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Learning & Skills Council v Barfoot and others

The 14 employees were all employed by the London East Technical and Enterprise Council (LETEC) and were members of the Investors in People (IiP) team. LETEC decided to establish a contractual bonus scheme for the IiP team in September 1998. Letters setting out the terms of the new scheme were sent to members of the IiP team which stated that the bonus structure would cease at the end of 2000 and that to receive the bonuses, they still had to be employed by LETEC at the time of payment. In June 2000, a further letter was sent indicating the level of bonuses for the period 1 April 2000 to 31 March 2001. On 26 March 2001, the Council took over the contracts of employment.

It contended that there was a cessation of the bonus scheme at the end of 2000.

The appeal would be allowed.

The employment tribunal’s approach to the issue of construction was flawed.

Having regard to the oral evidence, it did not indicate whether the employees had been informed whether the contractual bonus scheme would still be in place at the time of transfer. Secondly, if the evidence could be read as amounting to such an assurance, it was not possible to use that assurance as an aid to the construction of the original letters since it was settled law that events which took place after an agreement could not be used to construe that agreement. Thirdly, contractual documents had to be given the meaning which the documents would convey to a reasonable man having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. The law excluded from admissible background the previous negotiations of the parties and their declarations of subjective intent. Fourthly, no reasonable man having given the letter mature thought and having all the background knowledge available to the parties at the time, would have thought that it meant that, although the terms of the bonus scheme which was then being established would cease at the end of 2000, the IiP teams’ entitlement to a contractual bonus under some other bonus structure would continue indefinitely. It was not appropriate for the appeal tribunal to determine whether there was a cessation of the bonus scheme at the end of 2000, or whether it continued until at least 31 March 2001. In those circumstances, the claim would be remitted to a fresh tribunal for that issue to be addressed and to revisit the proper construction of the letters which created the original bonus scheme.

Knotts v United Friendly Insurance plc

Employment – Unfair dismissal – Reason for dismissal – Adequacy of employment tribunal’s reasoning. .

The employee worked as an area sales manager from 1992 until his employment was terminated by reason of redundancy in December 2000. His original employer was taken over by another company and the Transfer of Undertaking (Protection of Employment) Regulations 1981 did not apply. Following the take-over, the business was restructured and two posts became available for which the employee considered himself eligible to apply. The employee was unwell at the time of the interview for the first post and his application was therefore considered on the basis of a ‘desktop’ interview, without a personal interview. He was interviewed for the second post but in the event was not successful in applying for either.

He brought a complaint of unfair dismissal in the employment tribunal. The tribunal found that he had been unfairly dismissed. It also found, however, that applying the principle in Polkey v A E Dayton Services Ltd [1987] IRLR 503, it was impossible to calculate the chance that the employee would have been successful in his application had he had a full interview, and in those circumstances, no compensation would be awarded. The employee appealed.

He contended, inter alia, that the tribunal had not reached a final conclusion in its extended reasons as to the question of the appropriate percentage or degree of deduction under the Polkey principle.

The appeal would be allowed.

The tribunal had not properly discharged its responsibilities. It did not do justice to the employee for the tribunal simply to state that the appropriate deduction was ‘incalculable’ or ‘unascertainable’. If the tribunal meant that any deduction would have been extinguished by the contractual payment in fact made to the employee already, that was not what it had said. The matter would accordingly have to be remitted to the tribunal for consideration as to whether there should be a Polkey reduction, and if so, what the extent of that deduction should be.

Martin and others v South Bank University (Case C-4/01)

European Communities – Application of Community law in national courts – Reference from national court – Reference for preliminary ruling – Safeguarding of employees’ rights in the event of transfers of undertakings – Consideration of transferee’s obligation on early retirement of employees – Council Directive 77/187/EEC, art 3.

Article 3(3) Council Directive 77/187/EEC on the approximation of the laws of member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses provided that paras 1 and 2 should not cover employees’ rights to old age, invalidity or survivors’ benefits under supplementary company or inter-company pension schemes outside the statutory social security schemes in member states. The directive was transposed into United Kingdom national law by the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). The Whitley Council system was a system for establishing conditions of service in the public sector through joint negotiations between employers and employees. Section 46 of the General Whitley Council conditions of service (the GWC conditions of service) adopted the terms of the Collective Agreement on Premature Payment of Superannuation and Compensation Benefits concluded between the various National Health Service (NHS) employees aged between 50 and retirement age and with at least five years’ service within the NHS superannuation scheme. The provisions implementing s 46 provided, inter alia, for payment of an early retirement pension and early payment of a lump sum normally payable on retirement. Prior to1 November 1994, the applicants were employed as nursing lecturers at a college which formed part of the NHS. Following the attachment of nursing education to the Ministry of Education and Employment (the ministry), the college became part of the respondent university. Shortly before that, the respondent had informed the staff at the college that they would be offered a new employment contract, and that in the event of early retirement for any reason apart from permanent ill-health retirement, enhancement was discretionary. The applicants did not accept the terms and conditions of employment offered by the respondent and accordingly remained on the terms specified in their contracts of employment as at the time of transfer. In October 1996, the ministry announced changes to the terms of finance for early retirement, and consequently, the respondent informed all university staff over 50 that it was unlikely to be able to offer early retirement after 31 March 1997. In January 1997, the respondent again wrote to those members of staff offering them one last chance of early retirement before the new financial arrangements entered into force. The first two applicants accepted that offer, having previously refused. The third applicant remained in the respondent’s employment. The applicants brought a complaint before an employment tribunal claiming to be entitled to the NHS terms of early retirement instead of the respondent’s. In order to resolve the dispute, the tribunal decided that it was necessary to refer the following questions to the European Court of Justice for a preliminary ruling, namely: (i) whether rights which were contingent upon either dismissal or premature retirement by agreement with the employer fell within the definition of rights and obligations within the meaning of art 3(1) of the directive; (ii) whether the employees’ entitlement to the payment of early superannuation benefits and lump sum compensation on redundancy/in the interests of the efficiency of the service/on organisational change, were rights to old age, invalidity or survivor’s benefit within the meaning of art 3(3) of the directive; (iii) if and to the extent that the answer to the question (ii) was no, whether there was an obligation on the transferor arising from the contract of employment, the employment relationship or the collective agreement within the meaning of art 3(1) and/or 3(2) which transferred by reason of the transfer of the undertaking and rendered the transferee liable to pay the benefits to the employee upon dismissal; (iv) whether an employee might agree to forgo rights such as those laid down by s 46 of the GWC conditions of service, even though the terms of early retirement offered by the transferee did not provide the same benefits and that employee became a member of the transferee’s retirement scheme upon the transfer of the undertaking; (v) if the effect of art 3 of the directive was to preclude the transferee from offering transferred employees the option of taking early retirement benefits that were less beneficial than those to which they were entitled under the effect of the directive, what the consequences were for employees who accepted early retirement on the basis offered to them by the employer.

The Court ruled:

(1) Rights contingent upon dismissal or the grant of early retirement by agreement with the employer fell within the rights and obligations referred to in art 3(1) of the directive.

(2) Early retirement benefits and benefits intended to enhance the conditions of such retirement, paid in the event of early retirement arising by agreement between the employer and the employee to employees who had not reached a certain age, such as the benefits at issue in the main proceedings, were not old age, invalidity or survivors’ benefits under supplementary company or inter-company pension schemes within the meaning of art 3(3) of the directive.

(3) Article 3 of the directive precluded the transferee from offering the employees of a transferred entity terms less favourable than those offered to them by the transferor in respect of early retirement, and precluded those employees from accepting those terms, where those terms were merely brought into line with the terms offered to the transferee’s other employees at the time of transfer, unless the more favourable terms previously offered by the transferor arose from a collective agreement which was no longer legally binding on the employees of the entity transferred, having regard to the conditions set out in art 3(2).

(4) Where, in breach of the public policy obligations imposed by art 3 of the directive, the transferee offered employees of the entity transferred early retirement less favourable than that to which they were entitled under their employment relationship with the transferor and those employees accepted such early retirement, it was for the transferee to ensure that those employees were accorded early retirement on the terms to which they were entitled under their employment relationship with the transferor.

Carter v Qatar Airways Ltd and another

Employment – Transfer of undertakings – Continuity of employment – Unfair dismissal – Employment tribunal finding employee not dismissed – Correctness of decision – Transfer of Undertakings(Protection of Employment) Regulations 1981 (SI 1981 No 1794), regs 5(3), 8(1).

The complainant had been employed by the transferor as a cargo manager. In April 2001, the complainant was informed that the cargo department was to be closed, and the transferee was identified and it was indicated that he could expect to find alternative employment with the transferee. By a letter of 17 April 2001, the transferor told the complainant that he would be made redundant. Due to their collective ignorance of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981 No 1794) (TUPE), none of the parties had appreciated that the complainant was entitled as a matter of law to continue his employment with the transferee on the same terms which he had enjoyed with the transferor. The transferee made efforts to accommodate the complainant, without acknowledging his right to continue in employment. The complainant sought alternative employment with the transferor. On 24 April 2001, the transferor informed the complainant that his last day of work would be 30 April 2001. The relevant transfer of the transferor’s business to the transferee took place in May 2001. The complainant subsequently issued proceedings complaining of, inter alia, unfair dismissal and wrongful dismissal. He employment tribunal found, inter alia, that there had been no dismissal, and that the letters of 17 and 24 April had not amounted to termination of his employment by the transferor. The tribunal therefore dismissed the complainant’s claims. He appealed against that decision.

The appeal would be allowed.

In the instant case, the transferor’s letter of 24 April, read with the earlier letter of 17 April, had amounted to a notice of dismissal to take effect on 30 April. That was a dismissal within the meaning of s 95(1)(a) of the Employment Rights Act 1996. In the absence of any economic, technical or organisational reason for dismissal being advanced by either the transferor or the transferee, the dismissal had been connected with the transfer and consequently the complainant had been employed in the part of the undertaking transferred immediately before the transfer for the purposes of reg 5(3) of TUPE. That dismissal had been automatically unfair under reg 8(1) of TUPE as the complainant had been entitled to continue his employment on the same terms and conditions as before. In those circumstances, the tribunal had failed to apply the law correctly to the facts found. The tribunal’s decision would, accordingly, be set aside and substituted by a finding that the complainant had been dismissed by the transferor; that that dismissal had been automatically unfair under reg 8(1) TUPE; that he had also been dismissed for the purposes of the wrongful dismissal claim; and that all liability for losses properly recoverable by the complainant would pass to the transferee. The transferor would therefore be dismissed from the action and the matter remitted to a freshly constituted tribunal for assessment of the compensation due to the complainant from the transferee.

Bademosi v Securiplan

Employment – Transfer of undertakings – Continuity of employment – Employment tribunal finding employee’s rights not transferred – Correctness of decision – Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794).

The employee had worked for the employer as a security officer at a site at which the employer provided security for 21 years. In July 2000, the employee suffered an accident at work and was unable to return until November 2000, at which time there was no vacancy at the original site. He was therefore assigned temporarily to a magistrates’ court. In December 2001, the employee was informed that he was to go back to the original site in January 2002. The employer’s contract to provide security services at the court was then terminated, and staff were told that another company, C Ltd, had taken over responsibility for running that contract. The employee resigned and subsequently issued proceedings against the employer, complaining of, inter alia, unfair constructive dismissal. The essential issue before the employment tribunal was whether the employee’s rights to make a complaint against the employer had been transferred. The tribunal found, inter alia, that the employee’s rights to make a complaint against the employer had not been transferred under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). The employer appealed against that decision on the ground that the employee had been assigned to the magistrates’ court and that on the date of the transfer, his contract of employment had therefore transferred, by operation of TUPE, to C Ltd.

The appeal would be dismissed.

In the instant case, the central question had been whether or not the employee had been assigned to the undertaking which consisted of the duties performed at the magistrates’ court. The employee’s deployment to the original site had been terminated simply because of his industrial injury. Upon his return, he had been assigned elsewhere on a temporary basis. In those circumstances, the employment of the employee would not otherwise have terminated by reason of the transfer of the magistrates’ court contract in December 2001, since the employee would have simply reverted to his duties either at the original site or to other temporary assignments prior to being able to take up his position at the original site in January 2002.

European Commission v Italy (Case C-32/02)

European Communities – Community institutions – The Court of Justice – Actions – Failure of member state to implement directive – Italy – Council Directive 98/59/EC.

On an application by the European Commission under art 226 EC, the Commission brought an action for a declaration that Italy failed to fulfil its obligations under Council Directive 98/59/EC (on the approximation of the laws of the member states relating to collective redundancies) by not adopting the necessary provisions in respect of employers engaged in non-profit-making activities. Article 1(1)(a) provided, inter alia, ‘collective redundancies means dismissal effected by an employer for one or more reasons not related to the individual workers concerned’. Italy’s defence was not lodged within the time-limit laid down in art 40 of the Rules of Procedure and was not taken into consideration.

The court ruled:

The term ‘employer’ within the meaning of art 1(1)(a) of the Directive also covered employers engaged in non-profit-making activities. It was clear from the actual wording of art 1 of the Directive that the provision applied to redundancies effected by an employer without further distinction. By not adopting the necessary provisions in respect of employers engaged in non-profit-making activities, Italy had failed to fulfil its obligations under the Directive.

Clark v Kings College London

Discrimination – Sex discrimination – Employment – Equal pay and treatment – Comparator – Comparator being transferred to employee’s department – Comparator’s higher pay being preserved.

In March 1992, the employee commenced employment with the United Medical and Dental School of Guys and St Thomas’ Hospitals (UMDS) as a medical laboratory scientific officer grade 1. In August 1993, a male employee, T, transferred employment to UMDS when the forensic department merged with that of another college. In 1998, both employees transferred to the employer under circumstances where the Transfer of Undertaking (Protection of Employment) Regulations 1981 applied. Throughout his employment T received a higher rate of pay than the employee, although the employee had raised the point during an evaluation. The employee brought a complaint in the employment tribunal under the Equal Pay Act 1970, contending that she had undertaken like work as T but had not received the same pay. The tribunal accepted that she had been employed on like work when compared with T. The employer argued however that there was a material factor distinguishing their employment other than sex, namely the historical difference in pay between the employee and T due to the preservation of T’s terms and conditions of employment stemming back to the transfer of his employment in 1993 (the TUPE protection). The tribunal accepted that T’s original transfer was a relevant transfer to which the 1981 Regulations applied; however, it found in favour of the employee, on the ground that the suggestion of TUPE protection was not a genuine reason for the disparity in pay. It found that the real reason was the mistaken decision that the employee’s post was properly graded. The employer appealed.

The appeal would be allowed.

An employer who held a genuine but mistaken belief in a material factor explaining the variation in pay could be in no worse position than an employer who did not turn his mind to the respective gradings. In the instant case, the grading review did not break the causative chain stretching back to the historical difference in pay due to the protection afforded by the 1981 Regulations to T’s terms and conditions of employment. Further, even if the employer mistakenly concluded that the employee was correctly graded, at a level lower than that of T, such mistake, if genuine belief, was itself capable of amounting to a material factor and thus a defence under the 1970 Act. The matter would be remitted to the tribunal.

Mattinson and others v Industrial Services Group Ltd

Employment – Transfer of undertakings – Continuity of employment – Nature of undertaking – Validity of employment tribunal’s decision – Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794).

ISG was a specialist scaffolding contractor on large construction contracts. In March 1998, a subsidiary of British Nuclear Fuels plc awarded ISG the contract for the provision of scaffolding and cleaning services in the ‘Drypac’ project at the Sellafield plant during the mechanical construction phase of the project. In July 2000, ISG was informed that its contract on the mechanical construction phase would be terminated on 31 August, which it duly was. The finishing contract was awarded to IIS. Its scope included the provision of scaffolding for access purposes. All of ISG’s employees on the project applied for jobs with IIS on the finishing contract. IIS also recruited ISG’s former project manager, R, for another project in Southampton. All ISG employees who went to work for IIS filled in application forms and were selected by IIS’s management. ISG provided references for them. They were employed on the same national conditions. IIS continued to use some of ISG’s scaffolding with ISG’s agreement, and ISG provided other ancillary equipment. In subsequent disputes with some employees who had worked for both ISG and IIS, the preliminary issue arose as to whether there had been a transfer of an undertaking between ISG and IIS within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794). The employment tribunal held that there had not been an ‘undertaking’ transferred and ISG appealed.

The appeal would be allowed.

It was difficult to understand the logic of the tribunal’s reasoning with regard to whether scaffolding was part of the undertaking or an undertaking in its own right. On the facts, the tribunal should have considered, but did not, whether, having regard to all of the facts relating to the services provided by ISG, its activities – which comprised not just the provision of scaffolding, but also the provision of a dedicated team of workers and ancillary equipment – amounted to an undertaking for the purposes of the 1981 Regulations. They did not do so and accordingly the issue would be remitted to a differently constituted tribunal.

Tyson v Concurrent Systems Inc Ltd

Employment – Unfair dismissal – Appeal – Reasonableness of tribunal’s decision – Adequacy of reasons.

The employee was employed as a support contract administrator by D Ltd from October 1998. In May 2001, with D Ltd’s permission, she moved to Cornwall and continued to work there from home on a part-time basis. In April 2002, the part of the business in which she worked was taken over by the employer under a transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794) applied. After the transfer, the employer formed the view that a restructuring should be carried out and the employee’s role combined with that of another. She was told that she was free to apply for that new role or accept voluntary redundancy. She did not apply on the grounds that she could not work full-time or move to the new role’s location. She was then told that, as she would not accept voluntary redundancy, there would be compulsory redundancy with immediate effect. She brought a complaint in the employment tribunal alleging unfair dismissal and that discrimination as a part-time worker, pursuant to the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551). The tribunal upheld the complaint of unfair dismissal due to lack of proper consultation; but it also concluded that, had there been proper consultation, it would simply ‘have delayed the inevitable’. It went on to make a redundancy award but no further award for compensation, on the ground that her compensatory award had been accounted for by the payments of the salary which the employer had made. It dismissed the claim under the 2000 Regulations, on the ground that there was objective justification for the employer’s acts. The employee appealed against the tribunal’s calculation of a compensatory award for unfair dismissal, contending, inter alia, that it had failed to address her claim for compensation for loss of statutory rights. She further appealed against the dismissal of her claim under the 2000 Regulations.

The appeal would be allowed in part.

(1) It was apparent from the tribunal’s decision that it had simply omitted to deal with the claim by the employee for compensation for loss of statutory rights. There was no basis, once the decision had been made that the employee had been unfairly dismissed, on which she could properly be denied an award in or about the standard sum for loss of statutory rights and that sum ought to have been awarded by the tribunal. Accordingly, the employee would be awarded £200 under that head.

(2) The tribunal’s reasons in coming to its conclusion that it was necessary for the employers to act as they did to achieve a genuine business objective were not sufficiently stated. Accordingly, the appeal would be adjourned insofar as it related to the claim under the 2000 Regulations, with liberty to restore. The tribunal would be directed to provide reasons for the conclusions which it reached.

Lorimer v Aberdeenshire Council

Employment – Transfer of undertakings – Continuity of employment – Variation of contracts – Reduction in salaries – Unlawful deduction.

The appellant employee was employed as the deputy director in the housing and technical department by Banff and Buchan District Council. Following a local government reorganisation, the employee was taken on by the respondent local authority (the employer) as a building control officer at a salary which was considerably lower than his previous salary. A letter was sent informing the employee of that fact and stating that he would qualify for detriment compensation for a period of three years which would have the effect of maintaining his salary at the higher level until April 1999. That letter did not reach the employee; he was made aware of the situation as a result of subsequent correspondence. He appealed unsuccessfully against the salary decision and thereafter issued a complaint of unlawful deductions from wages in the employment tribunal. The tribunal held that, at the material time, the employee had not suffered any loss because the period up to April 1999 had not expired and dismissed the complaint. On a subsequent application, made in May 1999, the tribunal held, inter alia, that the employee had consented to a reduction in salary. The employee appealed to the Employment Appeal Tribunal.

The appeal would be allowed.

On the evidence, there was no acceptance by the employee of the reduction in salary. The tribunal had acted on the basis of a misdirection that, on the admitted facts, his actions amounted to a consent to, or acceptance of, the lower salary. The variation in the term of the contract of employment which related to salary had not been competently effected; accordingly, the decision of the tribunal would be quashed and a finding that there had been an unlawful deduction from wages substituted.