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Sweetin v Coral Racing

Industrial relations – Practice – Transfer of undertaking – Consultation prior to transfer of undertaking – Failure to consult – Compensation – Level of compensation – Whether tribunal erring in assessment of compensation – Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794), reg 11.

The tribunal should have adopted the same approach when assessing compensation for failure to consult under the 1981 Regulations as that adopted when assessing compensation for failure to consult under s 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. Accordingly, the tribunal should have awarded 13 weeks’ pay as compensation for the failure to consult. In the circumstances, the failure had been serious and gross and there were no mitigating circumstances to justify a departure from that level of compensation.

The wording of the compensation provisions in the 1981 Regulations and the 1992 Act reflected each other and underlined the importance of compliance with the duty to consult. Parliament had clearly intended that the awards in each case were to be penal in nature, rather than solely compensatory. While the consequences of redundancy were liable to be more serious than those of a transfer under the 1981 Regulations there was no reason to infer that Parliament, when using the same terminology as in the case of payments due for failure to consult in a redundancy situation, intended that the approach to the assessment of compensation payable should be any different.

An order would be substituted that a sum equivalent to 13 weeks’ pay was appropriate compensation for the failure to consult.

Radin (Susie) Ltd v GMB [2004] 2 All ER 279 applied.

[2006] All ER (D) 218 (Feb)

Parham v F Parham Ltd and another

Contract – Construction – Contractual term – Remuneration – Whether judge correctly construing agreement concerning remuneration due to claimant.

It contended, inter alia, that the judge had erred in his construction of cl 7 of the agreement in failing to have regard to commercial reality.

The appeal would be dismissed.

The judge had been entitled to come to the decision he had.

In the instant case, the words of cl 7 of the 1973 agreement had been clear, and the judge had correctly construed them in the circumstances of the agreement having been drawn up in relation to a family company.

Wilcox and others v Balfour Beatty Power Networks and another

Employment – Continuity – Transfer of trade, business or undertaking – Employment by transferor immediately before transfer – Tribunal concluding transfer – Whether tribunal paying proper regard to number of employees transferred.

In respect of the jointing contract, the tribunal had failed to deal with the issue of whether or not there had been a failure to take on a major part of the workforce in terms of numbers and skills. That failure amounted to an error of law.

To that extent, the appeal would be allowed. The jointing contract would, accordingly, be remitted to a freshly constituted tribunal for reconsideration. The tribunal had been entitled to reach the conclusions which it had in relation to the RASP contract.

Thomas and others v On Reflection Ltd and others

Employment – Continuity – Transfer of trade, business or undertaking – Preliminary issue – Employment tribunal finding that there had been no relevant transfer to the first respondent – Whether tribunal erring.The appeal would be dismissed.

No overwhelming case of perversity had been made out, and the tribunal’s decision was not one that could be said to be wrong.

The tribunal directed itself to follow guidance in the case authorities, it considered the relevant factors, balanced them and came to a factual conclusion both as to transfer and as to the existence at the material time of a stable economic entity and concluded on both those issues against the applicants. Its conclusions, which were supported by evidence, were open to them and were not reached in error of law or perverse.

Woodman v Monitus Ltd and another

Employment Appeal Tribunal – Practice – Appeals – Transfer of undertaking – Employment tribunal finding that there had been transfer of part of first respondent’s business to second respondent and that employee’s dismissal connected with transfer – Whether tribunal in error.The appeal would be dismissed.

The factual background of many of the cases which employment tribunals had to determine were complex and arose over a period of time rather than at a point in time. It was apparent from existing authority that the Employment Appeal Tribunal had to respect the fact-finding role of the employment tribunal and had not to emasculate its function by an over-zealous and artificial textual analysis of the text of the decision.

In the instant case, there had been no error of law by the tribunal, nor had it erred in makings its findings of fact.

Yeboah v Crofton [2002] IRLR 634 applied.

Guney-Gorres and another v Securicor Aviation (Germany) Ltd and another (Joined cases C-232/04 and C-233/04)

Court of Justice of the European Communities (Third Chamber)

European community – Employment – Continuity of employment – Transfer of trade, business or undertaking – Reference for preliminary ruling – Interpretation of directive – Whether transfer of assets an essential criterion in assessing whether transfer of undertaking or business having taken place – Council Directive (EC) 2001/23, art 1.

The applicants brought proceedings against the second respondent, the company tasked, by contract, to carry out security checks on passengers at Dusseldorf airport, and the first respondent, their former employer, the company tasked previously with the same services under a contract which had been terminated. Before the employment tribunal, the applicants sought a declaration that the employment relationship existing between them and the first respondent continued with the second respondent on the basis of the German civil code which implemented Council Directive (EC) 2001/23 (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 undertakings or businesses) in German law. The employment tribunal stayed proceedings and referred to the Court of Justice of the European Communities for preliminary ruling the question, inter alia, whether, in the context of an assessment whether there was a transfer of a business within the meaning of art 1 of the directive, a finding that there was a transfer of assets from the original contractor to the new contractor presupposed their transfer for independent commercial use by the transferee.

The Court ruled:

Article 1 of the directive had to be interpreted as meaning that in examining whether there was a transfer of an undertaking or business within the meaning of that article, in the context of a fresh award of a contract and having regard to all the facts, the transfer of the assets for independent commercial use was not an essential criterion for a finding that there was a transfer of those assets from the original contractor to the new contractor.

The transfer of assets was only a single factor in the overall assessment that had to be made by a national court when examining whether or not there had been a transfer of an undertaking or business within the meaning of art 1 of the directive.

Guney-Gorres and another v Securicor Aviation (Germany) Ltd and another (Joined cases C-232/04 and C-233/04)

JOINED CASES C-232/04 AND C-233/04

COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES (Third Chamber)

15 DECEMBER 2005

JUDGES ROSAS, (PRESIDENT OF THE CHAMBER), PUISSOCHET, VON BAHR, BORG BARTHET (RAPPORTEUR) and LÕHMUS

ADVOCATE GENERAL POIARES MADURO

JUDGMENT OF THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES

1 The references for a preliminary ruling concern the interpretation of Article 1 of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (OJ 2001 L 82, p. 16).

2 Those references were submitted in the course of proceedings brought by Ms Güney-Görres and Ms Demir against Kötter Aviation Security GmbH & Co. KG (‘Kötter’), the company tasked, by contract, to carry out security checks on passengers and baggage at Düsseldorf airport, and their former employer, Securicor Aviation (Germany) Ltd (‘Securicor’), the company tasked previously with the same services under a contract which had been terminated. Those employees brought an action against Kötter before the Arbeitsgericht Düsseldorf (employment tribunal), for a declaration that the employment relationship existing between them and Securicor continued with Kötter on the basis of Paragraph 613a of the German Civil Code (Bürgerliches Gesetzbuch, hereinafter the ‘BGB’) which implemented Directive 2001/23 in German law.

Legal context

Community legislation

3 Directive 2001/23 codifies Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event oftransfers of undertakings, businesses or parts of businesses (OJ 1977 L 61, p. 26), as amended by Council Directive 98/50/EC of 29 June 1998 (OJ 1998 L 201, p. 88).

4 The scope of Directive 2001/23 is established in Article 1 thereof, which provides:

‘1. (a) This Directive shall apply to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger.

(b) Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.’

5 The wording of Article 1 of Directive 2001/23 is identical to that of Article 1 of Directive 77/187, as amended by Directive 98/50 where the fourth recital in the preamble reads as follows:

‘… considerations of legal security and transparency require that the legal concept of transfer be clarified in the light of the case-law of the Court of Justice; … such clarification does not alter the scope of Directive 77/187/EEC as interpreted by the Court of Justice’.

6 Articles 3 and 4 of Directive 2001/23 contain the following provisions:

‘Article 3

1. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.

Article 4

1. The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.

…’

National law

7 Provision is made for the transfer of employment relationships by reason of a transfer of a business and for the associated prohibition against dismissal in Paragraph 613a of the BGB, entitled ‘Rights and obligations in the event of transfers of businesses’, which reads:

‘(1) Where a business or part of a business is transferred to another owner by a legal transaction, the rights and obligations arising from the employment relationships existing on the date of the transfer shall pass to that owner. Where those rights and obligations are subject to the provisions of a collective agreement or works agreement, they shall be incorporated into the employment relationship between the new owner and the employee and may not be amended in a manner unfavourable to the employee for at least one year following the date of the transfer. The second sentence shall not apply where the rights and obligations under the new owner are subject to the provisions of a different collective agreement or different works agreement. The rights and obligations may be amended before expiry of the period prescribed in the second sentence if the collective agreement or works agreement ceases to apply or if either party to a different collective agreement, which the new owner and the employee agree is applicable, is not bound by its provisions.

(2) The former employer and the new owner shall be jointly and severally liable in respect of obligations under subparagraph 1 if such obligations arose before the transfer date and fall to be met within one year of that date. However, if such obligations fall to be met after the transfer date, the former employer shall be liable only in respect of the period prior to the transfer date.

(3) Subparagraph 2 shall not apply where a legal person or a commercial partnership is dissolved by means of a reorganisation.

(4) Termination of an employee’s employment relationship by the former employer or new owner by reason of the transfer of a business or part of a business shall be without effect. This shall be without prejudice to the right to give notice on other grounds.

(5) The former employer or new owner shall be required to give written notification, prior to a transfer, to employees affected by that transfer of:

1. the date or proposed date of the transfer;

2. the reasons for the transfer;

3. the legal, economic and social implications of the transfer for the employees, and

4. any measures envisaged in relation to the employees.

(6) Employees may object in writing to the transfer of their employment relationships within one month of receipt of the notification under subparagraph 5. Objections may lie against the former employer or the new owner.’

Baxter and others v Marks and Spencer plc and another

Employment – Continuity – Transfer of trade, business or undertaking – Tribunal holding that TUPE regulations applicable – Tribunal concluding no breach by employer of duty to inform and consult save in one respect for which it did not award damages – Whether tribunal in error – Transfer of Undertakings (Protection of Employment) Regulations 1981, reg 10.

The appeal would be dismissed.

The applicants had failed to make out their contentions that the tribunal had erred in reaching its decision.

No detriment was found to have resulted from the employer’s technical breach in failing to supply the elected representatives after their election with the information which had been supplied before the election. It could not therefore sensibly be said that it was a misapplication of the tribunal’s discretion to award no compensation at all, nor that the decision undermined the purpose of the regulations or was contrary to public policy, as contended for by the applicants.

Moir v Heart of England Housing and Care Ltd

Employment tribunal – Hearing – Intervention of chairman – Employee maintaining intervention deflecting her from valid cross examination on issue later relied on by tribunal to reach decision – Whether employee having unfair hearing.

The appeal would be allowed.

In all the circumstances, the intervention of the chairman was not fair and would certainly have led an outside observer to say that there had not been a fair hearing.

On the evidence, the employee’s representative had been deflected from a course of action that he should have been allowed to pursue. One of the employer’s arguments was clearly that the company was in a precarious financial situation, and, if the accounts presented a more rosy picture, that was an issue that the employee was entitled to have put to witnesses.

Porter v Magill [2002] 1 All ER 465 applied.

McCormack and others v Scottish Coal Company Ltd

Employment – Continuity – Transfer of trade, business or undertaking – Employer operating in the mining industry – Employment tribunal and Employment Appeal Tribunal finding relevant transfer of an undertaking had taken place – Whether tribunal and appeal tribunal erring in law.

The appellant employer was a mining company that had entered into a transaction with CM Ltd relating to the carrying on of mining activities at an open cast mining site in Ayrshire. The majority of CM Ltd’s employees became employees of the employer following the transaction. Subsequently, the employees commenced proceedings before the employment tribunal, which held that the Transfer of Undertakings (Protection of Employment) Regulations 1981 had applied to the employer/CM Ltd transaction. The employer appealed to the Employment Appeal Tribunal. The appeal tribunal dismissed the appeal and remitted the case to the tribunal for further directions on the basis that there had been a relevant transfer of CM Ltd’s undertaking to the employer. The employer appealed.

The employer contended that the tribunal and the appeal tribunal had failed to follow the guidance in European authorities that provided that the characterisation of an undertaking as labour-intensive or, in the alternative, as asset-reliant, was determinative of the issue of whether there had been a transfer of an undertaking.

The appeal would be allowed.

It was clear that the findings of the tribunal had not provided a proper basis in fact on which to consider the application of the guidance provided by the Court of Justice, the Court of Appeal and the Employment Appeal Tribunal. There were no findings in fact that reflected an appreciation by the tribunal of the economic realities of the arrangements for provision of plant and labour for use at the site.

In assessing the degree of importance to be given to plant, and the transfer or non-transfer of it as part of the transaction, the national court had to have regard to all the circumstances and had to take into account the type of undertaking or business transferred, having regard in particular to the sector of activity in which it operated. That required a close examination of the wider industry context, and the activities of the predecessor entity within that context. It was in the light of that inquiry that the national court had to determine what were the essential and indispensable elements required in order for the economic entity to carry on operating and establishing whether the relevant elements had been taken over by the transferee.

The case would be remitted to the tribunal for a hearing de novo.