Nationwide Building Society v Benn & Ors UKEAT/0273/09/JOJ

Appeals and cross-appeals arising from a decision in the ET that two sample claimants had been unfairly dismissed following a transfer of an undertaking. The EAT found that the ET had erred in relying on a breach of the employer's relevant consultation regulations as the basis for their decision.

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Appeal No. UKEAT/0273/09/JOJ

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 14 and 15 April 2010

Judgment handed down on 27 July 2010

Before

THE HONOURABLE MRS JUSTICE SLADE DBE

MR D BLEIMAN

MR M WORTHINGTON

NATIONWIDE BUILDING SOCIETY (APPELLANT)

(1) MR NICHOLAS BENN & 16 OTHERS; (2) MR R CRAIG; (3) MR M JONES; (4) MR D MORRIS;(5) MR D SMITH-GALER (RESPONDENTS)

JUDGMENT

**APPEARANCES**

For the Appellant MR CHRIS QUINN (of Counsel)

Instructed by: Messrs Olswang LLP Solicitors 90 High Holborn London WC1V 6XX

For the First Respondents MR ANTHONY KORN (of Counsel)

Instructed by: Messrs Irwin Mitchell Solicitors Imperial House 31 Temple Street Birmingham B2 5DB

For the Second Respondent MR R CRAIG (The Appellant in Person)

For the Third Respondent No appearance or representation by or on behalf of the Third Respondent

For the Fourth Respondent MR D MORRIS (The Appellant in Person)

For the Fifth Respondent MR D SMITH-GALER (The Appellant in Person)

**SUMMARY**

TRANSFER OF UNDERTAKINGS

Economic technical or organisational reason

The Employment Tribunal erred in taking into account a perceived breach of the consultation requirements of Transfer of Undertakings (Protection of Employment) Regulations 2006 regulation 13(6) in determining that the dismissals of two sample Claimants were unfair within the meaning of Employment Rights Act 1996 section 98(4). No complaint of a breach of regulation 13(6) had been made by the Claimants nor did they have standing to do so. It was not raised in the course of the hearing and the Employment Tribunal did not invite submissions on the issue.

The Tribunal did not err in holding that the Claimants had been dismissed whether constructively or by application of Regulation 4(9).

The Employment Tribunal did not err in finding that the dismissals of the Claimants were for an organisational reason entailing changes in the workforce within the meaning of TUPE regulation 7(2). The changes affected a section of the workforce, the transferred employees. They did not have to affect the whole of the workforce to fall within regulation 7(2). Berriman v Delabole Slate Ltd [1985] ICR 546 considered. Appeal allowed. Case remitted to the same Employment Tribunal for consideration of whether the dismissals were fair or unfair within the meaning of section 98(4).

**THE HONOURABLE MRS JUSTICE SLADE**
  1. Nationwide Building Society ('NBS') appeals from the judgment of an Employment Tribunal ('ET') on 26 March 2009 which held that two 'sample' Claimants, Mr Bonnett and Mr Smith-Galer had been unfairly dismissed. The Claimants cross-appeal the finding that their dismissals were for an economic, technical or organisational reason entailing changes in the workforce within the meaning of regulation 7(2) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 **('TUPE'). Before us Mr Quinn appeared for NBS, Mr Korn for the First Respondents, Mr Benn and sixteen others, Mr Craig and Mr Morris appeared in person. Mr Morris also spoke for Mr Smith-Galer who appeared in person. We have considered written submissions made in letters from Mr Morris dated 16 March 2010 and Mr Smith-Galer dated 24 March 2010. We have taken the submissions made on behalf of the First Respondents as applying to all Respondents.
  1. It had been agreed between the parties that the ET would hear evidence on and determine issues relating to two sample cases initially, there being a significant number of issues generic to the majority of the cases. Those issues were agreed by the parties and were set out in a letter to the ET from NBS dated 6 March 2009. The sample cases were those of Mr Bonnett and Mr Smith-Galer.
  1. The claims for unfair dismissal arose from the resignation from their employment by the Claimants following the transfer of the undertaking in which they were employed from the Portman Building Society ('PBS') to the NBS on 28 August 2007. Some of the Claimants had been employed as Financial Planning Managers ('FPM') at PBS and had become Senior Financial Consultants ('SFC') at NBS and others had been employed as Regional Sales Managers ('RSM') at PBS and had become Area Sales Managers ('ASM') at NBS. Mr Bonnett was a senior Financial Planning Manager at PBS, a role which was not significantly different from that of FPM. Mr Smith-Galer was a Regional Sales Manager at PBS.
  1. The former PBS employees contended that the terms of their employment were altered to their detriment by NBS. Their job role and responsibilities were downgraded when they were assimilated into NBS roles. The process of assimilation was such as to be a breach of trust and confidence. The NBS bonus scheme which was to or did replace their PBS bonus scheme was substantially less beneficial to them. These acts constituted fundamental breaches to their contracts of employment entitling them to resign.
  1. The Claimants resigned on different dates.
  1. The ET held that Mr Bonnett and Mr Smith-Galer had been constructively dismissed. Alternatively they had been dismissed by operation of TUPE regulation 4(9). References to regulations are to TUPE unless otherwise indicated. The ET held that the reason for the dismissal of the Claimants was an 'economic, technical or organisational reason entailing changes in the workforce' within the meaning of regulation 7(2). The dismissals were therefore not automatically unfair. The dismissals were held to be for 'some other substantial reason' within the meaning of the Employment Rights Act 1996 **('ERA') section 98(1)(b) and were unfair under section 98(4).
**The Grounds of Appeal and Cross-Appeal**
  1. During the course of the hearing the grounds of appeal and cross-appeal were refined. By the conclusion of the hearing the grounds to be determined were that the ET erred:

1) In holding that NBS were in breach of regulation 13(6) in that:

(a) no such breach had been pleaded and NBS were not given the opportunity to deal with the allegation;

(b) no claim had been made under regulation 15 by a statutorily specified Complainant;

(c) Regulation 13 did not confer any rights other than those set out in TUPE.

2) In holding that NBS was in fundamental breach of contract entitling the Claimants to claim constructive dismissal in that its decision was 'contaminated' by a finding that NBS were in breach of its obligation of collective consultation under regulation 13(6).

3) In holding that the circumstances met the provisions of regulation 4(9) so that the Claimants were deemed dismissed by reason of that regulation in that its decision in this regard depended upon the erroneous finding of fundamental breach. A fundamental breach does not necessarily satisfy the test in regulation 4(9).

4) In finding that the dismissals were for an ETO reason;

5) In finding the dismissals to be unfair in that the ET in reaching this conclusion relied on an assumed breach of regulation 13(6). To do so was an error for the reasons set out above.

**The Relevant Facts**
  1. In the course of 2007 prior to the transfer of the undertaking, a job mapping process was undertaken. It had been decided that there should be no redundancies below the level of branch manager. All roles below this level would be mapped across to the merged organisation.
  1. Mr Watt, an NBS employee, and Ms Thompson, a PBS employee, undertook the process. About twelve roles were mapped. No discussion took place with individuals performing the PBS jobs which were to be the subject of the mapping process. The ET held:

'5.26. There was some dispute as to whether consultation was undertaken in relation to the mapping process. The mapping process fell within the remit of the Joint Consultative Group (JCG) which included in its composition representatives of the staff associations of both the Portman and the Nationwide; these were the Portman Building Society Staff Association (PGSA) and the Nationwide Group Staff Union (NGSU). However there was no evidence that the details of the mapping process were discussed with or provided to the JCG attendees. What was clear was that the outcomes of the mapping process were announced to the JCG. The outcomes were that the FPM and SFC roles were judged 88% comparable and that the RSM and ASM roles were judged 90% comparable. No challenge was raised by the Staff Association representatives to these outcomes. Mr Wright, the PGSA representative, gave evidence to the tribunal and it was apparent that he was a new appointee and inexperienced in the role of Staff Association representative. It was Mr Wright's evidence that certainly in relation to the change to the bonus scheme applicable to Portman FPMs and RSMs no consultation took place. He was simply informed of the new arrangement.

5.27. The Tribunal found as a fact that the job mapping process was not a rigorous process and was not reliable as to its outcome. Clear differences that existed between the roles of FPM and SFC and between the roles of RSM and ASM were neither identified not assessed.'

  1. On 5 March 2007 the JCG was informed of the principles of the mapping process and of the outcomes.
  1. The PBS bonus scheme for FPMs was based on the value of the products they sold. Mr Bonnett's gross bonus payments in the seven months prior to the transfer averaged £5000 per month and represented approximately double his base salary. The RSM's bonus was based on a percentage of the bonus sums earned by FPMs and by the Mortgage Managers. Mr Smith-Galer's bonus with PBS was £5000 per month.
  1. At a JCG meeting on 5 July 2007 an interim bonus scheme was announced which would operate for five months after transfer. Under this scheme transferring employees would receive the equivalent of the average monthly bonus that they had earned at PBS in the seven months preceding the transfer. Thereafter a new bonus scheme was to apply to the transferring employees. The ET found that the Claimants suffered no diminution in their earnings between September 2007 and the end of January 2008.
  1. Mr Bonnett resigned on 24 December 2007. He considered that with NBS he would be dealing with a limited product range. His standing, quality of service and ability to provide holistic advice had been substantially diminished and that he had no alternative but to resign.
  1. The new bonus scheme which was to apply to transferring employees was announced on 11 January 2008. This was a similar scheme to that previously used by NBS and was based primarily on the quantity of products sold.
  1. The new bonus scheme was introduced in February 2008. In that month Mr Smith-Galer's bonus earnings were £1000 per month compared with pre-merger bonus earnings of £5000 per month.
  1. Mr Smith-Galer resigned in April 2008. His evidence was that during the months post-merger promises were made about new product and fund ranges which did not materialise. His role had changed significantly and his earnings were diminished under the new bonus scheme. He gave evidence that the trigger for his resignation was the working environment, the lack of designated office space, the unwelcoming atmosphere, the reality of the new pay scheme and the diminution in his earnings evident in February and March 2008 as well as the lack of progress on the product range.
**The relevant statutory provisions**
  1. Transfer of Undertakings (Protection of Employment) Regulations 2006:

"4(1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.

4(9) Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.

7(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 X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is-

(b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce.

(2) This paragraph applies where the sole or principal reason for the dismissal is a reason connected with the transfer that is an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer.

(3) Where paragraph (2) applies-

(a) paragraph (1) shall not apply;

(b) without prejudice to the application of section 98(4) of the 1996 Act (test of fair dismissal), the dismissal shall, for the purposes of section 98(1) and 135 of that Act (reason for dismissal), be regarded as having been for redundancy where section 98(2)(c) of that Act applies, or otherwise for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

13(6) An employer of an affected employee who envisages that he will take measures in relation to an affected employee, in connection with the relevant transfer, shall consult the appropriate representatives of that employee with a view to seeking their agreement to the intended measures.

15 (1) Where an employer has failed to comply with a requirement of regulation 13 or regulation 14, a complaint may be presented to an employment tribunal on that ground—

(a) in the case of a failure relating to the election of employee representatives, by any of his employees who are affected employees;

(b) in the case of any other failure relating to employee representatives, by any of the employee representatives to whom the failure related;

(c) in the case of failure relating to representatives of a trade union, by the trade union; and

(d) in any other case, by any of his employees who are affected employees.

(7) Where the tribunal finds a complaint against a transferee under paragraph (1) well-founded it shall make a declaration to that effect and may order the transferee to pay appropriate compensation to such descriptions of affected employees as may be specified in the award.

(10) An employee may present a complaint to an employment tribunal on the ground that he is an employee of a description to which an order under paragraph (7) or (8) relates and that—

(a) in respect of an order under paragraph (7), the transferee has failed, wholly or in part, to pay him compensation in pursuance of the order;

(11) Where the tribunal finds a complaint under paragraph (10) well-founded it shall order the transferor or transferee as applicable to pay the complainant the amount of compensation which it finds is due to him.

(12) An employment tribunal shall not consider a complaint under paragraph (1) or (10) unless it is presented to the tribunal before the end of the period of three months beginning with—

(a) in respect of a complaint under paragraph (1), the date on which the relevant transfer is completed; or

(b) in respect of a complaint under paragraph (10), the date of the tribunal's order under paragraph (7) or (8),

**or within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of the period of three months.

**

16(1) Section 205(1) of the 1996 Act (complaint to be sole remedy for breach of relevant rights) and section 18 of the 1996 Tribunals Act (conciliation) shall apply to the rights conferred by regulation 15 and to proceedings under this regulation as they apply to the rights conferred by those Acts and the employment tribunal proceedings mentioned in those Acts.

**(3) "Appropriate compensation" in regulation 15 means such sum not exceeding thirteen weeks' pay for the employee in question as the tribunal considers just and equitable having regard to the seriousness of the failure of the employer to comply with his duty."

**

Employment Rights Act 1996:

"205(1) The remedy of an employee for infringement of any of the rights conferred by section 8, Part III, Parts V to VIII, section 92, Part X and Part XII is, where provision is made for a complaint or the reference of a question to an industrial tribunal, by way of such a complaint or reference and not otherwise."

**The judgment of the ET**
  1. In respect of the change in the job roles and responsibilities of the Claimants when they transferred from PBS to NBS the ET held at paragraph 20:

"We concluded that in imposing a change of role on the FPMs and the RSMs with effect from the date of transfer the respondent acted in fundamental breach of the claimants' contracts of employment. The new role represented a diminution in the skills and responsibilities that were characteristics of and inherent in the FPM and RSM roles at the Portman. Significantly the RPMs in being unable to continue to sell products for which they were licensed, were losing their qualifications in that respect. Their knowledge of and skills in advising on those funds were superfluous since the Nationwide product range was so limited. Those skills could not therefore be maintained. These were aspects of their role at Portman in which they had no doubt been encouraged to take pride and were expected to maintain and develop. The RSM was managing a reduced number of branches populated by staff with a more limited breadth of operation, and with reduced autonomy in respect of the management function."

The ET held at paragraph 21 that attendance by Mr Watt and Ms Thomson at JCG meetings at which the principles applicable to job mapping were given did not 'amount to consultation 'with a view to reaching agreement' as provided under regulation 13(6) TUPE, and does not bind the Claimants as to the fairness and reasonableness of the process.'

  1. With regard to the next alleged breach of contract: the change to the Claimants' bonus payment scheme, the ET held at paragraph 22 that there was no breach of contract in the change to the enhanced bonus scheme which was in place for five months post transfer.
  1. At paragraph 25 the ET held that:

"The new bonus scheme of which information was sent out on 11 January 2008 may however have resulted in diminution of earnings."

Because Mr Bonnett resigned before the announcement of the new scheme he was unable to establish a breach by NBS in respect of it. The ET observed at paragraph 26:

"It will be a matter for individual claimants who resigned post-11 January 2008 to provide evidence, if they wish to refute the evidence of the respondent that their earnings could be substantially equivalent."

  1. The ET accepted Mr Smith-Galer's evidence that his bonus income was reduced in February to less than £1000 per month from its previous level of £5000 per month. The ET held at paragraph 27:

"We concluded that his evidence of reduction was supported by the figures produced by Mrs Rigby which showed that Mr Smith-Galer's bonus income was reduced in February 2008 to less than £1000 from its previous level of £5000. We concluded that this represented a significant reduction in his earning ability and a fundamental breach of Mr Smith-Galer's contract."

At paragraph 29 the ET held:

"We concluded that the substantial drop in either potential or actual income of Mr Smith-Galer amounted to a change that was outside of that envisaged in the case MITIE and as such was a fundamental breach of his contract of employment."

  1. The ET held that the breaches of contract were sufficiently important to justify the Claimants resigning, that Mr Bonnett and Mr Smith-Galer resigned because of the fundamental breaches and did not delay in doing so.
  1. At paragraph 37 the ET held:

"Our conclusions therefore on the constructive dismissal question are that:

(i) the substantial change to Mr Bonnett's job role amounted to a fundamental breach of his contract of employment which justified him in treating his employment contract as an end. That was the reason for his resignation and he did not delay. This amounts to a dismissal under s.95(1)(c) of the Employment Rights Act.

(ii) the substantial change to Mr Smith-Galer's job role and to his earnings potential amounted to a fundamental breach of his contract of employment which justified him in treating his employment as at an end. That was the reason for his resignation and he did not delay. This also amounts to a dismissal under s.95(1)(c) of the Employment Rights Act."

  1. The ET observed that in the light of their findings on constructive dismissal they did not have to consider whether there had been a valid variation of the Claimants' contracts.
  1. In addition to finding that the Claimants had been constructively dismissed the ET held that they had been dismissed by operation of regulation 4(9). At paragraph 39 the ET held:

"It is also clear that having found that the change in the claimant's terms and conditions amounted to a fundamental breach of their contracts of employment, that the circumstances meet the provisions of Regulation 4(9) TUPE which provides

'where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph 1, such an employee may treat the contract of the employment as having been terminated and the employee shall be treated for any purpose as having been dismissed by the employer.'"

  1. The ET then considered whether the Claimants had been dismissed for an ETO reason. They found that the reason for dismissal was connected with the transfer.
  1. At paragraphs 42 and 43 the ET held:

"42. We concluded that the principal reason for the change to the claimants' job roles and therefore for their dismissal was the fact that the respondent did not have in place at or soon after the date of transfer the range of products or funds which would have enabled the claimants to continue to function at the level that they had previously. Had the respondent had a product range equivalent to the Norwich Union range offered by Portman, the roles of the FPMs and RSMs would probably not have altered significantly post merger.

43. We concluded that this amounted to an organisational reason for the change in the terms and conditions of the FPM and RSM. The next question therefore, was whether that organisational reason 'entailed changes in the workforce'."

  1. The ET considered Berriman v Delabole Slate Ltd [1985] ICR 546. It directed itself that for an ETO reason to entail changes in the workforce there must be a change in job functions or numbers of the workforce. Standardisation of rates of pay does not fall within that description.
  1. The ET held at paragraph 45:

"In the present case we have found that there was a change in the job functions of the FPMs and the RSMs. It was that change that was the basis of our finding that there was fundamental breach of contract on the part of the respondent in imposing that change. We found that the lack of an equivalent product range on offer to customers of Nationwide as the transferee company entailed a change to the claimants' job functions. As such the change was for an organisational reason which entailed changes in the work force."

  1. Since the change to the Claimants' bonus scheme was connected with their job functions and was driven by the product range and funds available to NBS the ET concluded that it was made for an ETO reason.
  1. The dismissals were for an ETO reason and therefore not automatically unfair. Since they were for a potentially fair reason the ET went on to consider the fairness of the dismissals under ERA section 98(4).
  1. The conclusion of the ET as to the fairness of the dismissals is set out in paragraph 48 of the judgment:

"It is our conclusion that in view of the failure to involve the employees in any meaningful consultation in relation to the fundamental changes that were imposed on their job roles, the dismissal of the claimants was not fair. We do not consider that it is reasonable of the respondent to seek to rely on the attendance of staff association representatives at the JCG or on any consultations with the staff associations in relation to the change to the bonus scheme. We have found that such discussion as took place at the JCG did not amount to 'consultation with a view to reaching agreement' as required under reg 13(6) TUPE. For those reasons we uphold the claims of unfair dismissal for both claimants. However the unfairness of the dismissal relates principally to the procedures adopted and will therefore impact on the compensation to be awarded."

**The submissions of the parties***The Appellants*
  1. At the heart of Mr Quinn's submissions is the contention that the ET erred in relying on an alleged breach of regulation 13(6) in reaching its findings that NBS were in fundamental breach of contract and that the dismissal of the Complainants was unfair. This reliance on regulation 13(6) 'contaminated' the conclusions reached.
  1. In his submissions in reply, Mr Quinn contended in relation to regulation 13(6) that:

(i) on a proper reading of the relevant authorities there had been no breach of regulation 13(6);

(ii) no regulation 15 claim had been brought;

(iii) no claim of breach of regulation 13(6) had been raised in the pleadings;

(iv) regulation 13(6) did not form part of the contractual claim.

  1. Mr Quinn contended that the job-mapping in respect of which the ET directed its criticisms, and, it was said, upon which it relied in reaching its conclusion that there had been a breach of regulation 13(6) was not an 'intended measure' over which NBS was required to consult appropriate representatives. In this regard he relied on obiter dicta in Institution of Professional Civil Servants v Secretary of State for Defence [1987] IRLR 373 that projections as opposed to positive steps to achieve manpower reductions were not 'measures' at all to submit that job-mapping was not itself an 'intended measure'. Accordingly the ET erred in holding there had been a breach of regulation 13(6).
  1. Further it was submitted that the Claimants had no standing to bring a complaint of breach of regulation 13(6). It was only the representatives specified in regulation 15(1) who could do so. Reliance was placed on Mercy v Northgate HR Ltd [2008] ICR 410 to that effect. In any event no regulation 15 claim had been brought by the Claimants. Regulation 16(1) read with section 205(1) of ERA precluded a claim by the Claimants under regulation 13(6).
  1. No suggestion of a breach of regulation 13(6) had been raised in the ET1s or at the hearing. NBS had not been given the opportunity to present arguments and any evidence on the point. Reliance was placed on Chapman v Simon [1994] IRLR 124.
  1. Regulation 13(6) gave rise to no contractual rights relevant to consideration of whether there had been a fundamental breach of contract by NBS.
  1. Mr Quinn submitted that the ET found two fundamental breaches by NBS of the Claimants' contracts of employment. These were (i) the 'assimilation' breach and (ii) the bonus breach. Issues as to procedure and therefore regulation 13(6) were found by the ET to be an integral part of each breach. If the ET had also found a breach of the duty of trust and confidence as contended by the Claimants, it would also have relied on regulation 13(6) to reach that conclusion.
  1. Mr Quinn rightly conceded that it was possible to construe paragraph 37 of the judgment of the ET as showing that they made a finding of two breaches of contract neither of which depended upon any procedural failure. However reading the judgment as a whole the finding of the ET that NBS were in breach of regulation 13(6) affected the conclusion that it was in fundamental breach of contract.
  1. On behalf of NBS it was submitted that it was not enough for the ET to conclude that because there was a fundamental breach of contract by NBS in respect of the Claimants, they had been dismissed by application of regulation 4(9). The ET erred in so concluding. Mr Quinn referred to Tapere v South London and Maudsley NHS Trust [2009] IRLR 972 in which it was held that 'working conditions' include but are not restricted to contractual terms.
  1. Further Mr Quinn submitted that the breaches of contract found by the ET were procedural in part. Such a breach, even if established, does not 'find a home' in regulation 4(9).
  1. Mr Quinn also contended that the ET erred in considering regulation 4(9) as the Claimants did not plead that they had been dismissed by reason of the application of that provision.
  1. Mr Quinn submitted that the ET did not err in concluding that if dismissed the Claimants were dismissed for an ETO reason. They correctly applied Berriman v Delabole Slate Ltd. The organisational change did not have to affect the entirety of the workforce to be an ETO within the meaning of regulation 7(2).
  1. It was said that paragraph 48 of the judgment makes it clear that the unfairness as found by the ET was procedural, that in respect of both the change in job roles and the bonus issue the nature of the procedural unfairness was the failure to involve the employees in 'any meaningful consultation'. The finding of unfairness was wrongly influenced by the conclusion of the ET that there had been a breach of regulation 13(6).
*The Respondents*
  1. Mr Korn submitted that the conclusion of the ET that NBS were in breach of regulation 13(6) formed a part but not a critical part of its reasoning. Lack of consultation with representatives was just one of the issues relied upon by the ET in determining the fairness of the dismissals.
  1. Quite properly Mr Korn drew attention to the judgment of Tarbuck v Sainsbury's Supermarkets Ltd [2006] IRLR 664 in which the EAT re-stated the long established principle that a party should have the right to make submissions on any issue in relation to which adverse findings may be made. However by referring to Chapman v Simon he sought to confine this principle to discrimination cases and to distinguish those from unfair dismissal cases. He contended that in unfair dismissal cases it is for the ET to determine reasonableness. A dismissal can be held to be unfair for different reasons than those advanced by the parties. The assessment by the ET of fairness will depend on the evidence.
  1. If he were wrong in his contention that the dicta in Chapman v Simon and Tarbuck were confined to discrimination cases, Mr Korn accepted that it would be necessary for the cases be remitted to the ET to consider the regulation 13(6) point giving the opportunity to the parties to make submissions on whether the conclusion of the ET is to remain the same in light of those submissions.
  1. Mr Korn contended that the ET did not err in holding that there had been a breach of regulation 13(6). As for standing to bring a claim alleging a breach of that provision, Mercy dealt with consultation on redundancy under a different statutory provision and was distinguishable from this case which concerned the consultation provisions of TUPE. Howard v Millrise Ltd [2005] IRLR 84 illustrates the contention that individuals may bring a claim that there had been a breach of the information and consultation provisions of TUPE.
  1. Mr Korn contended that the findings of the ET of fundamental breaches of contract and of substantial changes in working conditions were unassailable. The only ground of challenge to the finding of fundamental breach of contract was 'contamination' of the finding that there were such breaches by reliance on regulation 13(6). Mr Korn submitted that it is clear that the ET did not rely on regulation 13(6) to decide whether the Claimants had been dismissed whether constructively or by application of regulation 4(9). Paragraph 37 of the judgment set out the fundamental breaches found. These conclusions did not depend on an infringement of regulation 13(6). In the course of his submissions Mr Korn referred to a third basis for the finding of the ET that NBS were in fundamental breach of trust and confidence. He submitted that the ET was entitled to find the manner and process of assimilation of job roles to be such a breach.
  1. It was submitted on behalf of the Respondents that the ET did not err in holding that the breaches of contract which it had found – significant diminution of job roles and reduction in earning capacity by introducing a new bonus scheme – were substantial changes in the employees' working conditions and were to their detriment. He referred to Tapere in which the EAT held that whether there is a change in working conditions is a simple question of fact. Unarguably there were such changes. The EAT in Tapere further held that in deciding whether there is a material detriment to the employee what has to be considered is the impact of the proposed change from the employee's point of view. The ET did not err in holding that the Claimants were dismissed by application of regulation 4(9).
  1. Mr Korn rightly conceded that a desire of a transferee to harmonise roles of transferred employees is a potential organisational reason for dismissal within the meaning of regulation 7(2). Changes in roles amount to a change in function and that is a change in the workforce. He further accepted that if regulation 7(2) applied to the dismissals of the Claimants their dismissals were not automatically unfair. Their fairness was to be determined by applying ERA section 98(4).
  1. It was submitted that since the change in roles proposed did not affect the workforce as a whole but only the former PBS employees, the change in roles of these employees did not constitute an ETO as explained in Berriman at paragraph 56. Accordingly Mr Korn contended that the ET erred in law in holding that because the Claimants resigned because of a change in their roles they were dismissed for an ETO reason.
  1. Mr Korn accepted that if regulation 13(6) was relied upon by the ET for a material part of its reasoning on the fairness of the dismissal the case would have to be remitted to the ET.
**Discussion and conclusion**
  1. To the extent that the ET relied upon its finding that NBS were in breach of regulation 13(6) in reaching its conclusions in our judgment it erred in doing so.
  1. Regulation 13(6) was not referred to in the ET1s. It was not included in the agreed list of issues to be determined by the ET set out in paragraph 4 of its judgment. It does not appear to have been raised at the hearing either by the Claimants or by the ET. Yet there are substantial references in the judgment of the ET to a breach by NBS of regulation 13(6). Neither party was given an opportunity to make submissions on regulation 13(6) before the ET delivered its judgment.
  1. In Tarbuck the EAT held that it was not legitimate for an ET to have focussed on a distinct head of discrimination – in that case a failure to consult – as the basis of its decision when the parties had not been given an opportunity to adduce evidence and make submissions on the issue. At paragraph 62 the EAT held:

"…it is a fundamental principle of natural justice that a party should have the right to make submissions on any issue which is the subject of the dispute and in relation to which adverse findings may be made. That did not occur here."

And then at paragraph 64:

"…here there was no indication that a finding of this nature was going to be made, and indeed, the list of issues suggested otherwise. At that stage, after the hearing and the close of submissions, it was not legitimate for the Tribunal effectively to raise this point of its own motion, and to determine it without reference to the parties."

  1. The situation in the appeal before us is comparable to that in Tarbuck. We cannot accept any reason in principle why the self evident proposition that parties should have identified and be given opportunity to address a point on which an ET will rely in reaching its decision should be confined to discrimination cases. As Mr Korn described it in the course of argument, this is a natural justice point. It is not confined to employment cases let alone discrimination cases.
  1. In Mercy the Court of Appeal considered the standing of an employee to bring a claim for a protective award under the collective consultation provision of Employment Relations (Consolidation) Act 1992 **('ERCA') sections 188 and 189. The employers contended that an individual employee had no standing to bring such a claim save in the circumstances specified in section 189(1). Lord Justice Maurice Kay held at page 416c:

"I accept the submission of Mr Wynne, on behalf of Northgate, that section 189(1) is a carefully devised provision, defining and restricting standing to bring a complaint, and that where, as here, the complaint is as to breach of the obligation to provide information to appropriate employee representatives, such a complaint can only be presented by "any of the employee representatives to whom the failure related". At that stage, the statute deals with the complaint as a collective rather than an individual matter and limits standing, no doubt so as to prevent the possibility of numerous individual challenges which are not supported by appropriate representatives."

  1. In our judgment the principle relied upon in Mercy is equally applicable to the right to bring a claim for breach of the information and consultation provisions of TUPE. Howard v Millrise Ltd [2005] IRLR 84 was a case in which an employee could rely on the information and consultation provisions of TUPE. That was because the regulation 10 of the 1981 Regulations expressly provided that where an employer failed to comply with the requirement to invite the election of representatives, information should be given to affected employees. In default the individual affected employees had a right to present a claim for breach of the Regulation. That was not the situation in this case. In this case the Claimants would have had no standing to bring a claim for breach of regulation 13(6). Regulation 16(1) by reference to section 205(1) ERA provides that the sole remedy for breach of the provisions of TUPE is a complaint to an ET. The right to bring such a complaint is provided and circumscribed by the Regulations. We do not accept the submission that all that section 205(1) does is to preclude a complaint other than to an ET. In any event the Claimants brought no such claims, and there had been no determination of a claim for breach of regulation 13(6).
  1. We incline to the view that Mr Quinn's submission that job-mapping was not a 'measure in relation to an affected employee' is to be rejected. However in light of our conclusions that the ET otherwise erred in relying on a breach of regulation 13(6) it is not necessary for us to determine this issue.
  1. In our judgment the basis for the conclusion of the ET that NBS were in fundamental breach of contract is clearly stated in paragraph 37. The conclusion of the ET that there was a breach of contract was not 'contaminated' by its view that NBS had been in breach of regulation 13(6). Reading the judgment of the ET as a whole it is clear that they relied on regulation 13(6) in assessing the fairness of the dismissals not in determining whether NBS had been in breach of contract.
  1. Amongst the issues to be decided, the ET set out at paragraph 4(i)(vi):

"Did the relevant transfer of undertaking that took place from the Portman Building Society to the Respondent involve a substantial change in working conditions to the material detriment of the claimants such that they were entitled to treat their contracts of employment as having been terminated?"

This issue reflects the wording of and is a clear reference to regulation 4(9). In our judgment the question of whether the Claimants had been dismissed by application of that Regulation was clearly for determination.

  1. The ET did not simply reason that because they had found NBS to be in fundamental breach of contract the Claimants were dismissed by application of regulation 4(9). At paragraph 20 of the judgment the ET held:

"The new role represented a diminution in the skills and responsibilities that were characteristic of and inherent in the FPM and RSM roles at Portman. Significantly the FPMs in being unable to continue to sell products for which they were licensed, were losing their qualifications in that respect."

The ET also found that the change in the bonus scheme announced on 11 January 2008 represented a substantial reduction in earnings and earning capacity.

  1. In our judgment both a diminution in the role of the job the Claimants were to perform and in the case of Mr Smith-Galer a significant reduction in his bonus rightly led to a conclusion that the Claimants had been dismissed by application of regulation 4(9).
  1. Further, by reason of our conclusion that the ET did not rely on regulation 13(6) in reaching the conclusion that NBS had been in breach of the Claimants' contracts they did not err in relying on such breaches in whole or in part in holding that the Claimants had been dismissed by application of regulation 4(9).
  1. Accordingly we conclude that the ET did not err in holding that the Claimants had been dismissed whether constructively or by application of regulation 4(9).
  1. Counsel were agreed and the unrepresented Claimants did not dissent from the view that the cases of the Claimants other than the sample cases of Mr Bonnett and Mr Smith-Galer in respect of whom evidence was heard would have to be considered by the ET to determine whether they left in response to the breaches of contract and not for any unconnected reason. In paragraph 33 of the judgment the ET referred to the fact that they had determined this issue in relation to the claims of Mr Bonnett and Mr Smith-Galer but not the other Claimants. The same issue would have to be determined in deciding whether the other Claimants had been dismissed whether constructively or by application of regulation 4(9).
  1. The ET concluded at paragraph 41 that the reason for the Claimants' dismissal was not the transfer itself but was for a reason connected with the transfer. The ET held:

"42. We concluded that the principal reason for the change to the claimants' job roles and therefore for their dismissal was the fact that the respondent did not have in place at or soon after the date of transfer the range of products or funds which would have enabled the claimants to continue to function at the level that they had previously. Had the respondent had a product range equivalent to the Norwich Union range offered by Portman, the roles of the FPMs and RSMs would probably not have altered significantly post merger.

43. We concluded that this amounted to an organisational reason for the change in the terms and conditions of the FPM and RSM. The next question therefore, was whether that organisational reason 'entailed changes in the workforce'.

45. In the present case we have found that there was a change in the job functions of the FPMs and the RSMs. It was that change that was the basis of our finding that there was fundamental breach of contract on the part of the respondent in imposing that change. We found that the lack of an equivalent product range on offer to customers of Nationwide as the transferee company entailed a change to the claimants' job functions. As such the change was for an organisational reason which entailed changes in the work force.

46. We further concluded that the change to the claimants' bonus scheme was done for a reason connected to the transfer and that it was also done for an economic, technical or organisational reason entailing changes in the work force. The principal reason for the change in the bonus scheme was connected to the claimants' job functions since it was driven by the product range and funds available to the respondent at that time."

  1. The challenge to the conclusion of the ET that the dismissals were not for an ETO reason was that they did not entail 'changes in the work force'. It was rightly accepted by Mr Korn that harmonisation of roles and functions and remuneration may have amounted to an 'organisational reason'. Although it is contended in his skeleton arguments that the transfer did not entail the changes as it would have been open to NBS to run the PBS business as a separate business, rightly this was not relied upon on oral submissions. Mr Korn contended that because the changes made by NBS only affected the transferring employees and not their existing staff they did not affect the workforce as a whole.
  1. Berriman concerned the resignation of one employee after a transfer because he refused an offer from the transferee to work at a reduced rate of pay. The Court of Appeal held at page 551E:

"…we do not think that the dismissal of one employee followed by the engagement of another in his place constitutes a change in the 'workforce'. To our minds, the word 'workforce' connotes the whole body of employees as an entity: it corresponds to the 'strength' or the 'establishment'. Changes in the identity of the individuals who make up the workforce do not constitute changes in the workforce itself so long as the overall numbers and functions of the employees looked at as a whole remain unchanged."

  1. TUPE applies not only to a transfer of an undertaking but also to a transfer of part of an undertaking. The undertaking or part of an undertaking must retain its identity to be a relevant transfer within regulation 3(1). The unchallenged conclusion of the ET was that there was an organisational change of the group of employees which transferred from PBS to NBS. Regulation 7(2) does not state that the organisational reason must entail changes in the entirety of the workforce. In this case the organisational change affected a body of transferring employees. In our judgment the ET did not err in concluding that organisational reasons entailed changes in the workforce. It did not err in concluding that the dismissals of the Claimants were for an ETO reason.
  1. The basis for the decision of the ET that the dismissals of the Claimants were unfair for the purposes of ERA Section 98(4) was set out in paragraph 48. The ET held:

"It is our conclusion that in view of the failure to involve the employees in any meaningful consultation in relation to the fundamental changes that were imposed on their job roles, the dismissal of the claimants was not fair. We do not consider that it is reasonable of the respondent to seek to rely on the attendance of staff association representatives at the JCG or on any consultations with the staff associations in relation to the change to the bonus scheme. We have found that such discussion as took place at the JCG did not amount to 'consultation with a view to reaching agreement' as required under reg 13(6) TUPE. For those reasons we uphold the claims of unfair dismissal for both claimants. However the unfairness of the dismissal relates principally to the procedures adopted and will therefore impact on the compensation to be awarded."

  1. In our judgment it is apparent that in reaching the conclusion that the dismissals were unfair the ET placed reliance on their view that NBS had not consulted with appropriate representatives of the employees affected by the transfer as required by the Regulations.
  1. For the reasons stated earlier in our judgment, the ET erred in relying on their decision that there had been a breach by NBS of regulation 13(6). Regulation 13(6) is not directly applicable to assessment of the fairness of a dismissal where no breach has been established by a successful claim. However it is open to the ET to have regard to the extent and nature of any consultation both collective and individual engaged in by NBS on the changes in the Claimants' job roles and applicable bonus scheme in deciding whether their dismissals were fair for the purposes of ERA section 98(4). Whether and to what extent to take into account such consultation or lack thereof in deciding upon the fairness of the dismissals is a matter for the ET.
  1. The appeal is allowed and the finding that the dismissals were unfair within the meaning of ERA section 98(4) set aside as are its references in the judgment to TUPE regulation 13(6). The claims are remitted to the same ET for determination of the issue of whether the dismissals of the Claimants were fair or unfair within the meaning of ERA section 98(4). Save as stated above the findings of fact and the other conclusions reached by the ET are to stand. The parties may adduce additional evidence and make submissions at the remitted hearing on the issue of whether the dismissals were fair or unfair within the meaning of ERA section 98(4).

Published: 28/07/2010 10:34

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