RCO Support Services Ltd v Unison
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lady Justice Hale,Lord Justice Pill |
| Judgment Date | 12 April 2002 |
| Neutral Citation | [2002] EWCA Civ 464 |
| Docket Number | Case No: A1/2000/2596 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 April 2002 |
[2002] EWCA Civ 464
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEAL TRIBUNAL
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Pill
Lord Justice Mummery and
Lady Justice Hale
Case No: A1/2000/2596
Mr Nicholas Underhill QC and Mr Thomas Linden (instructed by Eversheds for the Appellant)
Mr Brian Langstaff QC and Miss Dinah Rose (instructed by Thompsons for the Respondent Unison)
Mr Gerard McDermott QC, Mr Conor Quigley and Miss Joanne Connolly (instructed by the Legal Department of Rentokil Initial UK Limited for the Respondent Initial Hospital Services).
This is an appeal from the order of the Employment Appeal Tribunal on 4 July 2000 dismissing the appeal of RCO Support Services Limited (RCO) from the decision of the Employment Tribunal sitting at Liverpool. The judgment given on behalf of the Appeal Tribunal by its President, Lindsay J, is reported at [2000] ICR 1502.
On a preliminary issue arising in proceedings by former employees (cleaning and catering staff) for unfair dismissal and by the cleaners' union, Unison, for breach of consultation obligations, the Employment Tribunal held, in Extended Reasons sent to the parties on 2 November 1998, that there were transfers of undertakings, within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981, as amended, (TUPE), for the supply of cleaning and catering services at Walton Hospital. The transferee was RCO, which operated a contract for the supply of cleaning and catering services at the near-by Fazakerley Hospital. Both hospitals, only three miles apart in Liverpool, are administered by the respondent Aintree Hospitals NHS Trust (the Trust), which was not represented on the hearing of the appeal.
On 31 March 1998 the process of moving in-patient services from Walton Hospital to Fazakerley Hospital was completed. Walton Hospital was left with only an out-patients service. This dispute is concerned with the impact of the closure of in-patient services at Walton and the transfer of them to Fazakerley on the employment rights of the ancillary cleaning and the catering staff formerly employed to supply support services at Walton.
Cleaners
From 1972 the cleaning work at Walton Hospital was contracted out, first to Taylorplan and then from October 1995 to the respondent, Initial Hospital Services Limited (Initial). The cleaners employed by Initial were permanently dedicated members of the in-patients' cleaning team, mainly working in particular wards or theatres for 4 years or more. They were known as "ward girls" or "theatre girls" and were regarded as part of the team serving the ward or theatre. They needed a certain amount of training and operated established systems with the medical staff.
Phase 1 of the closure of in-patient services at Walton began on 29 March 1994 with the closure of the Accident and Emergency Department. In 1996 Wards E and F at Walton were closed. They were directly replaced by two new wards at Fazakerley, using the same medical and nursing staff serving the same patients. The same 6 cleaners moved to Fazakerley with the rest of the ward. RCO had the cleaning contract at Fazakerley. It disputed the contention of Unison that the cleaners were protected by TUPE, but accepted, without abandoning its contention, that the 6 cleaners should have continuity of employment. Phase 1 was completed by the transfer of the opthamology ward and the main operating theatres.
On 19 November 1997 there was a meeting between RCO and Unison. There was a discussion about the future of 25 cleaners and 3 supervisors employed by Initial, whose functions were moving to Fazakerley. RCO denied Unison's contention that their employment would transfer pursuant to TUPE, but said that they "would be taken on if they resigned from Initial." No agreement was reached. Further meetings failed to resolve the disagreement. RCO successfully tendered against Initial for the cleaning contract at Fazakerley on the footing that TUPE did not apply. When RCO advertised the resultant vacancies none of the Walton cleaners applied for jobs with RCO. None of them were taken on by RCO. The tribunal expressly found that there was "no dishonourable reason" for RCO's preference.
On 31 March 1998 Phase 2 of the process of transfer was completed. The new building at Fazakerley was ready. The doctors and nurses serving particular wards were transferred to equivalent wards at Fazakerley along with medical equipment, furniture and beds. The operating theatres at Walton were closed and were replaced by the same number for the same work at Fazakerley. There was a ward-for-ward, theatre-for-theatre equivalence in the arrangements at the 2 hospitals. Though the area to be cleaned was smaller at Fazakerley, it had to be carried out in accordance with the same work standards, procedure codes and monitoring issued by the Trust. The cleaners' employment at Walton ended on 31 March 1998.
Catering
The catering staff at Walton was employed by the Trust. There were 6 chefs and a larger number of catering support staff (room supervisors, cashiers, assistants and porters) supplying a complete catering service for patients and staff. Individual members of the catering staff team had designated roles with allotted work in the kitchen or the dining room. There was, of course, flexibility and cover for absences within a team.
At Fazakerley, where RCO had the catering contract and employed the same categories of catering support staff to fulfil the same functions, the staff restaurant was replaced by a new catering facility in February 1998, but the kitchen remained operative. The 6 chefs at Walton were moved to Fazakerley, but remained employees of the Trust. 6 support staff were re-deployed within the Trust and 3 were made redundant. RCO invited applications from them. One of them was taken on. Another employee at Walton was taken on by RCO later. Some catering equipment (slicing machine, service trolleys) was moved from Walton to Fazakerley.
The Employment Tribunal
Having made the important findings of fact summarised above the Employment Tribunal directed itself as follows—
"5(a) A transfer of an undertaking attracts for employees the protection of [TUPE] when the ownership of an economic entity changes while it retains its identity. When a part of a business is detached, it is an economic entity within the scope of [TUPE] if it is a unit with organisational independence."
The Employment Tribunal then asked and answered the first question-Was there an undertaking?- in a manner which RCO does not appeal—
"5 (b) Was there in either of these cases an economic entity? There was in each: the cleaning services for in-patients at Walton Hospital; the catering support for in-patients there. Particular people did particular jobs in particular places for particular people: all the work in either group was homogeneous, belonging in the same category; the employees cleaned and they did the jobs ancillary to serving the food prepared by chefs; each was a group with its own identity; each was staffed by people dedicated to particular tasks…"
The Employment Tribunal then moved to the second question-Was there a transfer?—
"6. Was there a change of ownership or merely a closure of Walton with a dissipation of the work elsewhere? Did either unit retain its identity? In other words was there a transfer of either economic entity? There was a transfer of each."
In its reasoning the Employment Tribunal expressly considered the judgment of the European Court of Justice in Suzen [1997] ICR 662, which is heavily relied on by RCO, and commented that
"On the face of it, this means that where there is no transfer of assets, if the second contractor does not in fact become the employer of the original contractor's workers, there is no transfer. Thus a new owner might defeat the operation of [TUPE] simply by refusing to take on the old workforce. On that understanding of Suzen, the finding would irresistibly go against these applicants."
After considering the purpose of TUPE and the parent Acquired Rights Directive 77/187/EEC, and the decision of the Employment Appeal Tribunal in ECM(Vehicle Delivery Service) Limited v. Cox [1998] ICR 631, EAT (which was later upheld by the Court of Appeal: [1999] ICR 1162) the tribunal considered all the circumstances of the case and found as a fact that the economic entities, which existed at Walton in respect of the support cleaning and catering services, retained their identity in the new location at Fazakerley operated by RCO. The tribunal justified its conclusion on the cleaners (domestics) as follows—
"6 (d) The core business of the domestics moved to Fazakerley, ward for ward, theatre for theatre. The ancillary demand, the cleaning of corridors, remained, though the corridors changed; likewise the cleaning of offices. It was no more than a change of location for the same business carried on by a different firm. Here was a labour intensive business: the transfer of tangible assets was of little significance, for there was not much that might be transferred. On a strict definition, the nature of the business meant that there were no significant intangible assets, such as goodwill or unpaid fees; the Trust provide a free public service, without rival, to the greater part of the community. The need for the cleaners' labours were substantially maintained. To the extent that these cleaners were trained to do a special kind of cleaning, the need for their particular skill...
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