TU38/2011, TU39/2011, TU40/2011

EMPLOYMENT APPEALS TRIBUNAL

APPEAL(S) OF:                                                                              CASE NO.

Billy Bligh                  -  appellant 1

                                               TU29/2011

Les Byrne                    -  appellant 2

                                               TU30/2011

Laurance Callery         -  appellant 3

                                                TU31/2011

Dave Conroy               -  appellant 4

                                              TU32/2011

Mark Dardis                -  appellant 5

                                               TU33/2011

Pat Doolin                   -  appellant 6

                                                TU34/2011

Jack Flood                   -  appellant 7

                                                TU35/2011

Kenneth Gray             -  appellant 8

                                                TU36/2011

Scott Hazel                 -  appellant 9

                                               TU37/2011

Jimmy Joyce                -  appellant 10

                                                TU38/2011

Pat Kelly                     -  appellant 11

                                              TU39/2011

Robert Kennedy         -  appellant 12

                                               TU40/2011

Tom Maher                  -  appellant 13

                                                TU41/2011

Tom Moloney              -  appellant 14

                                                TU42/2011

Michael O'Riordan      -  appellant 15

                                            TU43/2011

Albert O'Toole            -  appellant 16

                                                TU44/2011

Pat Staunton               -  appellant 17

                                                TU45/2011

Brendan Farrell           -  appellant 18

                                                TU46/2011

against the recommendation of the Rights Commissioner in the case of:

Stobart Ireland Driver Services Limited         -   respondent    

under

PROTECTION OF EMPLOYEES ON TRANSFER OF UNDERTAKINGS REGULATIONS 2003

I certify that the Tribunal

(Division of Tribunal)

Chairman:   Mr. P. O'Leary B L

Members:     Mr. R. Murphy

                    Mr. T. Brady

heard this appeal at Dublin on 1st May 2013 and 22nd October 2013

Representation:

Appellant:       Mr. Michael Halpenny, SIPTU, Liberty Hall, Dublin 1

Respondent:    Mr. Alistair Purdy, Purdy Fitzgerald Solicitors, of Kiltartan House, Forster Street, Galway informed the Tribunal on 22 October 2013 that the respondent was not defending the appeal. Mr. Purdy departed the proceedings.

This appeal came before the Tribunal by way of employees (the appellants) appealing against a Rights Commissioner Decision references:

r-101572-tu-11/EH -appellant 1

r-101585-tu-11/EH -appellant 2

r-101591-tu-11/EH -appellant 3

r-101601-tu-11/EH -appellant 4

r-101603-tu-11/EH -appellant 5

r-101606-tu-11/EH -appellant 6

r-101611-tu-11/EH -appellant 7

r-101614-tu-11/EH -appellant 8

r-101615-tu-11/EH -appellant 9

r-101616-tu-11/EH -appellant 10

r-101617-tu-11/EH -appellant 11

r-101618-tu-11/EH -appellant 12

r-101619-tu-11/EH -appellant 13

r-101620-tu-11/EH -appellant 14

r-101621-tu-11/EH -appellant 15

r-101622-tu-11/EH -appellant 16

r-101623-tu-11/EH -appellant 17

r-106852-tu-11/EH -appellant 18

Background:

The appellants were employed by Company K which was contracted to a large supermarket chain (Company T) to operate a chilled and frozen foods warehousing and national distribution centre. Company K operated that facility on behalf of the supermarket chain from their warehousing site in Ballymun.

In or about the 14 September 2010, Company K was notified that the contract was awarded to the respondent. Subsequently, on 22 October 2010 the contract for the transport section of the business transferred to the respondent. It was the appellants’ claim that a transfer of undertakings occurred but that this was denied by the respondent. The appellants’ complaints related to breaches of Regulations 4, 7, 8 and 9.

The contract was for the logistics and transportation of chilled and frozen products from Company T’s Ballymun depot. The transport function was separate from the warehousing function at the time the appellants contend a transfer occurred. At the time of the transfer there were a total of 147 Company K employees allocated to the transport contract including 126 drivers with the remaining employees working in transport management and administration.

It was outlined to the Tribunal that the drivers represented by the union were and are, a distinct bargaining unit and had their own separate agreement with Company K to govern pay and terms and conditions of employment and other procedural matters. The use of contractors was minimal and for a short period in the months prior to the transfer.

At the point of transfer there were 63 tractor units, 131 trailers, 8 rigid trucks as well as a number of tug-masters and double-deckers. The use of all of this equipment was taken over by the respondent on 22 October 2010. Between February and April 2011 the tractor units and trailers were gradually replaced by units owned by the respondent. The other three categories, owned by Company T are still used by the respondent.

At the point of transfer there were a number of support facilities in Company T’s depot, owned by Company T and utilised for the purpose of servicing the transport contract. These support facilities included a transport office, parking facilities, refuelling facility, truck-wash and vehicle maintenance (operated by a contractor). The use of these facilities was taken over by the respondent from 22 October 2010. The respondent continues to use the facilities with the exception of the vehicle maintenance facility which was later taken on directly by the respondent towards the end of 2011.

There were negotiations between the respondent and Company K prior to the transfer with regard to staff either being made redundant or transferring employment to the respondent on existing pay and benefits. However, there was no consultation with the employees. The union asserted that a transfer of undertakings had occurred within the meaning of the Regulations. A number of employees did not transfer but accepted a redundancy payment. A number of other employees accepted a redundancy payment and commenced new employment with the respondent under different terms and conditions. The 18 appellants started work with the respondent the following day, without any break in the employment and without being offered either a redundancy payment or new employment. They transferred to the respondent’s terms and conditions. The appellants’ statutory entitlements were preserved by terms of an agreement with the respondent. Due to the refusal of the respondent to acknowledge a transfer of undertaking the union was constrained to enter into an agreement with the respondent, without prejudice to the rights of members to pursue claims under the Regulations for their full rights and entitlements and without prejudice to the drivers’ collective agreement. Case law was opened to the Tribunal by the appellants’ representative.

It was the appellants’ case that breaches had occurred under the Regulations and as follows:

Regulation 4:

This regulation at subsection 1 provides,

“The transferor’s rights and obligations arising from a contract of employment existing on the date of a transfer, shall by reason of such transfer, be transferred to the transferee.”

Prior to the transfer of employment, Company K confirmed in writing the terms and conditions of those employees whose employment was transferring. The letter which issued to the employees was signed by Company K’s HR manager and was reflective of the conditions in the collective agreement. To date the respondent has not honoured the following in relation to the contract of employment:

• Paragraph 1 relating to the rostered working week. The letter confirmed the drivers’ contractual obligations including that of the appellants, to work a 45 hour week. However, the rolling roster of 4 working days over 7 days has not been honoured. In fact, the respondent has eliminated this roster along with the start time windows. As a consequence some drivers have now worked 9 months without a weekend off.
• Paragraph 5 relating to Christmas bonus. Company K’s letter confirmed the sum of Christmas bonus to be paid to staff transferring. To date the respondent has not honoured these contractual entitlements. The amount of the bonus is the sum of €370 except in the case of Appellant 18 (€571) and Appellant 6 (€615.38).
• Paragraph 13 relating to release for local union meetings. The letter confirms release for union meetings is paid. This has not been honoured by the respondent and paid release from driving duties for local union meetings has been eliminated.

It was the appellants’ case that that to date the respondent has failed to honour the following sections of the collective agreement with Company K:

• Clause 1 - this fundamental clause requires that matters affecting the terms and conditions of employment are to be subject to consultation and agreement. The respondent has not honoured this.
• Clause 5 relates to employee representation procedure. The provisions of this clause have been unilaterally altered in that whereas the clause in question provides for three driver representatives, only one is now permitted. The respondent has also failed/refused to honour representative facilities as provided by this clause such as paid time off from driver duties to attend meetings.
• Clause 6 relates to consultation. The respondent does not consult with employees, including the appellants on their terms and conditions of employment as provided for by the agreement.
• Clause 7 relates to disputes, grievance and disciplinary procedures. The respondent has failed to follow the agreed procedures as provided for in the collective agreement in respect of adhering to timelines and sanctions.
• Clause 11 relates to amendment of the agreement. The respondent has unilaterally altered the terms of the collective agreement without following the required procedures as provided for in clause 11.

Regulation 7:

This Regulation provides as follows,

“…the status and function of the representatives or of the representation of the employees affected by the transfer shall be preserved by the transferee concerned on the same terms and subject to the same conditions as existed before the date of the transfer as specified in any enactment, or in any agreement between the employer and the employees’ representatives.”

Post-transfer the status and function of the employees’ representatives has been greatly reduced by the transferee (the respondent) in the following ways:

• The number of employee representatives has been unilaterally reduced from 3 to 1.
• The facilities for the now sole driver representative to carry out his role and function has been greatly reduced by the respondent. Meetings are not scheduled in a timely manner to deal with grievances and matters raised by the representative on behalf of driver employees. Also meetings have been cancelled at short notice or arrangements for meetings not confirmed. At other times meetings are scheduled at inappropriate times for the driver representative.

Regulation 8:

This Regulation, at subsection 1(c), obliges the transferor and transferee to provide the employee the following information in good time prior to the transfer as follows: “the legal implications of the transfer for the employees and a summary of any relevant economic and social implications of the transfer for them”

Subsection 1(d) further provides for: “any measures envisioned in relation to employees.”

It is asserted by the appellants that the respondent did not comply with any part of Regulation 8. The application of the Regulations to the transfer was disputed. The respondent therefore failed to consult with the employees.

Regulation 9:

This Regulation provides at 9(2) as follows:

“A provision in any agreement which is or becomes less favourable in relation to an employee than a similar or corresponding entitlement conferred on the employee by these Regulations shall be deemed to be modified so as not to be less favourable.”

Notwithstanding, and without prejudice to, the appellants’ firm conviction as to the existence of a valid transfer of undertaking, the drivers who transferred from Company K to the respondent, including the appellants, were constrained to enter into a “voluntary” agreement. However, the terms of the agreement are considerably less favourable than those provided for in the collective agreement. Accordingly, it is the appellants’ case that the agreement constitutes a breach of Regulation 9 and should be modified to ensure its provisions are no less favourable than the collective agreement reached with the transferor (Company K).

Regulation 5:

It was submitted that the respondent has also failed in their obligations under this Regulation.

Determination

The Tribunal has given consideration to the submission made on behalf of the appellants in this case. The representatives of the respondent attended on the first day of the hearing. The Tribunal on that day requested the parties to agree the facts between them if possible and isolate those areas they did not intend to agree on, in order that the Tribunal could give consideration to the various arguments in the case. At the resumed hearing the representative for the respondent announced that it was not their intention to take part in the hearing as the findings were unlikely to impact on them to any great extent.

It appears that the Union and its members, the appellants herein, had come to an agreement with the respondent that the appellants would have their statutory rights preserved when the respondent took over the contract. The Tribunal observed that because such an agreement would impact on the State in certain eventualities it would be very difficult to enforce. If the Tribunal find that a transfer of undertakings did take place such an agreement would have no standing. The question then was whether a transfer of undertakings took place or not, as the case may be.

From the facts, as outlined to the Tribunal, it is clear that in or about late September 2010 the contract that Company K had with Company T was coming to an end and the contract was being passed to the respondent who were to succeed to the contract with Company T. Company K at that time had 126 drivers, 14 clerical staff and 8 managers approximately, working on Company T’s contract out of premises owned by Company T. Company K had 63 tractor units, 131 trailers, 8 rigid trucks , 3 tug masters and 5 double-decker trucks - all owned by Company T and used by Company K. On 22 October 2010 all the above vehicles were transferred for the use of the respondent. Some of the employees of Company K were paid what was called “a redundancy payment” but the appellants in this case did not accept redundancy. If the Tribunal decides that the transfer of undertaking Directive applies in this case then it applies to all the employees of Company K at the time of transfer which would be 22 October 2010 and not just to the appellants.

The Tribunal is aware that the information given to the Rights Commissioner differs significantly from that given to the Tribunal. The Rights Commissioner was informed that no tangible assets were transferred between Company K and the respondent. The appellants informed the Tribunal that all the trucks and other equipment which transferred from Company K to the respondent on 22 October 2010 were used as and from that day on by the respondent. The Tribunal was also informed that some of these vehicles were replaced by the respondent some time later. While on the face of it, it appears that only a small proportion of the staff are claiming the transfer of undertaking, a very large proportion of the staff actually ceased work with Company K on 21 October 2010 and commenced with the respondent on 22 October 2010. Those staff who took or received “redundancy” at the time, if the Tribunal find that the Transfer of Undertakings Directive applies, could not have been dismissed and if no dismissal took place, as no dismissal is allowed to take place where the Directive applies, then there can be no redundancy as a matter of law because there must be a dismissal in order for there to be a redundancy.

The Tribunal reviewed the case law in the matter and noted the following:-

1. The major criteria in establishing a transfer is whether the undertaking retains its identity after the transfer, in that the operation must be the same or similar to that which existed prior to the transfer. Rask and Christensen v Iss Kantinesservice A/S.

2. The transfer must relate to an “undertaking” which is “a stable economic entity.” This does not mean that the undertaking must be profitable or profit making. There is no such requirement and the undertaking can be a charity or a public body. The main requirement is that it can be identified as that which operated before the transfer.

3. The transfer must be embodied in a “contract” i.e. it must go from one natural or legal person to another natural or legal person who is or are responsible for operating the entity and who take on the function of an employer with regard to the employees of the undertaking. There is no requirement for a change in the legal owner i.e. the operators need not own the undertaking. In looking at this undertaking where it is owned by a third party one should ensure that this entity has not changed in substance from that which was originally owned by the third party. Ayez Suzen –v- Zehnacher et al.

4. The Tribunal must consider whether tangible assets such as trucks, trailers, buildings, equipment and other tangible assets used by the undertaking prior to the transfer have been transferred. Ayse Suzen –v- Zehnacher et al.

5. If intangible assets such as the knowledge of the workforce, procedures for working, good will, customer base etc. have been transferred. The value of the intangible assets to the undertaking at the time of the transfer must also be considered.

6. The extent to which the undertaking upon transfer resembles the undertaking before the transfer. Consideration of the name of the undertaking prior and following the transfer is not of great significance.

7. If the workforce after the transfer is identical or similar to that which existed prior to the transfer and the location/locations of that workforce before and after the transfer.

8. The type of undertaking transferred is also a factor that must be given consideration.

9. That there is no need for a direct contractual relationship to exist between the transferor and a transferee. The transfer may take place through a third party such as the proprietor of the tangible assets or the person who awards the contract.
10. Whether there was a period of suspension of the activity and if so the length of that suspension.

Most of the above factors were considered as relevant by ECJ in the Suzen –v- Zehnacher case but the Court also stated that other relevant facts where present should be considered. The Tribunal also considered the Spijkers, Hernandes, Hidalgo and other subsequent cases on these points. The Tribunal also considered Abler –v-Sodexho MM Catering GmbH. The Tribunal is also aware that other factors and freedoms under the EU Treaties may affect a decision of a Tribunal.

The Tribunal has taken into consideration the submission made by the appellants and having consulted other legal precedent must find as follows:

1. The contract in this case was the transportation and distribution of Company T’s goods in this country. This was the contract that was taken away from Company K and given to the respondent on the 22^nd of October 2010. The contract was based on Company T`s premises prior to the above date and remained there after that date with the respondent in occupation. The only change that took place was overall management of the contract. The passing of this contract between the parties necessitated the transfer of staff, vehicles and the use of premises from one party to the other. In the opinion of the Tribunal this was an easily identifiable undertaking or part of an undertaking within the definition given in the transfer of undertaking Directive.

2. The question of the undertaking being a stable economic entity did not need much consideration because the facts speak for themselves. What was passed was a cohesive unit of buildings, equipment, trucks, trailers and many of the staff along with the distribution and transport elements. There probably would have been changes to the schedules and rotas of the workforce but the shops receiving the goods would have remained the same.

3. As already stated above trucks, trailers, equipment and premises etc. were transferred to the respondent by Company T. Where such assets are not owned by either the transferor or transferee but owned by a third party (Company T) and used by the transferor/transferee during the course of the contract it is settled law that the transfer of undertakings directive would apply. There is no requirement for a direct link between the transferor and the transferee. The point being that neither the transferor nor transferee in such circumstances needs to own those assets for the purposes of the Directive. In this case it would appear on the face of the facts that tangible assets did transfer from Company K to the respondent and indeed on the facts given at the hearing the respondent had replaced some of the assets subsequent to the transfer which must have been a requirement of the contract between Company T and the transferee. The Tribunal has no information on this aspect of the case beyond the assertion of the appellants that this did happen.

4. An identifiable workforce in almost its entirety also transferred and the expertise and knowledge of the various itineraries used by the workforce in delivering the goods of Company T must have been a factor in the consideration of Company T when awarding the contract. The warehouse distribution centre from which that workforce operated was immediately occupied by the respondent on 22 October 2010. This distribution centre included a transport office, a truck wash, refuelling facilities and parking facilities all of which were necessary for the purposes of the contract. The experience of the workforce must be considered as an intangible asset of some value to the respondent. In retaining this workforce they were in a position to provide a smooth continuation of the transportation of the goods of Company T following the transfer. The ECJ has held that where such a workforce has been transferred without any other asset that it may in itself constitute an economic entity.
5. The undertaking on the 22^nd of October 2010 was almost identical in vehicles, premises, staff, customers, routes etc. to that, that existed prior to the above date. The only aspect of the undertaking that changed was the name of the company discharging the duties under the contract. The Company T contract held by Company K prior to the 21 October 2010 was not the sole work of Company K and that company still traded on this other work subsequent to the passing of the contract. This other work of Company K however was never performed from the premises of Company T. Company K continued trading without the identifiable element of their workforce which had been working on the Company T contract subsequent to 22 October 2010. It can be said that the Company T contract was part of Company K’s overall undertaking but ceased to be on 22 October 2010. 
6. It was noted by the Tribunal that the vast majority of the staff who were with Company K on 21 October 2010 were working with the respondent on 22 October 2010. Some staff received redundancy but the Tribunal is unsure who paid that redundancy and some of these staff continued to work for the undertaking subsequent to the date of transfer.

7. The type of undertaking in this case encapsulates all the elements that would be necessary to comprise an undertaking (economic entity) for the purposes of the Directive. It was a stable economic unit containing tangible assets of considerable value along with a stable workforce working to contract that had an identifiable customer base of Company T outlets all over the country.

8. The Tribunal also considered whether the lack of a contractual relationship between the transferor and the transferee would impact on the Directive applying in this case or whether the question of ownership of the assets transferred would have an effect on the transfer. In considering these points the Tribunal noted that ECJ precedent has established that ownership of the undertaking is not a factor that can impact on the Directive applying provided the transfer is embodied in a contract and that that contract goes from one natural or legal person to another natural or legal person who take on the function of employer with regard to the employees of the undertaking. There is no requirement for the transferor or the transferee to own the undertaking and no need for a contractual link between the transferor and the transferee.

The Tribunal noted that Art.1(1) (a) of the Directive states:

“This Directive shall apply to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger”

This makes no mention of a requirement for the transferor or transferee to have ownership of such an undertaking or business and therefore there is no need for the undertaking to be owned by the transferor or transferee. There is also no requirement for the contract of transfer to be between the transferor and the transferee. Mayeur –v- APIM. and Oy Lukenne case.

9. In this case there was no gap or period of suspension of the activity of the undertaking as that activity appears to have been continuous so that the Tribunal need not give consideration to this factor.

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It is clear to the Tribunal that the passing of the contract from Company K to the respondent was a transfer of an undertaking in that an economic entity passed from Company K to the respondent within the meaning of and subject to the Transfer of Undertaking Directive. The Tribunal sets aside the decision of the Rights Commissioner in these appeals and makes the following determination:

That the complaint of the appellants that the respondent was in breach of Regulation 4(2), 7(1), 8(1),(2),(3), of the S.I. 131/2003 (Protection of Employees on Transfer of Undertakings) Regulations 2003 is well founded.

The respondent is herewith required to honour all the conditions of employment and the terms of the agreement made between the transferor and the representatives of the appellants prior to the transfer and compensate each of the appellants for all and any financial loss suffered by them by the non-adherence of the respondent to the terms and conditions of their employment and the said agreement from the date of the transfer, the 22^nd of October 2010, to the date of this determination.  

Sealed with the Seal of the

Employment Appeals Tribunal

This   ________________________

(Sgd.) ________________________

     (CHAIRMAN)