Appeal No. EAT/856/01/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	 At the Tribunal
	On 29 July 2002
						          Judgment delivered on 18 February 2003

Before
THE HONOURABLE MR JUSTICE NELSON
MR J HOUGHAM CBE
MR D A C LAMBERT

DUDLEY BOWER BUILDING SERVICES LTD	APPELLANT

(1) MR P C LOWE
(2) W S ATKINS FACILITIES MANAGEMENT LTD
(3) SERCO LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellant	  MR B NAPIER
  (of Counsel)
  Instructed by:
  John Mowlem & Co PLC
  White Lion Court
  Swan Street
  Isleworth
  Middx TW7 6RN
	
For the Respondents	   MR B CARR
(  (of Counsel)
   Instructed by:
   Messrs Rowley Ashworth
   Solicitors
   Kennedy Tower
   St Chad’s Queensway
   Birmingham B4 6JG

   MR J LEWIS
(  of Counsel)
I  Instructed by:
   Messrs Clyde & Co
   Solicitors
   51 Eastcheap
   London 
   EC3M IJP

J  MS J FRASER
(  (Solicitor)
   Messrs Mackay Simon
   Solicitors
(  (Division of Maclay, Murray & Spence)
   3 Flenfinlas Street
   Edinburgh
   EHJ 6AQ

	

THE HONOURABLE MR JUSTICE NELSON

1	This is an appeal against the decision of the Employment Tribunal sitting at Birmingham of 24 May 2001 in which they determined that the employment of Peter Lowe, the First Respondent, had been transferred to Dudley Bower Building Services Limited, the Appellant, under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).

The Facts.
2	Mr Lowe had worked at RAF Cosford as an electrician employed by the Public Services Agency (PSA) from 4 January 1988. His employment transferred to W S Atkins Facilities Management Limited, the Second Respondent, in October 1993 under TUPE when the PSA building management duties were privatised. He became employed by AMS a division of the Second Respondent, but continued to perform routine electrical maintenance tasks and other minor electrical maintenance jobs. He was one of a small number of directly employed labour (DEL) employees involved in electrical and mechanical maintenance and repairing duties.

3	The Ministry of Defence sought tenders for a three-year contract to run from 1 January 1996 to 13 June 1999. Under that contract (the WSM contract) a works services manager (WSM) was responsible for nine packages of work devised to run RAF Cosford including operation of plant, maintenance and repair of its assets and other duties. Planned maintenance was dealt with in packages 3 and 4, and response maintenance in packages 5 and 6; package 5 dealt with emergency maintenance services and package 6 with non programmed maintenance.

4	There were four DEL full time employees including the First Respondent Mr Lowe. Mr Lowe was paid on an hourly basis and the other three DEL employees, on a fixed fee basis. The three fixed fee DEL employees spent about 70% of their time carrying out planned maintenance, the remaining 30% being occupied by emergency or very urgent maintenance, and providing some assistance to Mr Lowe in the carrying out of his tasks which were essentially those required under package 6. His work generally involved ‘minor maintenance work such as changing lamps, repairing various items of electrical equipment and changing electrical circuits. In addition, (Mr Lowe) carried out quality assurance checks and documentation, ensuring that the appropriate materials had been ordered and that the price for the job was sufficient.’

5	Mr Lowe had initially been responsible for overseeing work done by a number of agency staff, but as their numbers gradually reduced over the period of the contract that work receded. By the time the contract came to an end, his supervision had reduced to about 2% of his time and the processing of documentation about 5 – 10% of his time. Including related clerical work, some 98% of his time was spent on response maintenance tasks.

6	In July 1996 the MoD invited tenders for a new contract at Cosford known as the Multi Activity Contract which included some of the packages of work set out for the WSM contract which had commenced in January 1996. Serco Limited, the Third Respondent was successful in its tender and when this became apparent in April 1998 the Second Respondents drew to the Third Respondents attention their belief that the transfer of the contract would be subject to TUPE and that there were twelve individuals, including Mr Lowe, who were potentially subject to transfer.

7	As the Third Respondents intended to subcontract the work on package 6 to which Mr Lowe was assigned, it undertook to notify the Second Respondents of any companies tendering for that work as subcontractors so that the Second Respondents could contact that new subcontractor to establish what its intentions were with regard to TUPE.

8	The Third Respondents had decided by January 1999 that the response maintenance work required under package 6 would be subcontracted under a contract known as Measured Time Responsive Maintenance and Minor New Works Contract (the MTRM Contract). The contract period was from 1 April 1999 for a maximum of three years to 21 March 2002 with an estimated annual value of £100,000 but no guarantee given as to the actual amount of work which would be ordered. The work specified in the tender included maintenance work, location and rectification of faults, connection of equipment supplied and/or installed by others, testing, setting to work and commissioning of systems. Mr Lowe identified these duties as the ones which he had carried out for the AMS division of the Second Respondent.

9	Williams Brothers, who were subsequently acquired by the Appellants, tendered for the MTRM Contract in February 1999. The tender recognised the implications of TUPE stating that all site operatives required would be:
“from our established labour force at our Shrewsbury office.. or engaged under TUPE obligations from the existing permanently employed site staff “

10	The Second Respondent considered that Mr Lowe’s employment had been transferred under TUPE to Williams Brothers from 12 April 1999, but Williams Brothers denied that this was so. They undertook to consider him for employment if he provided a CV, which he did. He was not expected when he arrived for interview, but a short interview did take place at which, the Employment Tribunal found, there was no real exploration of his skills and their relevance to the contract. No offer of employment was made.

11	The award of the MTRM Contract to Williams Brothers was confirmed on 29 March 1999. They appointed a new electrician who spent about 89-90% of his time carrying out the work which the First Respondent, Mr Lowe, had carried out prior to ceasing work. Some of the balance of the new electrician’s work was that which had been previously dealt with by another subcontractor of the Second Respondents, W T Parker. The three fixed fee DEL employees had been transferred to the Third Respondents in order to carry out the same duties as they had before, which primarily related to package 5 but which had included an element of assistance to Mr Lowe in carrying out package 6.

12	Williams Brothers had estimated that with an annual value of £100,000 the contract would require one electrician and a trainee permanently at the site. Their project manager agreed that if Mr Lowe had fitted their criteria he would have been employed by virtue of TUPE. But both the Appellants and the Third Respondents refused to accept that Mr Lowe had been transferred to their employment under TUPE. The Second Respondent stated that Mr Lowe’s duties had been subcontracted to the Third Respondent with effect from 12 April 1999. None of the Respondents would accept him as their employee. Mr Lowe subsequently brought Tribunal proceedings, claiming breach of contract, unfair dismissal and redundancy. The question of whether there had been a relevant transfer under TUPE was heard by the Employment Tribunal as a preliminary issue.

The Employment Tribunal Decision.
13	The Employment Tribunal heard evidence over some four days and then adjourned so that written closing submissions could be prepared. The Tribunal in addition sent out a list of questions which they requested the parties to deal with in their written submissions. A further hearing then took place at which the written submissions and further oral closing submissions were considered. The Employment Tribunal analysed the law and the parties submissions and came to the following conclusions:-
1) That there was a stable economic entity in the performance of package 6 of the WSM Contract. The reactive maintenance programme comprised in package 6 was a distinct part of the undertaking which made up the WSM Contract. The performance of package 6 was substantially a matter for Mr Lowe and the package that he performed retained its identity following the transfer to Williams Brothers. The fact that some of the work was subcontracted in a way that meant additional duties were also taken on by Williams Brothers did not alter this conclusion as a business before and after a relevant transfer did not have to be identical. Here the customers remained essentially the same and the work performed for those customers was essentially the same. That work continued after transfer and was performed by a full time electrician as Mr Lowe himself was. The same buildings were used and security clearance still had to be provided.
The Employment Tribunal considered the authorities and concluded that the performance of a contract by a single employee, could amount to a stable economic entity and did so on the facts of this particular case.
2) The work carried out under package 6 was absorbed into the duties carried out by Williams Brothers following the transfer. The presence of very strict requirements in the WSM Contract for identifying tasks, categorising them in terms of urgency and agreeing costings, meant that there was no difficulty in identifying the economic entity which had been transferred to Williams Brothers.
3) The manner in which Williams Brothers dealt with Mr Lowe’s CV and interview suggested that they were trying to avoid any potential liability to accept him as a transferred employee under TUPE.
4) There was a relevant transfer of a stable economic entity of which Mr Lowe, who devoted 98% of his time carrying out specific tasks for that entity, formed a part.
The Appellant’s submissions.
14	Mr Brian Napier on behalf of the Appellant sought to pursue three lines of submission. Firstly that there was no economic entity capable of being transferred, secondly, that if there was an economic entity transferred to Serco, the Third Respondent, there was in any event no transfer to the Appellants because of the extent to which Serco had repackaged and hence altered the entity, and thirdly that the Employment Tribunal had applied the wrong test, particularly in considering the motivation of the Appellants in their treatment of Mr Lowe’s possible transfer of employment.

15	The Respondents each objected to the second line of submission relating to transfer and the third line of submission relating to motive being raised. The question of motive was not raised at all in the grounds of appeal, nor in skeleton argument, and transfer as expressed in Mr Napier’s proposed second line of submission was only obliquely referred to in the grounds of appeal, and not raised at all in the skeleton arguments. The contract documents, necessary to deal with the transfer argument were not before the EAT and none of the Respondents were prepared to deal with either the transfer argument or the motive argument as neither of them had been raised at all in the Appellant’s skeleton argument which dealt solely with whether or not there was a stable economic entity and stated that this was the only point to be pursued. Mr Napier eventually abandoned his second and third line of submission, thereby restricting himself to the economic entity point. He was content to leave it on the basis that the transfer argument could be raised in the appeal to be heard by us on the same day in the case of BKE and Mr S McLoughlin (EAT/0894/01/RN).  Both BKE and Dudley Bower Building Services Limited were within the John Mowlem and Company plc Group and were both represented by Mr Napier.

16	The Appellants submitted that the Employment Tribunal had failed to apply the correct legal test in order to determine whether there was an economic entity, and that the facts found by the Tribunal showed no basis for a finding that such an entity existed.
17	The decision in Schmidt v Spar und Leihkasser der Früheren Ämter Bordesholm, Keil und Cronshapen [1994] IRLR 302, where it was held that a cleaning operation carried out by a single employee could still fall within the Directive, was out of line with more recent European case law. It had not been overruled, but it should be cited with caution. In his oral submissions Mr Napier contended that if the only thing which can amount to an entity is the performance by an individual of his contract, the Directive cannot be satisfied. It was common ground between the parties that ‘an entity cannot be reduced to the activity entrusted to it’ Suzen v Zehnacker Gebaudereingung GmbH [1997] IRLR 255. The European Court of Justice also refers to the term ‘entity’ in the case of Suzen as:
 ‘an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective.’ 
That, Mr Napier submits, suggests that one person is not enough, and if there is only one employee there is a risk that the entity will be confused with the activity entrusted to it.

18	The decision in Schmidt was described in the opinion of the Advocate General in Allen v Amalgamated Construction Co Limited [2000] IRLR 119, as being ‘quite radical.’ Mr Justice Burton in White Water Leisure Management Limited v Barnes [2000] IRLR 456 described Schmidt as achieving the ‘somewhat odd result..relating to the contracting out of a cleaning activity carried on by one employee’.

19	In Hernandez Vidal & Others [1999] IRLR 132 and Sanchez Hidalgo & others [1999] IRLR 136 the passage in paragraph 13 of Suzen describing the term ‘entity’ as referring to ‘an organised grouping of persons and of assets enabling an economic activity which pursues a specific objective to be exercised’ was adopted. (Paragraphs 22 and 25 respectively.) In both cases it was stated that such an entity ‘must be sufficiently structured and autonomous…’ (paragraphs 27 and 26 respectively).

20	In Temco Service Industries SA v Imzilyen & others [2002] IRLR 214 the European Court of Justice referred to Schmidt, Suzen, Hernandez Vidal and said:-
“Thus, in certain labour-intensive sectors, a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity. Such an entity is, therefore, capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task (Suzen paragraph 21). Thus, an organised grouping of wage earners who are specifically and permanently assigned to a common task may, in the absence of other factors of production, amount to an economic entity (Hernandez Vidal & others, cited above paragraph 26.)”

21	In Cheesman & others v R Brewer Contracts Limited [2001] IRLR 144 Mr Justice Lindsay analysed the authorities and treated the requirement set out in Sanchez Hidalgo and Hernandez Vidal for an undertaking to be sufficiently structured and autonomous as an additional requirement for establishing whether an economic entity existed. In ADI (UK) Limited v Willer & Others [2001] IRLR 542 the Court of Appeal noted the European Court of Justice continued to adhere to its decision in Suzen in so far as that case might represent something of a retreat from earlier cases, including Schmidt.

22	The Employment Tribunal had therefore, Mr Napier submits, failed to appreciate this shift in the authorities and had therefore failed to appreciate that under European law as it now stands the performance of his contractual duties by a single person is not, by itself, enough to constitute an economic entity. The Employment Tribunal placed too much reliance upon the decision in Argyll Training Limited v Sinclair & Others [2000] IRLR 630, failing to appreciate that that case did not concern simply one employee but also an organised body of information identifying the trainees on the employers books and when and for how long their training programmes were planned to run.

23	On the facts of the present case Mr Napier submitted, there was no more than performance by Mr Lowe of the works comprised within package 6 of WSM. The work did not include a role for managers and there was no transfer of assets only continued use of premises. The performance by one individual of his duties could not amount to a stable economic entity. Nor could it be described as sufficiently structured or autonomous. There was therefore no entity and could not therefore have been any transfer. What the Employment Tribunal had effectively done was to look at the activity itself and become confused about the correct test. There was no contract to pay £100,000 only the granting of an option which would not therefore necessarily result in substantial work. At least in Schmidt the whole of the cleaning operation was transferred whereas here only part, albeit a substantial part, of Mr Lowe’s task was taken on by Williams Brothers.

24	There was therefore an error in law by the Employment Tribunal which should be rectified by the Employment Appeal Tribunal holding as a matter of law that no stable economic entity existed.

The Respondents submissions.
25	Each of the Respondents submit that Schmidt can neither be distinguished, nor rejected as no longer representing an accurate statement of the law.

26	The fact that an entity is identified as part of a larger business does not prevent it from being an economic entity. TUPE and the Directive specifically apply to part of a business. It cannot therefore be said that Schmidt does not apply to the present case because here the whole of the business was not in issue whereas the whole cleaning operation was an issue in Schmidt. Whether the business was sufficiently distinct was an issue of fact and the Tribunal were entitled to find that it was so distinct in this particular case in view of the fact that each maintenance task could be identified by virtue of the system of costing and specification.
27	There is no basis for any submission that the entity in the present case is less substantial than in Schmidt. In Schmidt there was a one person cleaning operation for a bank whereas here there is a reactive maintenance operation across the whole of the air base with 4,000 service and civilian personnel and a large variety of buildings. The issue is in any event one of fact for the Employment Tribunal to determine.

28	Nor can it be said that Schmidt was concerned primarily with the issue of whether a transfer had taken place. It is clear from paragraph 9 of its decision that Schmidt was concerned not only with transfer but with whether an undertaking could be treated as part of a business within the meaning of the Directive i.e. whether it amounted to a stable economic entity. Lord Justice Brown in ADI (para 73) considered that it was on this issue that Schmidt was a continuing authority.

29	The European Court of Justice in Schmidt said that the fact that the activity transferred is for the transferor merely an ancillary activity not necessarily connected with its objects cannot have the effect of excluding that operation from the scope of the Directive. It continued in paragraph 15:-

“Nor is the fact that the activity in question was performed, prior to the transfer, by a single employee sufficient to preclude the application of the Directive, since its application does not depend on the number of employees assigned to the part of the undertaking which is the subject of the transfer. It should be noted that one of the objectives of the Directive, as clearly stated in the secondary recital in the preamble thereto, is to protect employees in the event of a change of employer, in particular to ensure that their rights are safeguarded. That protection extends to all staff and must therefore be guaranteed even where only one employee is affected by the transfer.”

30	Schmidt was cited in Suzen but not disapproved. On the contrary it was cited as authority for the proposition that the Directive could apply to an operation performed by a single employee prior to transfer. At paragraph 8 the ECJ in Suzen said in relation to article 1(1) of the Directive:-
“In Schmidt [1994] IRLR 302, cited above, the Court held that that provision must be interpreted as covering a situation, such as that outlined in the order for reference, in which an undertaking entrusts by contract to another undertaking the responsibility for carrying out cleaning operations which it previously performed itself, even though, prior to transfer such work was carried out by a single employee.” 

31	In ECM (Vehicle Delivery Services) Limited v Cox [1999] IRLR 559 (paragraph 22) the Court of Appeal held that the ECJ had not overruled its previous interpretative ruling in cases such as Schmidt. It accepted however that Suzen identified limits to the application of the Directive in relation to transfer by indicating that:
“..the mere fact that the service provided by the old and the new awardees of a contract is similar does not therefore support the conclusion that an economic entity has been transferred.”

32	The issue in ADI, where the court recognised that Suzen represented something of a retreat from earlier cases including Schmidt, was transfer not the existence of an economic entity.

33	When Mr Justice Lindsay considered the authorities in RCO Support Services and Aintree Hospital Trust v Unison [2000] IRLR 624 he stated at paragraph 28(vi) of his judgment that:-
“Schmidt still stands as a reminder of how very little is required to amount to something capable of being an undertaking – one cleaning lady and her organisation – once due regard is paid to the safeguarding of employee’s rights, the subject matter of the Directive.”

In Cheesman [2001] IRLR 144 Mr Justice Lindsay expressed similar views at paragraphs 22 and 23 of his judgment.

34	The Respondents submit that the opinion of the Advocate General in Allen is not binding and has not been directly followed by the ECJ. Furthermore, the Second Respondent submits, there is, in any event, no reason in principle why a business with only one employee should be excluded from TUPE. The Directive is intended to provide protection for employees in the context of a change of employer and as was said in Schmidt:
“that protection extends to all staff and must therefore be guaranteed even where only one employee is affected by the transfer.”
(paragraph 15)

35	Nor can the case Argyll be distinguished. There was only one employee in that particular case with no tangible assets and the fact that employee had an organised body of information relating to the training contracts was not a true distinguishing feature from the present case. On the contrary the facts here demonstrated a more complex structure than that which was found to amount to a stable economic entity in Argyll.

36	White Water was a decision on its own facts and was properly considered by the Employment Tribunal. It was wrong to suggest that the reference to an entity requiring to be sufficiently structured and autonomous in Hernandez Vidal and Sanchez Hidalgo was an additional essential requirement. Paragraph 31 of a subsequent decision of the European Court of Justice in Oy Liikenne ab v Liskojarvi & Juntunen [2001] IRLR 171 did not refer to this as a separate requirement. In any event the Employment Tribunal expressly considered this requirement when at paragraph 5.1 of its decision it set out Mr Justice Lindsay’s description of the relevant considerations in determining the existence of a stable economic entity in Cheesman. The Employment Tribunal had interpreted the law correctly and applied it properly to the facts of this case.

37	There was ample evidence, the Respondents submit, upon which the Employment Tribunal could and did identify a stable economic entity. The specific maintenance package in which Mr Lowe was always involved at RAF Cosford was readily identifiable as the performance of package 6 under WSM Contract. This was in effect what Williams Brothers had undertaken to perform with, in addition, some of the specific tasks performed in the past by the specialist subcontractor W T Parker, though the latter represented only a small proportion of the work.

38	The work was to be performed at the same site, for the same client namely the MoD and for the same customer base namely the population of RAF Cosford. 

39	The package was easily identifiable because a very detailed form of costing existed, so that each specific maintenance task could be clearly identified for auditing purposes.

40	There was continued use of intangible assets namely the building and specialised access to the site, through security clearance, was also required.

41	A complex and precise costing and authorisation structure was laid down which required that each task had to be authorised and categorised in terms of its urgency.

42	There was goodwill under the contract which was transferred to the Appellants. The work was substantial and continuing. The response maintenance applied to the whole of the RAF Cosford base, spread over 650 acres and involving 4,000 service and civilian personnel.

43	The work as a whole, including the W T Parker element required a full-time electrician and a trainee. Prior to transfer there had been some management input and the three fixed fee DEL employees gave small, but occasional, assistance.

44	When considered as a whole, this was clearly not a case of an entity consisting solely of one man’s work on his contract. The disciplined and technical framework within which the work was performed made it more complex and more structured than had been the case in Schmidt or Argyll. The fact that the Employment Tribunal analysed all these matters in the course of its decision demonstrates that they were not simply confusing the entity with the activity which was performed under the contract.

45	The Employment Tribunal’s findings that the Appellants agreed in evidence that if Mr Lowe fitted the criteria, he would have been employed by them by virtue of TUPE shows that they recognised that a stable economic entity existed. If the Employment Tribunal had, as the Respondents submitted, applied the correct test in law, their finding could not be challenged save on the grounds of perversity which could not arise here. The Appellant conceded in its reply that if Schmidt remained good law their task would be very difficult.

Conclusions.
46	When considering the Transfer of Undertakings (Protection of Employment) Regulations 1981 and Directive 77/187 the Court has to consider whether a stable economic entity exists and whether that entity has been transferred. These are separate and distinct questions with different factors to be considered. Oy Liikenne AB paragraphs 31, 32 and 33. The factors to be considered in determining these questions are helpfully set out in paragraphs 10 and 11 of Mr Justice Lindsay’s judgment in Cheesman.

47	The five factors set out in paragraph 10 of the judgment in Cheesman as to the existence of an economic entity are not all separate mandatory requirements, but factors to be considered. Thus although Sanchez Hidalgo and Oy Liikenne refer to ‘an organised grouping of persons and assets’ the existence of assets is not a requirement in sectors which are essentially based on manpower, such as cleaning and surveillance, where there may be few if any assets. An entity cannot be reduced to the activity entrusted to it; its identity also emerges from other factors, such as its workforce, its management staff, the way in which its work is organised, its operating methods or indeed, where appropriate, the operational resources available to it. Suzen paragraph 15, Hernandez Vidal paragraph 30 and Allen paragraph 27 of the decision of the Court.

48	The application of these factors to the circumstances of any particular case is a determination of fact by the national court, provided of course that that court has the correct factors in mind when considering the circumstances before it. Whether a stable economic entity exists in any given case will always be a question of fact and degree but there is, in our judgment, no reason in principle why the work performed by a single employee should not amount to such an entity. Whether it does or not will depend upon the factors in the particular case. At one extreme, if the activity consists of no more than one cleaning lady and her mop, an economic entity may not exist, whereas if the task to be performed is complex and sophisticated and requires careful planning, specification and costings, it may be that an entity exists even though the work is performed by a single employee. There may well be some activities where the work of two or three employees is less complex and needs to be less structured and pre-planned than the work of a single employee. As a general rule it may be less common for one employee to constitute an entity but the fact there is only one employee cannot preclude the existence of such an entity.

49	We are satisfied that there is no requirement that there must be more than a single employee and that the words ‘grouping of persons’ does not seek to impose that requirement. There is no doubt that Suzen, which contains that phrase at paragraph 13 of its decision, remains a correct statement of the law. It is to be noted however that Schmidt is cited with approval in paragraph 8 of Suzen, which could not have been the case had the Court been seeking to disapprove of the proposition in Schmidt that the Directive could apply to a case where an operation was performed by a single employee. Nor is Schmidt expressly disapproved in any other ECJ case. In so far as there has been a retreat from earlier cases including Schmidt, (ADI para 33) it relates to the question of transfer and whether  whenever essentially the same job continues to be carried on, that mere fact is sufficient for a transfer to be deemed to have taken place.

50	As Mr Justice Lindsay said in RCO v Unison at paragraph 28(vi):-
“Schmidt still stands as a reminder of how a very little is required to amount to something capable of being an undertaking – one cleaning lady and her organisation – once due regard is paid to the safeguarding of employee’s rights, the subject matter of the Directive.”

51	The Court of Appeal in ECM did not regard the decision in Schmidt as having been overruled and confirmed that the limitations in Suzen related to the question of transfer rather than to the existence of a stable economic entity. The comments by the Advocate General in Allen and Mr Justice Burton in White Water point out the dangers of treating a decision on the facts of a particular case as amounting to a principle. In effect they caution against using Schmidt to support an argument that one employee is enough to amount to an entity, when in fact that case decides that a single employee does not preclude the application of the Directive. On the issue of the existence of an entity, as on the issue of the transfer of such an entity all the facts have to be taken as a whole, and not considered individually, in isolation.

52	As Mr Justice Lindsay said in Argyll (paragraph 10):
“Schmidt..illustrates that the fact that only one employee is within a particular sector does not itself deny the sector the title of ‘undertaking’”. 
We agree with that statement.
53	We conclude that the decision in Schmidt has neither been overruled nor disapproved in so far as it deals with the issue of the existence of a stable economic entity. It does not decide that the performance of contractual duties by a single person is in itself enough to constitute an economic entity; it decides that the fact that only one employee is within a particular sector does not preclude the application of the Directive. All the factors have to be considered, such as the workforce, management staff, the way in which the work is organised, the operating methods and where appropriate the operational resources. It must always be borne in mind that the activity in itself is not an entity.

54	The need for an entity to be sufficiently structured and autonomous is stated in Hernandez Vidal and Sanchez Hidalgo but not for example in subsequent cases such as Oy Liikenne. In our view a court does need to consider the extent to which an operation is structured and autonomous in order to determine whether it amounts to a stable economic entity. Whether it is sufficiently structured and autonomous will depend upon consideration of all the facts.

55	It is clear from the decision of the Employment Tribunal that they gave careful consideration to the law and its application. We are satisfied that it applied the correct principles in determining whether or not a stable economic entity existed and that they did not make any error in interpreting the law. They set out the five considerations enumerated by Mr Justice Lindsay in Cheesman and those include the need for the undertaking to be sufficiently structured and autonomous. They clearly had all the relevant factors in mind when they applied the law to the facts.

56	We are also satisfied that the Employment Tribunal applied the facts correctly and that there was a proper basis for their decision. The facts demonstrated a well established, sophisticated operation performed essentially by one qualified electrician but with some assistance from the three fixed fee DEL employees. It had been decided over the years that a complex and precise costing structure had to be laid down and that each task had to be authorised and categorised in terms of its urgency. The MoD required that each specific maintenance task had to be clearly identified for auditing purposes. There were a substantial number of buildings at the RAF Cosford base which was spread over 650 acres and some 4,000 service and civilian personnel to serve. The work performed by Mr Lowe was readily identifiable as the performance of package 6 under the WSM Contract. This identifiable and distinct undertaking was transferred to the Appellant. The goodwill under the contract was also transferred and the work was clearly substantial and continuing. The fact that Mr Lowe’s work did not constitute the whole of the entity transferred to the subcontractor did not prevent it from being an economic entity. It was readily identifiable as the Employment Tribunal found, and did in any event constitute the greater part of the work transferred. The subcontract, although not for a fixed period, was for a maximum of three years to the 21st March 2002 with an estimated, but not guaranteed annual value of £100,000 inclusive of the W T Parker elements. The nature of the subcontract did not in our judgment preclude the application of the Directive.

57	We do not consider that the Employment Tribunal fell into the error of looking at the activity itself rather than all the relevant factors. We are satisfied that the work performed by Mr Lowe was within a disciplined and technical framework which made it more complex and structured than in the cases of either Schmidt or Argyll. We conclude therefore that there was material upon which the Employment Tribunal could properly decide that a stable economic entity existed.

58	The issues of entity and transfer are often elided. The point was not argued before us but on the face of the Employment Tribunal decision we see nothing wrong with their reasoning as to transfer. On the basis of their finding that Williams Brothers were acting in a manner suggesting that they were trying to avoid any potential liability under TUPE, the Appellant would in any event be precluded from contending that the fact that Mr Lowe was not taken on was relevant to whether a transfer had taken place. See ECM.

59	The Employment Tribunal decision was carefully considered and reasoned and contains no error of law. The appeal must be dismissed.