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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Hynd v. Armstrong & Ors [2004] UKEAT 0005_04_2009 (20 September 2004) URL: http://www.bailii.org/uk/cases/UKEAT/2004/0005_04_2009.html Cite as: [2004] UKEAT 5_4_2009, [2004] UKEAT 0005_04_2009

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APPEARANCES

 

 

For the Appellants	Miss M Kerr, Solicitor Of- Messrs Harper Macleod Solicitors The Ca'd'Oro 45 Gordon Street GLASGOW G1 3PE
For the 1st & 2nd Respondents	Mr J MacMillan, Solicitor Of- Messrs Macroberts Solicitors 152 Bath Street GLASGOW G2 4TB

SUMMARY
TRANSFER OF UNDERTAKINGS

Transfer of undertakings – economic technical or organisational reason


 


LORD JOHNSTON:

1. This is an appeal at the instance of the employee against a finding of the Employment Tribunal sitting in Glasgow, inter alia that the then applicant had not been unfairly dismissed.
2. The background to the matter is the de-merger into two firms of one firm of solicitors that had been formed upon the original merger. The applicant lost his job in the process of redistributing the employees between the two de-merged groups. Before the Tribunal there was an issue of fairness about the way the matter was handled, all other things being equal, but that no longer features.
3. The sole issue, therefore, before us, was the effect or otherwise of Regulation 8 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE").
4. That Regulation so far as relevant is in the following terms:-

"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.

(2) Where an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer is the reason or principal reason for dismissing an employee-

(a) paragraph (1) above shall not apply to his dismissal: …"

5. The decision of the Tribunal in this respect is as follows:-

"Mr MacMillan's primary position on behalf of the respondents was that the Tribunal should hold that the applicant's dismissal was a redundancy per se and that the transfer and the circumstances surrounding it were merely the occasion of what was otherwise a redundancy dismissal.

Ms McManus submitted that on no view could the situation be described as a straightforward redundancy. While accepting that there was evidence of doubts among some Morison Bishop partners about the continuance of the applicant's role, it was equally clear that there were others (Mr Miller in particular) who were much more supportive and who would have been prepared to support the applicant's elevation to partner status. Mr Miller had explained that he was "testing the water" in relation to a possible partnership for the applicant. There was no consultation with the applicant about a possible redundancy until that time and thereafter the landscape within Morison Bishop changed dramatically.

We think Mr MacMillan recognised the difficulty of this argument in his final submission on this point when he said it would be "possible for the Tribunal to conclude that this was a redundancy per se" (our emphasis). While it is true that there was some material that might suggest that a redundancy situation may have materialised at some stage had the de-merger not occurred, we think that that was only possible - and by no means probable. Furthermore, the position changed substantially in the succeeding weeks and accordingly we are not prepared to hold that the dismissal was a redundancy per se and we reject Mr MacMillan's submissions on that point.

That then leaves a dispute between Mr MacMillan's fall-back position and Ms McManus's primary position. Put simply, the competing positions were that the reason for the dismissal was

(i) an economic, technical or organisational ("ETO") one falling within Regulation 8(2) of the 1981 regulations

(ii) or the transfer alone under Regulation 8(1).

The Tribunal was referred to a number of authorities in this respect particularly the

cases of Anderson & McAlonie -v- Dalkeith Engineering Ltd (1984] IRLR 429; Kerry Foods Ltd –v- Creber & Others [2000] IRLR 10, Thompson -v- SCS Consulting Ltd & Others [2001] IRLR 801, Gorictree Ltd -v- Jenkinson [1984] IRLR 391 EAT, Delabole Slate Ltd -v Berriman [1985] IRLR 305, Wheeler -v- Patel & Another [1987] IRLR 211 and Litster & ors v Forth Dry Dock Ltd and Anr [1989] IRLR 161.

In the course of the submissions, an interesting debate developed as to the construction and application of Regulation 8 as a whole. The question which arose is the one which is mentioned at paragraphs 35 and 36 of the EAT's decision in Thompson.

As we understood her submission, Ms McManus was arguing for the "mutually exclusive approach". For what it is worth, we prefer the "preliminary but displaceable conclusion" approach, as it seems to us that an ETO reason is a sub-set of the group which encompasses "transfer related reasons".

In the end of the day, we do not think anything turns on this distinction in approaches. The question to be answered is "what was the reason for the dismissal?" If the reason or principal reason was the transfer (or a reason connected with it) the dismissal is automatically unfair (Reg. 8(1)). If the reason or principal reason was an ETO reason entailing changes in the workforce of either the transferor or transferee before or after a relevant transfer, the dismissal is not automatically unfair (though it may yet be unfair according to the usual tenets of unfair dismissal law). In short, we must try to determine the true reason for the dismissal.

For his part, Mr MacMillan submitted that it was clear that the reason here was principally economic and organisational. The situation facing the Glasgow group was a critical one. The applicant was costing £75,000 per annum to employ. Organisationally, the new firm was moving to concentrate on litigation and property. Corporate and private client work became service functions. Even Mr Miller who had been a corporate partner gave evidence that he had had to move back to his commercial property roots in order to maintain a portfolio of work. All of the foregoing entailed necessary and legitimate changes in the workforce which plainly brought the situation within Regulation 8(2). Mr MacMillan relied in particular on the cases of Thompson and Gorictree.

Ms McManus submitted that as a matter of fact the dismissal was by reason of the transfer and accordingly that it was not open to the Tribunal to entertain the ETO argument. In this connection, she referred to the case of Kerry Foods Ltd. For it to be an ETO reason, it would have to be an ETO reason of Morison Bishop because the applicant was dismissed by Morison Bishop and not the new firm. Morison Bishop was ceasing to exist and accordingly it was impossible to divine what their ETO reason could have been. She submitted that if in truth part of Morison Bishop (i.e. the Glasgow group) took the decision to dismiss in relation to their own workforce going forward this was not a decision as to what would happen within Morison Bishop. She referred to the cases of Delabole and Wheeler. The respondents' motives were irrelevant. The onus was on the respondents. In short, Regulations 8(1) and 8(2) were mutually exclusive and it was clear in this case that the transfer was the reason.

In the event, we found that the most useful authorities were the cases of Whitehouse and Thompson. In Whitehouse, the Court of Appeal emphasised that the words "economic, technical or organisational ... entailing changes in the workforce" clearly meant that the reason must be connected with the future conduct of the business (see also Wheeler). In Whitehouse the dismissal was related to carrying on the service which the respondents had been successful in obtaining the contract for. While it is true that in that case the redundancy selection exercise was carried out after the transfer, we do not think that matters, given the wording of reg. 8(2). Morison Bishop's (the transferee) reason for the dismissal was an ETO one entailing it changes in prospective firm of Bishops (the transferee) in connection with the future conduct of the business, i.e. the part of the undertaking which was the subject of the relevant transfer to them. That appears to us to fall plainly within Reg. 8(2)

The EAT said in Thompson that in determining this issue (i.e. determination of the true reason) the matter is one of fact. The Tribunal must consider whether the reason was connected with the future conduct of the business as a going concern. It is entitled to take into account the relevant factual material whether there is any collusion between the transferor and transferee and whether the transferee intended to carry on the business. We respectfully adopt the approach set out in paragraph 37, sub-paragraphs 1-4 of the EATs reasoning in Thompson.

Finally, for the sake of completeness we hold that the reason was a composite reason of economic (predominantly) and organisational factors entailing changes in the workforce of the transferee after the relevant transfer. The applicant was not required for the future conduct of the transferee's business after the transfer.

Ms McManus also submitted that what was important to look at here was the transferor's reason rather than the transferee's and the tranferee's reason could not matter as they were not in existence. While that might be true from a technical point of view (i.e. that the partnership of Bishops did not come into existence until after the transfer) we are of the opinion that that point in itself does not affect the operation of Reg. 8.

The "Glasgow group" were intending to form themselves into a particular type of legal person (a partnership). What happened was that the "Glasgow group" (as prospective partners in the firm of Bishops) instructed themselves wearing their hats as partners in the firm of Morison Bishop (but with the authority of the rest of the partners in Morison Bishop) to dismiss the applicant because, looking to the future conduct of the entity which was to be transferred to them under Regulation 3, they did not have a requirement for the applicant. Put another way this was essentially a "future redundancy" - see Gorictree."

6. The authorities that are mentioned by the Tribunal as having been referred to them were substantially also referred to us.
7. Miss Kerr, appearing for the appellant, had a simple but potent argument against the background that there was no finding of redundancy in isolation unconnected with the de-merger. She maintained that the Tribunal had not addressed the proper question under Regulation 8, inasmuch they should have determined what was the principal reason for dismissal, that such was inevitably to be the transfer, and, thus in terms of Regulation 8(1), they should have gone straight to the question of remedy without considering Regulation 8(2). This proposition was based essentially on the case of Kerry supra.
8. Mr MacMillan, appearing for the respondents, submitted that the Tribunal has asked itself the proper question in determining, as they do, in the part of the passage we have quoted, that the reason for dismissal was what is known as an "ETO" and that fell within Regulation 8(2). That being so the only remaining issue was one of fairness and the Tribunal had resolved that against the appellant.
9. The authorities make it clear that in approaching the issues raised by Regulation 8, the first question to determine is whether or not the transfer was the principal reason for the dismissal. If that be the case, it seems that is the end of the matter and automatic unfairness is established, leading to a remedy.
10. On the other hand, if it is only a reason, the employer is entitled, in appropriate circumstances, to go to Regulation 8(2) and if it can be established that there was an economic technical or organisational reason entailing the changes in question which include the transfer, that removes the automatic notion of unfairness and leaves only the question to be determined as a matter of the usual rules of unfair dismissal.
11. We would emphasise that we do not consider the Tribunal is bound to determine that the transfer is the principal reason. If it does so do, those consequences we have mentioned, follow. If however it chooses only to identify it as a reason and the evidence will support the notion of an ETO, then Regulation 8(2) comes in to exclude the effect of Regulation 8(1).
12. Having regard to the terms of the Employment Tribunal decision which we have quoted, this is entirely apparent to us that they applied their mind to the correct test having identified the relevance of the transfer as a reason. They go on to hold that the principal reason was an ETO for the reasons they give which we will simply adopt.
13. In these circumstances we do not consider that the Employment Tribunal entered into any question of error of law, and, indeed, made decisions on the facts, which, are, given that they are the industrial jury, binding upon us. The critical factor being their finding that Regulation 8(2) as a matter of fact applies.
14. In these circumstances, there being no other issue live before us, we consider the Employment Tribunal came to a correct conclusion and the appeal is refused.