Whitehouse v Chas A. Blatchford & Sons Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BELDAM,LORD JUSTICE BUXTON,MR JUSTICE JONATHAN PARKER |
| Judgment Date | 23 April 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0423-7 |
| Docket Number | EATRF 1998/0664/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 April 1999 |
[1999] EWCA Civ J0423-7
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Royal Courts of Justice
Strand
London WC2
Lord Justice Beldam
Lord Justice Buxton
Mr Justice Jonathan Parker
EATRF 1998/0664/3
MR B LANGSTAFF QC with MR KIBLING (Instructed by Andrew Freer, GMB, National Legal Department, London SW19) appeared on behalf of the Appellant
MR T LINDEN (Instructed by Richard Linkskell, Legal Adviser, Engineering Employer's Federation, London SW1H) appeared on behalf of the Respondent
Friday, 23 April 1999
Before the court is an appeal by Mr Ian Whitehouse from the decision of the Employment Appeal Tribunal dismissing his claim for unfair dismissal against his employers, the respondent company, Chas A Blatchford & Sons Ltd.
The appellant, Mr Whitehouse, is 40 years of age. In 1975 at the age of 17, he took an apprenticeship as an artificial limb maker with James Stubbs & Co Ltd ("Stubbs"). After completing his apprenticeship, Stubbs employed him as a technician.
In 1987 Stubbs obtained a contract to supply prosthetic appliances to the Disablement Service Centre of the Northern General Hospital in Sheffield. The hospital was managed by the Northern General Hospital Services Trust. The contract with Stubbs was initially for five years but it was renewed in 1992. The contract was the mainstay of Stubbs' business, and by 1996 it employed a workforce of 18, including 13 technicians in the workshop of whom the appellant was one. The contract was due for renewal on 1 April 1997. In June 1996, on behalf of the hospital, the Disablement Service Centre sought tenders for the contract to supply prosthetic and orthotic services at the Northern General Hospital for the next five years.
Stubbs quoted for the contract but was unsuccessful. The respondent employers, who also tendered, were successful.
The employers are a national company with a workforce of some 400 employees who provide similar services under a number of other Health Service contracts. On 14 January 1996 the employers were told that theirs was the favoured bid. They thought this equivalent to being awarded the contract. But as is clear from a letter from the Disablement Services manager, the award of the contract was conditional upon discussions about staffing costs. Three days later, after the discussions had taken place between the Disablement Services manger and Mr Lewis, the employer's director of Prosthetic and Orthotic Services, it was clear that the hospital required the employers to reduce the charges they had proposed by, among other measures, cutting the number of technicians to be employed at the Disablement Service Centre from 13 to 12.
On the same day the employers told Stubbs' employees that they would be taking over the contract, and that it would result in one redundancy among the technicians. A week later the technicians were officially notified that there was a risk of redundancy. On 1 April 1997 the employers assumed responsibility for the provision of prosthetic services at the Northern General Hospital at the commencement of the new contract. They took on all Stubbs' employees, and appointed Mr Howett (Stubbs' prosthetic director) to be their manager on site.
After unsuccessfully seeking a volunteer for redundancy, the employers appointed Mr Howett to carry out an assessment of the technicians to decide which of the 13 should be made redundant. It was an unenviable task for many of them were his friends. But after a procedure which the Industrial (now Employment) Tribunal described as "difficult but onerous but carried out as objectively and fairly as he reasonably could have done", Mr Howett decided that it was the appellant who should be made redundant. Accordingly, the appellant was given notice of redundancy and special leave on 24 April 1997. On 30 April his redundancy was confirmed. His employment was terminated on 5 May. He invoked the employer's appeal procedure, but was unsuccessful and his notice eventually expired on 21 July 1997. On 1 May he complained to the Employment Tribunal that he had been unfairly selected for redundancy and accordingly unfairly dismissed. Later he added the additional ground that his dismissal was in breach of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("the Regulations") and that accordingly he should be deemed to have been unfairly dismissed.
In answer, the employers submitted that the reason for termination of the appellant's employment was redundancy and that his selection for redundancy was fair, and in answer to the claim that his contract of employment was terminated by reason of the transfer of the undertaking, the employers said that the applicant was dismissed for an economic, technical or organisational reason entailing changes in the workforce.
The Regulations
Regulation 5(1) provides that a transfer does not (ie by itself) operate to terminate the contract of employment but:
"…any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made…[with] the transferee".
Regulation 5(2) provides that:
"Without prejudice to paragraph (1) above…on the completion of a relevant transfer—
(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this Regulation to the transferee; and
(b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee."
The principal provisions of the Regulations relevant to this case are contained in Regulation 8 which, under the rubric "Dismissal of employee because of relevant transfer" provides:
"(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; but
(b) without prejudice to the application of section 57(3) of the 1978 Act or Article 22(1) of the 1976 Order (test of fair dismissal), the dismissal shall for the purposes of section 57(1)(b) of that Act and Article 22(1)(b) of that Order (substantial reason for dismissal) be regarded as having been for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held."
Regulation 8 has to be construed so that insofar as it is not impossible to do so, it enacts into English law the provisions of Council Directive of 14 February 1997 (77/187/EEC). Section II of the Directive safeguards the employee's rights. In particular, by Article 4 it provides:
"(1) The transfer of an undertaking, business or part of a 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 work force.
Member States may provide that the first subparagraph shall not apply to certain specific categories of employees who are not covered by the laws or practice of the Member States in respect of protection against dismissal."
The tribunal decision
The tribunal rejected the appellant's claim. It made an important finding in paragraphs 8 and 12 of its reasons for decision. In paragraph 8, after relating the nature of the business of the employers it said:
"Blatchfords quoted for the Northern General Hospital contract and were successful. However as part of the negotiation it was specified by the hospital that Blatchfords would have to reduce their charges by cutting the number of technicians employed at the Disablement Service Centre from 13 to 12."
In paragraph 12 it said:
"The first matter that we have to decide is whether or not the respondents have established that the dismissal of the applicant was for an economic, technical or organisational reason within the meaning of Regulation 8. We accept that it was a condition of the contract with the Northern General Hospital that the new contractor should reduce the contract price by reducing the numbers of technicians. We accept that if Blatchfords had not offered to do this they would not have obtained the contract. It seems to us that a redundancy in such circumstances was inevitable. We conclude that the reason for the applicant's dismissal was an economic or organisational reason which entailed a change in the workforce and that the respondents have established a defence under Regulation 8(2)."
After these findings, the tribunal considered whether the employers acted reasonably or unreasonably in treating the redundancy as a sufficient reason for the dismissal. They decided that it was, and in paragraphs 14 and 15 they summarised the position as follows:
"We think that this was one of those unfortunate occasions when somebody had to be made redundant. We think that the respondents operated a comprehensive and fair system of...
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