Unison v Somerset County Council & Ors UKEAT/0043/09/DA

Appeal by union against decision in the ET that the defendants had not failed to comply with Transfer of Undertakings (Protection of Employment) Regulations 2006

Appeal No. UKEAT/0043/09/DA



At the Tribunal

On 15 July 2009







Transcript of Proceedings



For the Appellant
MR ROHAN PIRANI (of Counsel)

Instructed by:
Messrs Thompsons Solicitors
18 Lawford Street
Old Market

For the Respondents
MR TOM LINDEN (One of Her Majesty's Counsel)

Instructed by:
Messrs Wiggin Solicitors
95 The Promenade
GL50 1WG


TRANSFER OF UNDERTAKINGS: Consultation and other information

In regulation 13 of TUPE the "affected employees" whose representatives the employer must inform and consult about a relevant transfer are those who will be or may be transferred, those whose jobs are in jeopardy by reason of the proposed transfer, and those who have internal job applications pending at the time of transfer. The definition does not extend to everyone in the workforce who might apply in the future for a vacancy in the part transferred.

  1. This is an appeal by UNISON from a decision of an employment tribunal sitting at Exeter and chaired by Employment Judge Hollow dismissing the union's application under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The allegation raised by the union was that the respondents, Somerset County Council, Taunton Deane Borough Council and South West One Ltd, a joint venture company established by the two councils together with IBM, failed to comply with their duty to consult employee representatives in accordance with Regulation 13. The complaint was expressed as being against all three respondents, although it appears from the argument before us that in reality the complaint was of the two councils who were transferors at the time of the relevant transfer.
  1. The two councils decided to transfer the bulk of the work of their Resources Directorates providing various transactional and corporate support services to the joint venture company which would be controlled and operated by IBM. It was common ground before the employment tribunal that the transfer took place in two stages to both of which TUPE applied, the first on 1 November 2007 and the second on 1 December 2007.
  1. It was also common ground that the agreement between the councils and IBM which gave rise to the transfer, in particular a staffing agreement which was one of the relevant documents, was signed in the late afternoon of Friday 28 September 2007. The members of the two authorities had set the end of September 2007 as a deadline for agreement being reached with IBM. Friday 28 September was, thus, the last weekday falling within the deadline.
  1. There had been lengthy and, in our view, exemplary consultation over a period of two years during which the councils' tendering and negotiation processes took place. The employees working for the relevant parts of the Resources Directorates, who have conveniently been described in argument before us as "in-scope employees", were given a choice as to whether they wished to be transferred under TUPE in the event of the transfer to become employees of the joint venture company, South West One Ltd, or to remain as employees of the County Council or Borough Council, as the case may be, and be seconded to the joint venture company under what was called a Retention of Employment Model. The employees concerned numbered 846. All but one decided that they wished to remain as council employees and be seconded to the joint venture company. The trade union had therefore, as it seems to us, already achieved a very important concession which protected the rights of its members to a considerable extent.
  1. There were certain aspects of the staffing agreement which remained contentious right up to the last moment. There had been what proved to be the last of a series of Joint Consultation Committee meetings on Tuesday 25 September when the unions were informed about the then envisaged agreement about future recruitment. Excluding some special provisions in relation to what were described as Key Positions, which have not featured in argument before us, the 25 September version of the agreement provided that the joint venture company was to advertise any vacancies occurring in the future in the first instance internally to all of the in#scope employees; that is to say, the one individual who had accepted transfer to the employment of the joint venture and the 845 who were seconded. So this group were to be the first port of call for any vacancy, and the company was to be required to take all reasonable steps to fill the vacancy with one of them. If such a person was appointed to the vacancy, he or she would retain seconded employee status. If this did not result in the vacancy being filled, there was to be a second stage of advertising the vacancy internally to other employees of the councils in accordance with their normal internal advertisement process. The company was to act reasonably in assessing the suitability of any such candidates who applied and if they were recruited it would be on the basis of being seconded employees. It was only if that failed as well that the company was to be entitled, if it wished, to advertise the vacancy externally; so there were potentially three stages of the recruitment process.
  1. It appears that this proposal was unacceptable to IBM, and Mr Crouch, who was the Head of Human Relations and Organisational Development for the councils and led their team negotiating with IBM, reached a somewhat different agreement with IBM under which there would be only two stages of recruitment. The first would be exactly the same; that is, advertising the vacancy in the first instance to existing employees in-scope, but then after that the second stage would be as follows:

"8.2.1 The Company shall advertise the vacancy to other employees of the Authority in accordance with the Authority's normal internal advertisement process giving a deadline for applications of not less than 14 days from the date of placement of the advertisement;

8.2.2 The Company will act reasonably in assessing the suitability of any candidates who apply in response to any advertisement placed pursuant to clause 8.2.1 and so as to comply with Authority HR Policies and Legal Requirements. If an offer is made to any such candidate it will be on the basis that they are recruited as a Seconded Employee."

  1. Clauses 8.3, 8.4 and 8.5 made long and detailed provision (which we shall not read out) for what was referred to as a 70/30 split. Essentially, if the proportion of the people employed or engaged in the provision of the transferred services at the time of the vacancy arising who were seconded employees of either of the councils was less than 70 per cent, the councils, not the joint venture company, would be entitled in their absolute discretion to decide whether the vacancy should be filled by the recruitment of an additional seconded employee, should it be necessary to recruit an external candidate. This provision would, or so those drafting it appear to have thought, go some way to meeting the concerns of UNISON that there might be a gradual privatisation of the workforce of the joint venture company by vacancies as they arose being advertised externally to applicants who had no connection with council employment and the job opportunities for council employees being thus diminished.
  1. Mr Crouch did not succeed in obtaining agreement to the 70/30 split combined with a three stage process. Instead there was to be a two stage process. He informed Mr Behan of UNISON of how matters stood by an email sent at 9.00am on Friday 28 September. The letter included this:

"As you will recall from our discussions last Tuesday, I offered to provide you with a copy of the draft Staffing Agreement subject to the completion of a confidentiality agreement. I explained that this was necessary because, at that time, we had not received formal confirmation from IBM that they were prepared to consent to its disclosure. You indicated that you did not wish to be provided with the agreement on this basis.

When I talked you through the main provisions of the Agreement (which I undertook verbatim), the only concern that was raised by the JCC was the possibility that the Council's involvement in the JV Company could diminish over time because the company would have the ability to recruit new employees directly rather than as secondees. As a result, we have reopened negotiations with IBM and have succeeded in securing a concession to the effect that the Councils will be able to ensure that the proportion of seconded staff working on Authority business within the JV Co cannot fall below 70% at any time during the life of the contract. The remaining 30% will permit IBM to bring in new resources that will support our staff and the Councils in the transformation and modernisation agenda, which is key to ISiS."

  1. The union had written letters of 25 and 27 September arguing that the transferors were not complying with their obligations to inform and consult under TUPE. Mr Crouch proceeded in the letter to take issue with those contentions.
  1. There was no consultation in the course of Friday 28 September. The agreement was signed on the Friday evening. There were briefing meetings, and meetings of the Joint Consultative Committee, after 28 September and before the actual transfers of services on 1 November and 1 December. These could not re-open the provisions of clause 8 in principle, although it appears they did discuss some of the details of implementation.
  1. Regulation 13(6) of the 2006 Regulations provides that 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. Regulation 13(1) defines "affected employees" as:

"… any employees of the transferor or the transferee … who may be affected by the transfer or may be affected by measures taken in connection with it; and references to the employer shall be construed accordingly."

  1. We have heard considerable argument from Mr Rohan Pirani from the appellant union and Mr Thomas Linden QC for the respondents on the question of whether the provisions of the revised clause 8 or any of them did or did not constitute measures taken in connection with the transfer, and, in particular, whether they were measures taken or to be taken by the transferors in connection with the relevant transfer. Let us assume for the moment, without deciding it, that they were. This would avail Mr Pirani nothing unless they were measures envisaged to be taken in relation to "affected employees". We must therefore decide whether they were.
  1. The change made between the version of the clause 8 proposals on which the Joint Consultative Committee were consulted on 25 September and the final version did not affect the in-scope employees at all. Their terms and conditions of employment were not going to change on 1 November or 1 December in any respect since (with the one individual exception whose case has not been argued before us) they were going to remain employees of the councils on secondment to the joint venture company. Moreover, as regards future vacancies, they were going to have the opportunity to be first in the queue under the old version of the agreement and the new version alike. Therefore, there was nothing on which to consult in respect of them even though they were, at least in some senses, affected by the transfer.
  1. The controversial question before us is whether other council employees at the time of the transfer who were not in-scope, that is, who were not working in the relevant parts of the Resources Directorate, were "affected employees" within the definition of Regulation 13. Mr Pirani has forcefully argued that they were, because their job prospects in the future (in the sense of the opportunity to move to a perhaps more congenial or better paid post than their existing ones) would be affected by the fact that the recruitment advertisement process was being changed from a three stage process in which (at stage two) they would take precedence over external applicants to a two stage process in which, if the joint venture company so chose, they would only be notified of vacancies simultaneously with an external advertisement to the world at large.
  1. There appears to be no authority which is directly in point, nor even very helpful. Mr Linden has referred us to the Acquired Rights Directive 2001/23/EC on which the 2006 Regulations are based. This provides in Article 7.1 that the transferor and transferee are required to inform the representatives of their respective employees affected by the transfer of a number of things including any measures envisaged in relation to the employees, and says that the transferor must give such information to the representatives of his employees in good time before the transfer is carried out. The transferee must give such information to the representatives of his employees in good time and in any event before his employees are directly affected by the transfer as regards their conditions of work and employment.
  1. Mr Linden emphasises the adverb "directly" in the last sentence. It is a puzzle to us why the adverb "directly" appears in the last of the three parts of Article 7.1 and why it only refers to the employees of the transferee rather than those of the transferor. In any event, we do not think it is possible to derive assistance from that linguistic curiosity in the interpretation of the domestic Regulations, particularly as regards the obligations of transferors.
  1. Mr Linden also refers to the Guide to the Regulations published by what was until recently The Department of Business, Enterprise and Regulatory Reform, now The Department for Business, Innovation and Skills, which under the heading "Consultations with the Affected Workforce" says this (emphasis added):

"The Regulations place a duty on both the transferor employer and new employer to inform and consult representatives of their employees who may be affected by the transfer or measures taken in connection with the transfer. Those affected employees might include (a) those individuals who are to be transferred, (b) their colleagues in the transferor employer who will not transfer but whose jobs might be affected by the transfer; or see their new colleagues in employment with the new employer whose jobs might be affected by the transfer."

  1. Mr Linden accepts, as do we, that a departmental guidance note is far from being a statute or even authoritative in the sense that interpretation by the Court of Appeal or House of Lords is authoritative. Nevertheless, it seems to us that the draftsman of the guidance note has formed a view about the meaning of the phrase "affected employee" under Regulation 13 which is very close to ours. We cannot accept the construction that Mr Pirani puts on "affected employees" as including any employees of the transferor who are not immediately affected by the transfer in the sense of being employed in the part transferred, but whose future career opportunities might be diminished by a change in the recruitment arrangements in the part transferred.
  1. If Mr Pirani were right it would, as it seems to us, have very dramatic consequences. It would mean, for example, that where on a transfer of part of an undertaking the majority of the workforce transferred on identical terms, but a small number of managers had their numbers reduced or their pay and terms and condition adversely affected, then any employee of the company or authority concerned at a more junior level who might, in future, aspire to seek promotion to managerial level would be on Mr Pirani's argument an "affected employee" within Regulation 13. Thus there would be an obligation on the authority to consult employee representatives of the rank and file, if we may so describe them, even if the union concerned had no representation whatever in managerial ranks. This would, we think, be a very surprising conclusion. It is very common in workforces in both public and private sectors for vacancies to be advertised internally before they are advertised externally and if part of the undertaking is then transferred under TUPE, it would lead to the conclusion in many if not most cases that every employee of the organisation concerned is potentially an "affected employee".
  1. We should record that Mr Pirani was disposed to accept that there must be more than a theoretical possibility of the individuals concerned seeking the jobs in question. If the functions transferred for example were confined to accountancy and lawyers it may be that the cleaners working for the company or authority concerned would not be affected employees even on his argument.
  1. We conclude that the "affected employees" are those who will be or may be transferred or whose jobs are in jeopardy by reason of the proposed transfer, or who have job applications within the organisation pending at the time of transfer. We do not think that the definition extends to the whole of the workforce, nor to everyone in the workforce who might apply for a vacancy in the part transferred at some point in the future.
  1. We, therefore, consider that the measures envisaged by clause 8 of the staffing agreement in its final form were not measures which brought Regulation 13(6) into play on 28 September. The employers had, as we have already said, carried out lengthy and exemplary consultation on the agreements as they took shape over the preceding two years. The final twists and turns in the last week of September did not bring the Regulations into play at all. Even if we are wrong about that, Mr Linden can still pray in aid the "special circumstances" defence provided for by Regulation 13(9). As to this, the tribunal in paragraph 42 of their decision said:

"Insofar as we have concluded that there were measures in respect of which there was no consultation, we have considered whether or not the Respondents can be absolved from the duty to consult under Regulation 13(9). Our unanimous conclusion is that given the fast moving events and the approaching deadline, the Respondents have discharged the burden of establishing that there were special circumstances which rendered it not reasonably practicable for them to consult. We do not lose sight of the fact that under the Regulations consultation must take place prior to the transfers which took place on 1 November and 1 December 2007. In practical terms however, the terms of the agreement governing the transfers were in place by 29 September, a month before the first transfer. The terms of the agreement were made known to the union very shortly after it was signed, but at that stage there was no practical step that the union could have taken to have changed the terms."

  1. The reference to fast moving events harks back to an earlier passage in their judgment where they set out the chronology and say in paragraph 22:

"When Mr Crouch resumed his discussions with IBM it became clear to him that IBM wished to unpick the agreement that had been reached in principle. Negotiations were proceeding at pace. The situation was pressured in that the deadline for completing the agreement in all respects was the end of September; that date was fast approaching and negotiations were going on more or less continuously over a number of different aspects of the proposed arrangement. IBM apparently had some concerns about the terms of the staffing agreement in general. Mr Crouch was concerned that there might be a complete breakdown in negotiations with the ultimate result that the whole arrangement would collapse. He took the opportunity to renegotiate the terms of the staffing agreement and was able to do so. He finally reached agreement with IBM after a substantial amount of late night negotiation. The final text of the staffing agreement was emailed to him and he received it at about 5.00pm on Friday 28 September."

  1. The Tribunal went on in that paragraph to find that the union had no real opportunity of considering the terms of the staffing agreement in its final form or raising any concerns they might have had. That conclusion we think is plainly correct; but having reached it the tribunal went on to find, as we have said in paragraph 42, that the special circumstances defence was in any event established.
  1. Mr Pirani has referred us to the two well known reported decisions which were given on this subject in 1978. In Bakers Union v Clarks of Hove Ltd [1978] ICR 1076 the Court of Appeal said that to establish the special circumstances defence, the circumstances must be special in the sense of being something unforeseen or unexpected, something out of the ordinary run of commercial or financial events and must be special to the facts of the particular case. In UCATT v H Rooke & Son Ltd [1978] IRLR 204, this Appeal Tribunal held that the employer has to show both (1) that there were special circumstances which rendered it not reasonably practicable for him to perform the duty and (2) that he took all steps towards its performance as were reasonably practicable in those circumstances.
  1. The employment tribunal in this case gave their decision in paragraph 42 in rather compressed form but Mr Linden has shown us that this may have been because the email point was first raised in the tribunal only in the course of cross-examination of both Mr Crouch and Mr Walsh and not at great length. We are, therefore, not surprised that it was dealt with fairly briefly. We consider that paragraph 42 taken with the earlier paragraph 22 do give sufficient reasons for the tribunal's conclusion and that it was one which they were entitled to reach. They took into account what they described as the fast moving events and the approaching deadline. They have also plainly taken into account that, as they found in paragraph 22, the situation in the negotiations was pressurised and that IBM were seeking to unpick the whole agreement which would have had disastrous consequences.
  1. In those circumstances we cannot interfere with their finding that the special circumstances defence is established. It follows that the appeal on liability fails.
  1. That makes it unnecessary for us to consider the final ground of appeal which Mr Pirani seeks to put by way of amendment to the original grounds of appeal (in which the point was perhaps overlooked). The tribunal in the last paragraph of their Decision said that if they were wrong about breach they would nevertheless have been minded to make no award of compensation. They said, "We would regard the failings of the Council if failings there had been as minor".
  1. In oral argument, Mr Pirani in answer to a question from the tribunal accepted that this would not have been a case for an award of 90 days compensation in respect of every affected employee and that (our phrase rather than his) there had been worse cases of this kind. Be that as it may, we did not hear substantive argument on the compensation point. We will only say that on the basis of the written submissions made to us, we can see no ground for thinking that the tribunal's observations on this subject erred in law in any respect. We are inclined to think that they exercised their discretion on remedy in a matter which is not open to reversal in this Appeal Tribunal. But as we have said, the appeal on liability must be dismissed.

Published: 08/01/2010 17:16

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