, or
(e)	in circumstances of danger which the employee reasonably believed to be serious and imminent, he took (or proposed to take) appropriate steps to protect himself or other persons from the danger”.

9.	As was not disputed between parties, s.100 can apply in a case of constructive dismissal.  However, in that event, regard requires to be had to the provisions of s.95(1) of the 1996 Act:

“95(1)	For the purposes of this part an employee is dismissed by his employer if (and, subject to subsection (2) ….only if) –
…
(c)	the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct”.

10.	Accordingly, in a constructive dismissal case, the identification of the “reason” for dismissal is a matter of considering what conduct of the employer caused the employee to resign and whether that conduct constituted a repudiatory breach of contract.

11.	I return then to the provisions of s.100 of the 1996 Act to consider what conduct by an employer could be a reason for resignation that is covered by its provisions.  In terms of their forms ET1, the claimants rely on s.100(1)(c), (d) and (e).  Thus, to have a relevant claim the claimants would require to demonstrate that the reason for their resignations was some conduct of the employer which was in respect of their having brought to his attention, by reasonable means, circumstances connected with their work which they reasonably believed were harmful or potentially harmful to health or safety, or some conduct of their employer which was in respect of their having left, proposed to leave or refused to return to their place of work on grounds of danger, or some  conduct of their employer which was in respect of their having taken appropriate steps to protect themselves or other persons from the danger in question.  Put shortly, to succeed in a case of unfair constructive dismissal under reference to s.100, the claimants would require to establish that the reason for their resignations was some conduct of their employer which was caused by and in respect of their having taken reasonable action as a result of the inadequacy of health and safety procedures or as a result of them having refused to work in what they reasonably believed were dangerous surroundings.  Further, that conduct would require to have been conduct going to the root of the employment relationship.

12.	We have given careful consideration to the basis on which the claimants seek to advance their claims as set out in their forms ET1.  They assert that the reason for their resignations was that their employer asked them to tell the health and safety representative at the client’s site that it was they who had forged the purported safety training certificates that they had presented to him.  We have no difficulty in acceding to the proposition that if an employer had made such a request of his employee then that would be a fundamental breach of contract entitling the employee to resign.  That, however, is not of itself sufficient for the purposes of s.100.  As Mr Strang submitted, in a constructive dismissal case, the employee requires to show the reason for his dismissal.  That is something which is known to him.  Just as, where an employer dismisses an employee, it is for the employer to show the reason for the dismissal (Abernethy v Mott, Hay & Anderson [1974] ICR 323), in a constructive dismissal case, it is for the employee to show the reason for his resignation.  To bring themselves within the provisions of s.100 the claimants would require to show that the reason for their resignation was conduct of the employer falling within the description which we have set out above.  

13.	Mr Strang submitted that the claimants could not bring themselves within s.100.  Mr Napier accepted that we could not go beyond the terms of the forms ET1 in determining whether or not the claimants had presented a relevant case.  We consider that the employer’s conduct founded on by the claimants as being the reason for their resignations cannot, on any view, be said to fall within the terms of s.100.  There is no question of their suggesting that their resignations were because they had brought their employer’s attention to harmful or potentially harmful circumstances connected with their work or because they had left, proposed to leave or refused to return to their place of work on grounds of danger or because they had taken reasonable and appropriate steps to protect themselves or others from danger.  In short, on their averments, they had done nothing other than object to their employer asking them to take responsibility for forged documentation.  That was not conduct caused by the claimants having taken action in respect of a health and safety matter falling within s.100(c ), (d) or (e) of the 1996 Act.  On this ground alone we are, accordingly, satisfied that it would not be appropriate to remit the case.

TUPE
14.	The relevant regulations are the Transfer of Undertakings (Protection of Employment) Regulations 1981, i.e. “old” TUPE.  The relevant provisions are:

“5.	Effective 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 transfer or any undertaking or 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. ….
(3)	Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, a person so employed immediately before any of those transactions.……
……..
8.	Dismissal of employee because of relevant transfer
(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 V of the 1978 Act and Articles 20 to 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”.

15.	The TUPE Regulations were made in implement of Council Directive 77/187/EEC of 14 February 1997 on the approximation of the laws of member states relating to the safeguarding of employee’s rights in the event of transfers of undertakings, businesses or parts of businesses.  The preamble includes:

“Whereas 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;”

16.	Mr Strang observed that he did not understand the claimants’ argument to be that TUPE operated so as to transfer contingent claims of an ex-employee (Tsangacos v Amalgamated Chemicals Ltd [1997] IRLR 4) nor did he understand the argument to be that, like the employees in the case of Litster v Forth Dry Dock & Engineering Co Ltd [1989] ICR 341, the claimants’ resignations occurred at a point in time when transfer was in contemplation or was imminent.  Rather, he understood that the claimants’ case was that the transfer of business was engineered so as to avoid the transferor employer becoming liable to pay compensation in respect of the claimants’ dismissals and that in such circumstances, TUPE provided a remedy.

17.	As it transpired, Mr Strang’s understanding as to what was to be the essence of the claimants’ argument was correct.  Mr Napier’s submission was to the effect that TUPE had as its purpose the protection of employee’s rights as demonstrated by the decision in Litster.  The claimants’ case really came down to them alleging that they were the victims of a fraudulent device to head off payment of compensation having to be made by their employers.  Their case was, he said, not fanciful.  G & K Valve Services Limited had sold substantial assets to the appellants by the end of September 2004 (by which time the claimants’ claims had been presented to the Employment Tribunal).  The claimants’ case was that there had been collusion between the appellants and G & K Valve Services.  He was not saying that the constructive dismissals were because of the transfer but they were for a reason connected with the transfer and that was enough to produce the result that they should be regarded as protected by the provisions of TUPE.  

18.	Mr Napier continued with the submission that as a matter of principle, the fact that a dismissal pre-dates a transfer of business does not, of itself, prevent the application of TUPE.  Litster demonstrated that.  Litster could be extended such as was demonstrated by the case of Harrison, Bowden v Bowden [1994] ICR 186.  He also referred to the case of Peters v Farmfield & Michael Peters Group plc as showing that a wide construction could be afforded to the words “connected with” in the Regulations, under reference to P Boerk International A/S v Foreningenaf Arbejdledere Denmark.  In short, Mr Napier’s submission was that if the transfer was because of an employee’s dismissal or resignation then the dismissal amounted to being for a reason connected with the transfer and fell within the provisions of TUPE.

19.	We are not persuaded by Mr Napier’s argument.  When the terms of the relevant TUPE Regulations are read in conjunction with the explanation of their necessary interpretation as set out in Litster, we are readily satisfied that whilst a gap in time between the point of dismissal (or resignation in a constructive dismissal case) and the point of transfer will not, of itself, exclude the application of TUPE, it does not follow that where transfer of the employer’s business was not only not in process at the point of dismissal but was not in contemplation at all, TUPE applies.  The essence of the protection is encapsulated in the preamble to the Directive to which we have referred.  Paragraph 17 of the case of Boerk explains, similarly:

“….unless otherwise expressly provided, Directive 77/187 may be relied upon solely by workers whose contract of employment or employment relationship is in existence at the time of transfer.  Whether or not such a contract or relationship exists at that time must be assessed on the basis of national law subject, however, to compliance with the mandatory provisions of the Directive concerning protection of employees from dismissal as a result of the transfer”.

20.	National law went as far as recognising that the TUPE regulations which are relevant for this case (SI 1981/1974), required to be construed so as to apply to a person employed immediately before a transfer or who would have been so employed if they had not been unfairly dismissed before the transfer for a reason connected with the transfer (my emphasis). To do otherwise would, as Lord Keith put it in Litster have driven a “coach and four” through regulation 5(1). Harrison Bowden Ltd v Bowden, where employees were dismissed in anticipation of a transfer to someone as yet unidentified (the business had been advertised for sale as a going concern two days earlier), is another example of TUPE being applied in circumstances which accord with that identification of their purpose.  That, however, is as far as national law on the matter goes. 

21.	Accordingly, employers cannot effectively dismiss employees (or cause their resignation) because of the anticipation of a transfer or the fact of a transfer.  That is not the same as saying that if employers decide to transfer and transfer their business because employees have, at some earlier stage, been dismissed and/or resigned the effect is to revive contracts of employment which were previously brought to an end at a stage when there was no question of any transfer being in contemplation.  That is not the purpose of TUPE and there is no indication either in the Regulations or in any of the authorities referred to that that is so.  We agree with Mr Strang that the implications of such an approach would be wide reaching and could cause real difficulties for those entering into legitimate transactions for business transfers.  The employee protection involved would be quite different from that which underlies TUPE.  The claimants here, having decided to give up seeking to pursue G & K Valve Services for compensation that was found to be due by them in respect of the termination of their contracts of employment seek, in effect, to have the appellants held liable for that debt.  On no view, however, did their contracts of employment transfer to the appellants; they did not have any contractual duty to the claimants imposed on them whether voluntarily or by operation of TUPE.  That is simply not what TUPE is about.  

Disposal

22.	In these circumstances we will pronounce an order upholding the appeal and dismissing the claimants’ claims.