EMPLOYMENT APPEALS TRIBUNAL
CASE NO.
TU24/2013
TU25/2013
APPEALS OF:
Paul Ryan
&
Robert Ryan
against the recommendation of the Rights Commissioner in the case of:
Balfour Beatty CLG Limited
Under
PROTECTION OF EMPLOYEES ON TRANSFER OF UNDERTAKINGS REGULATIONS 2003
I certify that the Tribunal
(Division of Tribunal)
Chairman: Ms. K.T. O'Mahony B.L.
Members: Mr J. Horan
Ms H. Kelleher
heard this appeal at Thurles on 17th December 2014, 8th April 2015, 9th April 2015, 14th July 2015 and 15th July 2015.
Representation:
Appellants:
Mr James Scanlon, Maples and Calder, Solicitors, 75 St Stephen's Green, Dublin 2
Respondent:
Ger Connolly. Mason Hayes & Curran, South Bank House, Barrow Street, Dublin 4
This case came before the Tribunal by way of appeals by the employees against the decisions of the Rights Commissioner Ref: R-125406-tu-12/GC and R-125408-tu-12/GC.
These appeals (TU24-25/2013) are to be read in conjunction with appeals (PW230-233/2013). The appeals under both Acts were heard in conjunction with each other and it was agreed that the evidence tendered in either case can be used in either or both of them.
Background:
The appellants in this case are father and son both of whom were former directors and employees of MP Ryan Ltd. (MPR). The father set up the company in 1984. Both appellants later became employees of the company. MPR had an electrical maintenance contract with Bord Gais Networks (BGN). Under this contract MPR provided electrical maintenance (planned work) for the network and charged for labour and materials for any remedial work (unplanned work) in respect of any necessary repair work arising from the inspections. In addition, MPR tendered for BGN capital projects on a case by case basis. Practically all of MPR’s work was for BGN; in its last full year of business 93% of its entire work was invoiced to BGN.
BGN contracted with between 20 to 30 contractors for the performance of its various maintenance works. BGN decided to award all of its maintenance works to one contractor and ultimately, the respondent, a joint venture company (BBCLG), became the awardee of the “super contract”. Three contractors were deployed into the respondent as part of the super contract on a phased basis over a period of 4/5 months beginning in November 2011. A number of other contractors became sub-contractors to the respondent.
Around this time MPR’s contract with BGN had been extended to March 2012 and thereafter there was a further extension to 7 May 2012. The appellants entered discussions with the respondent with a view to winning a sub-contract within the new structure operated by the respondent. At a meeting held on 25 April 2012 the respondent was seeking a reduction in some of MPR’s rates and these discussions were unsuccessful. At that meeting MOG, a representative of BB, assured the appellants that it was not intended to “mess people around regarding TUPE”. By letter dated 1 May 2012 MPR notified its employees that that they were being transferred to the respondent under the Protection of Employees on Transfer of Undertakings Regulations, 2003. On 7 May 2012 MPR ceased all operations. MPR had not engaged in prior consultation with the employees.
The respondent refused to engage former employees of MPR who turned up at its premises on 7 May 2012 and an industrial relations dispute arose between the respondent and the TEEU (on behalf of the employees) resulting in a number of the former employees placing a picket at the respondent’s premises. MPR had not furnished the respondent with its employee details as requested by the respondent in its letter of 19 June 2012 and at a conciliation conference held on 6 July 2012 an agreement between the parties was brokered under the auspices of the LRC to avoid the threat of industrial action.
In its letter of 6 July 2012 the LRC set out their “interim proposal as agreed by the parties”.
“(MPR) will forward details of employees which the company believe are covered by the Transfer of Undertakings provisions to BBCLG head office by 12 noon on Monday 9 July 2012 …. The respondent will evaluate the data provided and confirm their view around the transfer of undertakings by 12 noon on Tuesday 10 July”.
In its letter of 9 July 2012, the respondent expressed dissatisfaction at the information provided by MPR, in particular it did not include the employees’ contracts of employment or any differentiation between the various types of work performed by them for BGN and the number of employees was greater than heretofore indicated.
However, the issues between the parties were “settled” on 27 July 2012, based on the terms as agreed at the LRC on 6 July 2012. Under this agreement the four employees transferred into the employment of the respondent and were immediately made redundant. Each of the four former employees signed waiver agreements in favour of the respondent which stated:
I (named employee), acknowledge that my employment with the Company will terminate by reason of redundancy with effect from 27th July 2012 …”
In consideration of my agreement to the terms and conditions of this waiver and in full and final settlement of any and all claims, actions or causes of action, suits, complaints, contracts. …whether arising under statute, common law, equity or otherwise arising out of my employment with (the respondent) or the termination thereof as I may have against the company or any associated company, their directors, employees, officers, representatives, agents, successors, shareholders and assigns, the Company shall pay to me the gross sum of €(amount) (inclusive of my statutory redundancy).
The waiver agreements specified a number of statutes excluded under the agreement, including The European Communities (Protection of Employees on Transfer of Undertakings) Regulation 2003 (the Regulations or alternatively TUPE) and each signatory acknowledged that he had received advice in relation to the waiver agreement, thus showing compliance with the legal requirement of informed consent to the waiver.
Subsequently on 5 November 2012, after the appeals herein were submitted, the Labour Relations Commission issued a further letter to the respondent setting out the terms agreed at the Conciliation Conference on 6 July 2012: the company agreed to take on four named former employees of (MPR) to avoid the threat of industrial action; the company agreed to recognise their previous service with (MPR); in the event that the company did not have work for the four named employees they were to be made redundant and paid ex-gratia redundancy payments in accordance with the Company/Union terms; and, in return the Union agreed to withdraw all threats of industrial action related to MPR employees. The letter went on to state the arrangement/agreement was without prejudice to the Company’s view that there is and was no transfer pursuant to the Transfer of Undertakings Regulations and likewise, it was without prejudice to the Union’s view that a Transfer of Undertakings was applicable under the Transfer of Undertakings Regulations 2003. The respondent believed that this letter possibly issued in responses to a request from it.
In January 2013 the respondent reached settlements with two other former employees of MPR who signed almost identical waivers in favour of the respondent. In total, payments amounting to around €93,000 were paid by the respondent to six of the former MPR employees. Thus, of the ten employees who had been in the employment of MPR in early 2012, six received termination payments from the respondent, two others left MPR and took no action in relation to the termination of their employment and the two appellants herein are the two remaining employees.
The appellants contend that they are entitled to protection under the Protection of Employees on Transfer of Undertakings Regulations, 2003.
The respondent’s position was that there had not been a transfer of an undertaking or part of an undertaking from MPR to the respondent and the appellants were not entitled to the protection of the Regulations. The nature of the contract held by MPR before it was subsumed into the respondent’s super-contract was such that it could not in itself have accounted for the major part of MPR’s work; only around 20% of MPR’s income from BGN related to its periodic contract. There was a great deal of other work that the appellants were engaged in on behalf of BGN that was not covered by the periodic contract they held. MPR could still have tendered for that work in the future. The payments made to the MPR employees were brokered by the LRC and were agreed solely in order to avoid industrial unrest and picketing of the sites on which the respondent operated.
Determination:
The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 implement “Council Directive Number 2001/23/EC. The approach of the ECJ (the Court) in deciding whether there has been a transfer of an undertaking in a particular instance has been clearly summarised in Irish case law. In Electric Skyline Limited v Paul Mullen and Ors TU67-70/12 the Tribunal summarised the Court’s approach as: “The Directive and Regulations are broadly drafted and, in the absence of clear definitions, interpretation of what constitutes a ‘transfer of undertaking’ has proved difficult. The approach adopted by Courts and Tribunals has been to ensure that the social purpose of the Directive is met. Rather than limiting themselves to the interpretation of the precise words and phrases used in the Directive, the Courts have adopted the ‘purposive approach’ in that they have looked at the overriding objective of the Directive which is to protect workers in the business which is transferred, and in deciding whether there has been a transfer, all the circumstances have to be looked at. See Spijkers case (JMA Spijkers V Gebroeders Benedik Abbaatoir CV 1986 2 CMLR 296) and followed in the Courts herein, as evidenced by the decision of Blaney J in Bannon V EAT Drogheda Town Centre (1992) and the Employment Appeals Tribunal in the case of Morris V Smart Brothers Limited UD 688/93.”
Similarly in ECM V Cox 1998 IRLR 255 Morrison J. stated “It can be said with confidence that neither the presence nor the absence of any one factor will demonstrate that a transfer of undertaking has or has not occurred. It is a question of looking at the facts and keeping an eye on the purpose and protection given by the Directive”.
Regulation 3 (1) states:
“These Regulations shall apply to any transfer of an undertaking, business, or part of an undertaking or business from one employer to another employer as a result of a legal transfer (including the assignment or forfeiture of a lease) or merger
(2) Subject to this Regulation, in these Regulations -
“transfer” means the transfer of an economic entity which retains its identity;
economic entity means an organised grouping of resources which has the objective of pursing an economic activity, whether or not that activity is central or ancillary to another economic or administrative entity.”
Clearly these Regulations apply to the transfer of a part of an undertaking. There is no authority before the Tribunal that the Regulations do not apply below a particular threshold.
Suzen -v- Zehnacker Gebaudereinigung GmbH Krankenhausservice (1997) IRLR 255, is one of the leading cases on the transfer of a services contract. In that case the Court held that the Directive 77/187 does not apply to the mere transfer of a works/service contract “if there was no concomitant transfer from one undertaking to another of significant tangible or intangible assetsor the taking over by the new employer of a major part of the workforce in terms of their numbers and skills assigned by the transferor to the performance of the contract.” Stated in positive terms the Court’s view was that in the case of a second generation transfer of a works/service contract the Directive will apply where there is either a transfer of significant tangible or intangible assets or where a major part of the workforce assigned to the performance of the contract was taken over by the transferee.
MPR’s business was labour intensive. The Finance Manager of the respondent company confirmed in evidence that the six employees of MPR who were taken on by the respondent on 27 July 2012 and 29 January 2013 were paid monies by the respondent based on having been transferred to the respondent and becoming its employees. Her evidence was that they were treated in the same way as around 335 other employees who had transferred to the respondent from three other contractors/companies and afforded the protections of the Transfer Regulations. All the monies paid to those six MPR employees was treated for tax purposes on the basis that the respondent was their employer and their entire service from the beginning of their employment with MPR as well as the period from 7 May 2012 to the date of the signing of the agreements with the respondent were recognised by the respondent..In addition to the foregoing a further letter presented in evidence, dated 14 February 2013 from the respondent company to the Revenue Commissioners, referred to making “an employee redundant during 2012” and that “this employee transferred into our business under a transfer of undertaking from a company called (MPR)”. The Tribunal cannot accept the respondent’s contention that the taxation treatment of these MPR employees was merely an administrative function. The Tribunal finds that these former MPR employees were treated as having transferred into the respondent.
While MPR’s business was labour intensive and in general electricians have their own tool boxes, BGN provided maximos (a significant piece of communication equipment for use by employees for receiving job details and feeding back job information to Bord Gais) to the MPR employees prior to 7 May 2012.. In Abler v Sodexho MM Catering Gmbh and Anor [2004] IRLR 168 the Court acknowledged that in some instances the provision of assets by the contracting authority may result in a transfer of assets between the service providers. The evidence in this case was that the maximos were not only in the possession of the respondent/the new service provider after May 2012 but that they had become its property. Thus, in this labour intensive work the one significant asset was transferred to the new contractor.
Electrical maintenance work requires highly skilled and trained workers. The respondent’s evidence was that sometime after April 2012 Douglas Calibration became a subcontractor providing electrical maintenance for the respondent under the contract and is paid a daily works rate for remedial work done. Like MPR’s contract with BGN Douglas Calibration has to tender for project work. Three former employees of MPR went on to work for Douglas Calibration. Their evidence was that they were doing the same work in the same places, using the same equipment and receiving communication from BGN in the same way as when they worked withMPR. The ratio of their work as between electrical maintenance and project work was more or less the same in two cases as when they worked with MPR but in the third case there was there was a disparity. The Tribunal concludes that the provision of electrical maintenance was an identifiable economic identity.
Economic entity is defined as an organised grouping of resources which has the objective of pursing an economic activity, whether or not that activity is central or ancillary to another economic or administrative entity. In Klarenberg v Ferrotron Technologies GMBH [2009] IRLR 301the Court stated
“The fact that the transferred part of the undertaking or business does not, under the new employer, continue to be operated as an organisationally autonomous part of the undertaking or business is not sufficient in itself to preclude the existence of a transfer within the meaning of the Directive.”
The Court had regard to the objective of the Directive which seeks to ensure protection of employees’ rights in the event of a transfer. It reasoned that such an understanding of the identity of the economic entity, depending entirely on the single factor relating to organisational autonomy could not be accepted as that would imply that if the transferee decided to break down that part of the undertaking or business and integrated it into its own structure the Directive could not be applied, thus depriving the employees concerned of the protection afforded by the Directive.
In this case the documentation provided is particularly instructive. The earliest background documentation provided is an email dated 10 March 2011 from the overall contracting body BGN to MPR which is headed “10/051 – Networks Services and Works Contract – TUPE”. It sought TUPE as requested earlier on 3 May 2011for issue to the tenderers for the Networks Services and Works Contract. It was confirmed in evidence that TUPE provisions and information were outlined in documents provided to potential tenderers in order “to facilitate a seamless transfer of activities”. Unfortunately it is also clear that MPR did not complete the “due diligence” paper work regarding their employees in the timely manner requested even though it was clearly sought for the purposes of TUPE.
In summary, from the start the correspondence between BGN and MPR confirms that these matters were being dealt with in the broad context of TUPE. For whatever reason it was done, it is clear that six MPR employees, out of a potential ten, were taken on and treated as employees for tax and other purposes as having transferred in to the respondent under the Regulations. This was confirmed in the respondent’s evidence. The respondent, in correspondence with the Revenue Commissioners months after the event and months after the current appeals were submitted, confirmed that an employee transferred in from MPR. Two other employees, the appellants herein, were treated differently to those six.
Accordingly, with a major part of the workforce treated as having transferred and with the respondent taking on the work previously carried out by MPR it seems clear that an “economic entity” was transferred. The documentation provided and the evidence given indicate that the respondent accepted this as a transfer as envisaged under the Regulations.
The Tribunal therefore determines that the appellants succeed in their appeals and hereby upsets the decisions of the Rights Commissioner.
The loss suffered by the two appellants herein as a result of the non-compliance by the respondent with the Regulations could be quantified either as a loss of remuneration under the Unfair Dismissals Act or on a similar basis to the redundancy payments sums as paid by BBCLG to the other employees.
It has to be said however that the appellants contributed significantly to their own situation by not complying with the requests for TUPE information on MPR employees including themselves on a timely basis and by holding out for subcontractor status for as long as they did.
The second appellant sought but, despite his efforts, did not find alternative employment to mitigate his loss until October 2014. The first appellant made limited attempts to find other work but was not successful. In all of these circumstances the Tribunal awards the second appellant the sum of €19,000.00 and the first appellant the sum of €55,300.00.
Sealed with the Seal of the
Employment Appeals Tribunal
This ________________________
(Sgd.) ________________________
(CHAIRMAN)