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Nicholas v Grant (trading as Sandancers Cafe)

Employment – Transfer of trade, business or undertaking – Continuity of employment – Transfer of business of company to new employer – Employee subsequently making claims of unfair dismissal – Whether employee having continuity of employment for purposes of relevant legislation – Whether tribunal erring in approach – Transfer of Undertakings (Protection of Employment) Regulations 1981,SI 1981/1794, reg 5 – Employment Rights Act 1996, s 218.

The appeal would be allowed.

An employment relationship was essentially characterised by the link existing between the employee and the part of the undertaking or business to which he was assigned to carry out his duties.

The tribunal did not seem to have considered whether the employee had been assigned to carry out her duties at the cafe or had been assigned elsewhere. In failing to consider that part, the tribunal had committed an error of law. The employee had been working at the cafe on 13 February 2005 on the day immediately before the transfer, and for three months afterwards. In those circumstances, there had been continuity of employment for the purposes of reg 5 of the Regulations and s 218 of the Act.

Cross and another v British Airways plc

Employment – Continuity – Transfer of trade, business or undertaking – Normal retiring age – Whether statutory normal retiring age transferable on transfer of undertaking – Employment Rights Act 1996, ss 94, 109 – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794.

Section 109(1) of the Employment Rights Act 1996 provides: ‘Section 94 does not apply to the dismissal of an employee if on or before the effective date of termination he has attained—(a) in a case where—(i) in the undertaking in which the employee was employed there was a normal retiring age for an employee holding the position held by the employee, and (ii) the age was the same whether the employee holding that position was a man or a woman, that normal retiring age, and (b) in any other case, the age of sixty-five.’

The employees had both been employed as flying crew by British Caledonian Airways Ltd (BCal) until its takeover by British Airways (BA). After the take-over they continued to work for BA in those capacities. As flying crew with BCal, they had been entitled to continue in work until aged 60, when they could have retired on full pension. However, BA had for over thirty years had a rule requiring its flying crew to retire at the age of 55. In due course, many years after the transfer, BA required the employees to retire at 55 in accordance with its rule. They challenged that requirement in unfair dismissal proceedings before an employment tribunal, maintaining that they were entitled to continue working until aged 60. The employment tribunal held that the dismissals were fair, and that decision was upheld on appeal to the Employment Appeal Tribunal. The employees appealed.

The following issue, inter alia, arose on the appeal: whether the statutory normal retiring age set by s 109 of the Employment Rights Act 1996, excluding the right given by s 94 of the Act not to be unfairly dismissed, was transferable under the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794 (TUPE).

The appeal would be dismissed.

The statutory normal retiring age set by s 109 was not transferable under (TUPE).

The normal retiring age at any given time, though often heavily influenced by the contractual provision for retirement in force at that time, was, like the contractual term itself, subject to change, pre- and post-transfer. It was not something that was capable in terms of s 109 of the Act of being frozen in perpetuity as at the moment of transfer. It was the normal retiring age for those in the ‘position’ of the employee in question at the time of his dismissal that mattered, for it was that which, by s 109, determines whether, at that time, he had a right under s 94 not to be unfairly dismissed. Accordingly, however well disposed the courts should be to preserving pre-transfer contractual rights of employees corresponding, as provided by regulation 5(2)(a) of TUPE, to the ‘… powers, duties and liabilities’ of the transferring employer ‘under or in connection with any such contract’, if the concept of normal retiring age might vary and, for that purpose was that applicable at the time of dismissal, there was nothing there to transfer or to preserve as at the time of transfer. All that was transferred was a general law right not to be unfairly dismissed before reaching normal retirement age, whatever that might be at the time of dismissal.

Cross and another v British Airways plc

Employment – Continuity – Transfer of trade, business or undertaking – Normal retiring age – Whether statutory normal retiring age transferable on transfer of undertaking – Employment Rights Act 1996, ss 94, 109 – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794.

Section 109(1) of the Employment Rights Act 1996 provides: ‘Section 94 does not apply to the dismissal of an employee if on or before the effective date of termination he has attained—(a) in a case where—(i) in the undertaking in which the employee was employed there was a normal retiring age for an employee holding the position held by the employee, and (ii) the age was the same whether the employee holding that position was a man or a woman, that normal retiring age, and (b) in any other case, the age of sixty-five.’

The employees had both been employed as flying crew by British Caledonian Airways Ltd (BCal) until its takeover by British Airways (BA). After the take-over they continued to work for BA in those capacities. As flying crew with BCal, they had been entitled to continue in work until aged 60, when they could have retired on full pension. However, BA had for over thirty years had a rule requiring its flying crew to retire at the age of 55. In due course, many years after the transfer, BA required the employees to retire at 55 in accordance with its rule. They challenged that requirement in unfair dismissal proceedings before an employment tribunal, maintaining that they were entitled to continue working until aged 60. The employment tribunal held that the dismissals were fair, and that decision was upheld on appeal to the Employment Appeal Tribunal. The employees appealed.

The following issue, inter alia, arose on the appeal: whether the statutory normal retiring age set by s 109 of the Employment Rights Act 1996, excluding the right given by s 94 of the Act not to be unfairly dismissed, was transferable under the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794 (TUPE).

The appeal would be dismissed.

The statutory normal retiring age set by s 109 was not transferable under (TUPE).

The normal retiring age at any given time, though often heavily influenced by the contractual provision for retirement in force at that time, was, like the contractual term itself, subject to change, pre- and post-transfer. It was not something that was capable in terms of s 109 of the Act of being frozen in perpetuity as at the moment of transfer. It was the normal retiring age for those in the ‘position’ of the employee in question at the time of his dismissal that mattered, for it was that which, by s 109, determines whether, at that time, he had a right under s 94 not to be unfairly dismissed. Accordingly, however well disposed the courts should be to preserving pre-transfer contractual rights of employees corresponding, as provided by regulation 5(2)(a) of TUPE, to the ‘… powers, duties and liabilities’ of the transferring employer ‘under or in connection with any such contract’, if the concept of normal retiring age might vary and, for that purpose was that applicable at the time of dismissal, there was nothing there to transfer or to preserve as at the time of transfer. All that was transferred was a general law right not to be unfairly dismissed before reaching normal retirement age, whatever that might be at the time of dismissal.

Decision of the Employment Appeal Tribunal [2005] IRLR 423, [2005] All ER (D) 10 (Apr) affirmed.

Co-Operative Group (CWS) Ltd v Stansell Ltd and another

Industrial and Provident Societies – Determination of disputes – Arbitration – Transfer of property and engagements – Prohibition against assignment of building contract without written consent – Whether transfer effective to vest in claimant society rights of predecessor under building contract – Whether statutory provision overriding contractual prohibition on assignment – Industrial and Provident Societies Act 1965, s 51(1).

Section 51(1) of the Industrial and Provident Societies Act 1965 provides, so far as is material: ’51(1) Any registered society may by special resolution transfer its engagements to any other registered society which may undertake to fulfil those engagements; and if that resolution approves the transfer of the whole or any part of the society’s property to that other society, the whole or, as the case may be, that part of the society’s property shall vest in that other society without any conveyance or assignment.’

The claimant was a society registered under the Industrial and Provident Societies Act 1965. It was incorporated with limited liability. In April 1990, the defendant building company entered into a contract on a JCT standard form for the construction of a building in Somerset (the contract). Problems subsequently arose with flooding. The contract had been entered into by the defendant with Co-operative Retail Services Ltd (CRS). Clause 18.1.1 provided ‘Neither the Employer nor the Contractor shall, without the written consent of the other, assign this contract’. CRS was, like the claimant, registered under the 1965 Act. At a duly convened general meeting of CRS in March 2000, a special resolution was passed pursuant to s 51 of the 1965 Act to transfer the whole of its property and assets and all its engagements to the claimant. The transfer was in consideration of the claimant issuing to each member of the CRS paid up shares in the claimant equal in value to the amount standing to the credit of the member in the share account of the member in the register of members of CRS on the date that that the transfer became effective. The claimant in turn undertook to fulfil the engagements of CRS. The defendant was not notified by CRS or the claimant of the proposed resolution to transfer engagements. Nor was it notified of any assignment of the contract. The claimant issued a notice of arbitration. The arbitrator held as a preliminary issue that cl 18.1.1 did not prevent the claimant from pursuing the action against the defendant. He took the view that the transfer effected by the resolution did not constitute an assignment of CRS’s interest in the building as envisaged by the building contract but that, even if there had been an assignment, s 51 of the 1965 Act overrode the restriction on assignment contained in that clause. The defendant appealed. The judge overturned the arbitrator’s decision on both points and the claimant appealed.

The appeal would be allowed.

On its true construction, s 51(1) of the 1965 Act operated so as to vest the benefit of the building contract in the claimant, notwithstanding the prohibition against assignment in cl 18.1.1 and the absence of consent by the defendant.

The self-evident purpose of the provision was to enable or authorise one registered society to transfer to another society its engagements and its property with the minimum of formality – simply by passing a special resolution, which would have the stated statutory consequence of vesting the transferor’s property without the need for a conveyance or assignment. The language of ‘a transfer of engagements’ was broad enough to include the liabilities of a society to its members and to third parties and the rights of a society against its members and against third parties; and to cover contracts which would not ordinarily be transferable without the consent of the other party, such as contracts of service with employees of the transferring society. The force of the statutory language and purpose dispensed with the need for the consent of the defendant to the transfer to the claimant of the benefit of the building company. Further, there was nothing in the scheme of the Act generally or in the context of s 51(1) in particular, which prevented the words of the subsection from having their natural and ordinary meaning. Nor did the authorities require the construction of the judge below. It would not be consistent with Parliament’s intention if it was only to be lawful to transfer the benefits of contracts or engagements where that was contractually permissible; that would defeat the purpose of the beneficial statutory intervention.

Nokes v Doncaster Amalgamated Collieries Ltd [1940] 3 All ER 549 considered.

Decision of Blackburne J 2005] All ER (D) 324 (Jul) reversed.

Principal and Fellows of Newnham College in the University of Cambridge v Revenue and Customs Commissioners

Value added tax – Exemptions – Election to waive exemption – Land – College rebuilding and refurbishing library – Meaning of ‘occupation’ – Whether college in occupation of library – Value Added Tax Act 1994, Sch 10, paras 2(3AA), 3A(7).

Value Added Tax Act 1994, Sch 10, para 2(3AA) provides, so far as material: ‘Where an election has been made under this paragraph in relation to any land, a supply shall not be taken by virtue of that election to be a taxable supply if-(a) the grant giving rise to the supply was made by a person (“the grantor”) who was a developer of the land; and (b) at the time of the grant … it was the intention or expectation of-(i) the grantor … that the land would become exempt land (whether immediately or eventually and whether or not by virtue of the grant) or, as the case may be, would continue, for a period at least, to be such land. 3A(7) For the purposes of para 2(3AA)… land is exempt land if …(a) the grantor, or (c) a person connected with the grantor … is in occupation of the land without being in occupation of it wholly or mainly for eligible purposes’.

The college was a body corporate established by Royal charter. Although within the University of Cambridge, it was autonomous in relation to the management of its own property. The education services which it provided were exempt supplies for the purposes of the Value Added Tax Act 1994. The college decided to rebuild and refurbish its library. Pursuant to professional advice received, the college formed a wholly owned subsidiary (NCLCL) and funded all its setup costs. The college elected to waive exemption (opted to charge VAT tax) in respect of the main college building (including the library) on the college site. At the start of the library construction works an appropriate notification of that election was provided to the commissioners. The construction work took place between June 2001 and November 2003 with the library opening for business on 12 January 2004. An agreement for lease was entered into between the college and NCLCL on 22 February 2001. A formal lease was granted on completion of the building. In addition to the agreement for lease, the college entered into other agreements with NCLCL at the same time. Those included an agreement for the sale of library books and other library assets of the college, an agreement for the secondment of library staff from the college to NCLCL, an administration agreement for the running of the library (by the seconded staff) and an agreement for the management of rare books. To complete the set of agreements required to implement the advised structure, NCLCL entered into an agreement with the college for the hire of library books in order to provide library services to the college. The issue for determination was whether the college remained in occupation after the grant of the lease. If so, the land was exempt land within Sch 10, para 3A(7) of the Act; and was exempt land for the purposes of para 2(3AA). Notwithstanding the election under para 2(1) of Sch 10 the grant of the lease was not to be taken as a taxable supply. The commissioners held that the election to waive exemption made by the college under para 2 was of no effect by reason of sub-para 2(3AA) of that schedule. The VAT and Duties Tribunal concluded that the college was in occupation of the library and upheld the commissioners’ decision. The college appealed, challenging each of the three elements in the reasoning which led the tribunal to the conclusion that the college was in occupation of the library: (i) use by students and fellows, (ii) the presence of college employees on secondment to NCLCL and (iii) the control which the college was able to exercise over NCLCL.

The appeal would be allowed.

For the purposes of para 3A(7) to be in ‘occupation’ of land required more than a right to use that land. It required some degree of control over the user by others, namely, some degree of control over what those who were not also in occupation of the land could do on the land.

In the absence of any element of control by students and fellows of the college over access to and use of the library by others it was impossible to sustain the first of the reasons given by the tribunal. Moreover, there could be no doubt that, under the arrangements that were agreed, the library staff were to be present in and in control of the library. There could be no doubt that the library staff were to remain employees of the college. The college alone was to have the power to discipline and dismiss them. But, subject to that, the library staff were required, under the terms which each agreed with the college on countersigning the secondment letter, to carry out their duties under the direction of NCLCL. During secondment the library staff were to be answerable to NCLCL, and only indirectly to the college, for what they were to do in the library. The fact that the library staff remained employees of the college was not sufficient to support the conclusion that the college was in occupation of the library. Their presence and control was as persons acting under the direction of NCLCL. It was not, of itself, indicative of presence and control by the college. Further, the arrangements reflected the true intent of the parties and had to be given the effect which, in law, they had. Although the arrangements made between the college and NCLCL might be described as contrived or artificial, in the sense that they had no commercial purpose other than to enable the college to recover input tax, but the commissioners were right to accept that they could not be treated as a façade.

The decision of the tribunal that the election to waive exemption made by the college under para 2 was of no effect by reason of sub-para 2(3AA) would be set aside.

The circumstances in which it is appropriate to deny this court the benefit which it can expect to derive from consideration of the issues in the High Court should be seen as exceptional.

Werhof v Freeway Traffic Systems GmbH & Co KG (Case C-499/04)

European community – Employment – Continuity of employment – Transfer of trade, business or undertaking – Safeguarding of employees’ rights – Collective agreement applicable to transferor and employee at time of transfer – Reference for preliminary ruling – Interpretation of directive – Whether transferee bound by collective agreement subsequent to one in force at time of transfer – Council Directive (EEC) 77/187, art 3(1).

Article 3(1) of Council Directive (EEC) 77/187 provides, so far as material: ‘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.’

The Court ruled:

Article 3(1) of the directive had to be interpreted as not precluding, in a situation where the contract of employment referred to a collective agreement binding the transferor, that the transferee, who was not a party to such an agreement, was not bound by collective agreements subsequent to the one which had been in force at the time of the transfer of the business.

By virtue of the directive, the rights and obligations arising from a collective agreement to which a contract of employment referred were automatically transferred to the new owner, even if, as in the instant case, the latter was not a party to any collective agreement. Accordingly, the rights and obligations arising out of a collective agreement continued to bind the new owner after the transfer of the business. However, when interpreting provisions of a directive, account had to be taken of the principle of the coherence of the Community legal order which required secondary Community legislation to be interpreted in accordance with the general principles of Community law. Freedom of association, which also included the right not to join an association or union, was one of the fundamental rights protected in the Community legal order. The directive had therefore to be interpreted so as to make it possible to avoid a situation in which the transferee of a business who was not a party to a collective agreement was bound by future changes to that agreement. His right not to join an association would thus be fully safeguarded. In those circumstances, the applicant could not maintain that a clause contained in an individual contract of employment and referring to collective agreements concluded in a particular sector had necessarily to be dynamic and refer, by application of art 3(1) of the directive, to collective agreements concluded after the date of the transfer of the undertaking.

Muscat v Cable & Wireless plc

Employment – Contract of service – Triangular employment relationship – Whether contract of employment with end-user could be implied.

The claimant was employed by a company, EIL. He was subsequently dismissed and immediately re-engaged as a contractor. A company, E-Nuff, was set up for the purpose of receiving his pay and car allowance. EIL was taken over by C&W, and the claimant continued to work as before, but under the direction of C&W management. The claimant continued to submit invoices in the name of E-Nuff to C&W, but they were not paid. He was told that C&W did not deal with contractors direct and that he had to deal with C&W through an agency. He entered into a ‘contract for services’ with the agency, after which the agency paid E-Nuff’s monthly invoices. Thereafter, C&W informed the claimant that it not require his services any more. He presented a complaint of unfair dismissal to an employment tribunal. C&W contended that he was not an employee, and the tribunal dealt with that as a preliminary issue. It adjourned the issue until after the Court of Appeal gave its decision in Dacas v Brook Street Bureau (UK) Ltd [2004] All ER (D) 125 (Mar). The dissenting judge in Dacas considered that the minimum mutuality of obligations required to establish a contract of employment could not be satisfied where the obligation to remunerate did not lie on the person having control of the worker’s work. The majority took the view that, so long as the remuneration was being provided by the ‘employer’ it mattered not that it was not paid directly but through some other arrangement made by the employer. It advised that in cases where there was a triangular employment relationship, employment tribunals should consider the possibility that there might exist an implied contact of employment between the worker and the end-user. Applying the guidance given by the majority inDacas, the tribunal decided that the claimant had had an implied contract of employment with C&W. C&W appealed, contending that the guidance given in Dacas was wrong and that the minority judgment was correct; that the decision was not binding on the tribunal because it was obiter; and that in applying it the tribunal had erred in law. The EAT held that the guidance was binding upon employment tribunals and dismissed the appeal. C&W appealed.

The appeal would be dismissed.

The view of the majority in Dacas was correct. The essentials of a contract of employment were the obligation to provide work for remuneration and the obligation to perform it, coupled with control. It did not matter whether the arrangements for payment were made directly or indirectly. The guidance provided for employment tribunals was unimpeachable. Whilst it was not strictly ‘binding’ according to the rules of precedent, it was plainly right for employment tribunals to heed it. The guidance did not direct employment tribunals to reach any particular conclusion; only to consider the possibility that an implied contract might exist.

Dacas v Brook Street Bureau (UK) Ltd [2004] All ER (D) 125 (Mar), [2004] IRLR 358 applied.

Decision of the Employment Appeal Tribunal [2005] All ER (D) 412 (Feb) affirmed.

Preston and others v Wolverhampton Healthcare Trust and others

Employment – Equality of treatment of men and women – Equality clause – Part-time workers denied access to employers’ occupational pension schemes – Employees transferred from employment of one employer to another – Meaning and effect of statutory time limit on bringing claims – Whether claims presented in time – Equal Pay Act 1970, s 2(4).

The appeal would be dismissed.

On the true construction of s 2(4) of the Act time began to run in a claim against the transferor for equality of treatment under its occupational pension scheme from the date of the transfer.

The rule that s 2(4) originally laid down was that a claim in respect of the operation of an equality clause had to be brought within six months of the end of the employment to which the claim related. It applied to each and every claim that might be made in respect of the contravention of a term modified or included by virtue of an equality clause. The same rule had to be applied where there had been a TUPE transfer. The only question was to which employment did the claim relate. The answer, where the claim was in relation to the operation of an equality clause relating to an occupational pension scheme before the date of the transfer, was that it related to the woman’s employment with the transferor. The best way of achieving the purpose of the time limit was to link it as closely as possible to the liability which was the subject of the claim. That was achieved if the period of six months within which the claim relating to the operation of the equality clause with regard to an occupational pension scheme provided by the transferor had to be brought ran from the end of the claimant’s employment with the transferor, to whom the liability belonged, rather than the end of her employment with the transferee.

Decision of Court of Appeal [2004] IRLR 979, [2004] All ER (D) 73 (Oct) affirmed.