Complainant

Respondent

Parties

Eileen  Cox

Sinead Lynch & Samantha Swaris T/A  Gallery Cafe

Representatives

 Citizens Information Service

 No attendance

Act

Complaint/Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Section 39 of the Redundancy Payments Act, 1967

CA-00053794-001

21/11/2022

This is the common background for each of the complaints against Homestyle Meats Ltd(the current employer) and Gallery Café(the former employer).

This is one of a number of cases brought by three former employees of an entity trading as The Gallery Café against that former employer and also their current employer ( Homestyle Meats Ltd) where they seek to establish if their service and all other contractual and  employment rights transferred to the current employer under a Transfer of Undertakings or in the alternative, whether they are entitled to statutory redundancy payment from their former employer. That a redundancy payment arose from the closure of the previous business is denied by the Gallery Café. That the change of employer results in a transfer of obligations including rights and service is denied by Homestyle Meats Ltd. It should be noted that the employees of Homestyle Meats Ltd are not seeking any redress other than to establish their legal position as to whether there was or was not a transfer of undertakings with all of the related implications, in particular the transfer of service to this Respondent(an alternative scenario arises with the previous employer if it is deemed that there was no transfer of undertakings.) The Complainant and her colleagues emphasised that they  enjoy a good working relationship with the current employer, including their employment conditions.

The following essential facts were established from the submissions of the Parties before during and after the hearing.

Mr Davis is the beneficial owner of the property in Longford which includes a supermarket trading under the  Supervalu franchise. There is a café on the property.

In October 2006 Mr Davis  entered into a lease with Samantha Swaris and Sinead Lynch  whereby they rented the café and operated it as tenants under the name of The Gallery Café. There was no mention of any difficulties in adhering to the terms of the lease until 2022. In June 2022 the lessees owed three months arrears of  rent. It would appear that the relationship between the two lessees also deteriorated and only one of those named, Sinead Lynch, communicated with the employees of The Gallery Café. The other partner had no visible involvement in the business at that stage.

On June 11th, 2022, the lessees closed the business and ceased trading. Ms Lynch returned the keys of the café to Mr Davis.

In a letter dated June 13th, 2022, issued for social welfare purposes, Ms Lynch wrotethat the café had closed and ceased trading due to financial difficulties in the current economic climate. ‘This is apermanent closure under current management. ‘ The complainant was described as unemployed withimmediate effect.

The Complainant was employed as a kitchen assistant. Having commenced employment on 04.10.2007, she had over fifteen years service with the Respondent.

The Respondent was concerned about the closing of the café which was used by customers of the Supervalu shop and other facilities in the centre. He wanted the café to remain open.  With his solicitor he met with the lessees and operators of the Gallery Café in early July to see if either of them would be willing to operate the entity and to discuss financial matters. While more detail of that meeting is provided in the Respondents summary, in short it became evident that the lessees had accumulated arrears of taxes owing to the Revenue Commissioners in addition to the arrears of rent and other liabilities. No agreement was reached to continue to operate under the partnership or by either one of the two partners.

Still requiring  someone to operate the café, the Respondent decided to do so himself. He met with the former employees of the Gallery Café and offered them employment on a day one basis i.e., without any transfer of their service. They became employees of Homestyle Meats Limited, which up to that point provided a ready meal service but had never operated as a café. The café reopened on 13 July 2022.

The Complainant and her colleagues took advice from the local citizens information service regarding their previous service i.e., had it transferred or were they entitled to redundancy and pay in lieu of notice from the previous employer. Correspondence issued to the new employer on their behalf on 26 September 2022  regarding a transfer of employment conditions including service.

Mr Davis  replied on 5 October 2022:

‘In respect of the transfer of Business it was not an ordinary transaction as would normally be the case. I took possession of the building and contents in lieu of unpaid rent and breach of lease agreement. Under a normal trade transfer I would be entitled to take on the staff and their entitlements or to negotiate that the previous employer’s honour their service, in this case that was not possible.’

He also referred to the circumstances under which the café had closed.

Correspondence was then issued to the partners in the previous business and the previous employers of the Complainant on November 3rd, 2022

A solicitor replied for the Gallery Café(former employer) on behalf of his client, Sinead Lynch on November 5th :

“ Our client carried on business at the Gallery Café with her partner. We understand that that business has been continued  and that your clients employment has continued. Your clients are therefore not entitled to any redundancy. They have not been made redundant but their employment has been continued.

The effect of the correspondence in September and November 2022 was that  both the previous and current employer denied being liable for the service of the Complainant/s, whether by way of an entitlement to statutory redundancy or to a transfer of previous service. Complaints against the former and current employer were submitted to the WRC in November 2022 seeking to have the responsibility for the recognition of that previous service determined against one or other  of the employers of the Complainant/s who are separate Respondents in these matters. Complaints regarding the failure to follow the protection of employment conditions on transfer were made against the current and former employer in accordance with the Regulations were submitted against both employers.

See also ADJ-00043603-604-605-43543-43636-43637-43583-43651

The Complainant sought a decision as to whether or not a transfer of undertakings as defined under the TUPE Regulations of 2003 had occurred or whether, in the alternative, the former employer, the named respondents trading as the Gallery Café are liable for payment of statutory redundancy. The Complainant made an application for redundancy on November 3rd, 2022, which was rejected in correspondence from the legal representative of Ms Lynch in correspondence dated November 5th, 2022. This  an appeal of the refusal to pay redundancy.

There was no attendance by or on behalf of the Respondent.

The following is the relevant extract from the Findings in the complaints against Homestyle Meats Ltd where the question of whether there was in fact a transfer of undertakings is determined.

‘ Having reviewed all of the material and submissions provided by the parties, the questions to be determined appear to be  quite straightforward.

1.      Does the incorporation of the Gallery Café into the business of Homestyle Meats Ltd constitute a transfer of undertakings for the purposes of the EU Directive and the TUPE Regulations?

2.      If the answer to the first question is in the affirmative, was the Complainant an employee at the date of transfer?(a negative answer to the first question would not necessitate an answer to this question).

Before addressing these questions, it should be noted that the facts point to the  circle of customers remaining broadly the same between the two businesses i.e., the nature of the business,  a café, remains the same, the targeted customer base of those using the shopping centre and the provision of the café service to attract that base remain the same, the entity operated by Homestyle Meats Ltd  uses the same equipment furniture and fittings as the pervious legal entity and all of the employees of the former employee were taken over by the new employer. The question of the date of transfer and the gap in the period between the closure by one legal entity and the reopening by another is specifically addressed under the second question below, the employment status of the employees on the date of transfer.

3.      Question 1  Does the incorporation of the Gallery Café into the business of Homestyle Meats Ltd constitute a transfer of undertakings for the purposes of the EU Directive and the TUPE Regulations?

In considering this question, it is useful to recall the purpose of the Directive/s on which the TUPE Regulations are based.

Directive 2001/23EC describes the purpose of the Directive as one to provide for ‘the approximationof laws relating to the safeguarding of employees rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.’ This second Directive, the acquired rights directive built upon the foundation of the earlier Directive 77/187, aiming to provide greater clarity in terms of the rights of employees. The principle behind the Directives and repeated interpretations of the Directives, is to safeguard workers rights where there is a change of employer.

The leasing of the premises containing equipment for providing the services of the operation was one part of the business/es of FW Woods Ltd, along with other units at the shopping centre. FW Woods appears to operate as a holding company as the property owner for the purposes of leasing out the different units. It is understood the FW Woods  leased one unit of their  business to the operators of the Gallery Cafe on an agreed lease, the terms of which they adhered to and operated as a going concern for approximately sixteen years. When they reneged on the terms of that lease the Director of FW Woods, Mr Davis, also a Director of Homestyle Meats,  repossessed the leased property. While it may be said that he had no choice in the matter, the fact is he took back the lease when the fundamental term of the contract with the operators of the Gallery Café (the lessee) was broken i.e., they failed to pay the rent and consequently forfeited the lease on the cafe. What the Respondent seeks is a legal decision that his own decision to operate the café as a going concern as part of another business(Homestyle Meats Ltd) does not represent a legal transfer and consequently a transfer of undertaking with all that entails in terms of the rights of the Complainant and others previously employed by the tenants of FW Woods and now employed by him now employed by him.

Article 1(b) of the Directive of 2003 and Section 3 of the TUPE Regulations S.I. 131/ 2003 are important reference points for consideration of the Respondents proposition.

Art 1(b) of the Directive

Transfer of an economic entity which retains its identity…an organised group of resources…pursuing an economic activity…whether or not that activity is central or ancillary.

It is accepted that the lessees were in financial difficulties. However, their business was neither declared insolvent nor were they in liquidation and neither is there any evidence that they have since entered any form of legal dissolution , which the Directive requires they must have entered under the national legislation in a full and legally recognised manner before they can be regarded as bankrupt or insolvent(Article 5 of the Directive, Section 6(1) of  S.I.131/2003). The business in this case, retained its identity as a café under the same name providing the same service with the same resources, including the equipment which I am satisfied  was owned at least partly, if not wholly, by the FW Woods and consequently transferred to the Respondent business, Homestyle Meats Ltd. with the same employees and with the same customer base i.e., in the main those passing through the shopping centre.

Moving onto the relevant terms of the Statutory Instrument which gave effect to the Directive of 2001, Section 3 of SI 131/2003 states:

...’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.’

As can be seen, the Regulations specifically provide for the reassignment of a lease or the forfeiture of a lease to be regarded as a legal transfer. The previous lessees in this case had a contract conditional on paying the agreed rent. When they failed to keep up their payments, they breached the terms of their agreement and forfeited the lease. At that point the lessor took over the leased  premises himself and two weeks later, he employed the  staff of the previous employer to operate it as a going concern in the name of another of his own his own businesses - Homestyle Meats Ltd. I find that the Respondent in the name of Homestyle Meats is no different to another employer to whom a lease transfers  along with the business and all of its trappings after they take over the operation of the business. The suggestion that because the entity which leased the premises and the two businesses had no relationship beyond that of landlord and tenant between FW Woods and both tenants somehow negates the principles and terms of TUPE is not a credible proposition. Homestyle Meats Ltd is no different from any other tenant who would have taken over the lease in question. That too would have been a legal transfer of an economic entity. That F W Woods was previously the landlord and no money changed hands in the transfer does not undermine in any way the definition of a transfer of an undertaking through a legal transfer. Nor does it remove  Homestyle Meats Ltd  from the ambit of the regulations. What Mr Davis appears to be attempting to do, is to insert himself as FW Woods between Home Style Meats Ltd and the previous lessors of the unit in the name of The Gallery Café so as to deny any legal transfer and any consequent liabilities on the part of Homestyle Meats Ltd as the successor employer The transfer of the Gallery Café to Homestyle Meats Ltd following the forfeiture of the lease by the previous operator having  breached the terms of their agreed contract, was a legal transfer of an undertaking which brings the Respondent and the Complainant within the ambit of S.I.131/2003. Effectively, Homestyle Meats Ltd absorbed the entity known as the Gallery Café into their business. The previous holders of the lease and operators of the forfeited lease  were the transferor for the purposes of the legislation and Homestyle Meats Ltd were and are the transferee for the same purposes.

The characteristics of the changeover of operator of the Gallery Café to Homestyle Meats Ltd in July 2022  bear all the necessary hallmarks of a transfer of an undertaking as a legal transfer of an undertaking for the purposes of S.I.131/2003(and the originating EU Directive)

Q2.The Date of Transfer - If the answer to the first question is in the affirmative, was the Complainant an employee at the date of transfer?

One of the essential elements for a transfer of an undertaking under TUPE is that the employee/s concerned are required to  be employees at the date of the transfer for the transfer of the majority of  pre-existing employment conditions including that of service to pass to the transferee. Following on from the known facts (allowing that there was no evidence available from the previous employer) and the analysis of question one and the related conclusions, it follows that the first possible  date of the transfer was the date on which the transferor ceased trading at The Gallery Café and handed back the keys, ceasing to use the property and closing their business. Alternatively, the date of transfer was July 4th, the deadline given by Mr Davis to the lessees whereupon if they did not reopen the café he would ‘have to open the café myself’ (see his letter of 5 October 2022). The café then reopened on July13th. In all a two-week period at most before the legal transfer occurred and a further two weeks before the Complainant commenced employment in the reopened café.

Clearly there was a gap in the employment relationships i.e., the ending of one and the commencement of the new own. That gap requires examination to determine if the Complainant was in fact an employee of the previous employee on the date of transfer.

What must also be taken into account is the relevant national legislation governing the employment relationship.

Article 2 of the Directive of 2001 states:

‘This Directive shall be without prejudice to national law as regards the definition of contract of employment or employment relationship.’

For the most part, the definition of the permanent  termination of employment under national law in Ireland is set out in the Unfair Dismissals Act unless the termination is brought about by a statutory  redundancy in which case the Redundancy Payments Act will take effect. The Minimum Notice and Terms of Employment Act sets out the statutory periods of notice which an employer is obliged to give to an employee on termination of their employment except in cases of serious misconduct.

The following is an extract from the interpretations contained in the Unfair Dismissals Act 1977 as amended.

“date of dismissal” means—

(a) where prior notice of the termination of the contract of employment is given and it complies with the provisions of that contract and of the Minimum Notice and Terms of Employment Act, 1973, the date on which that notice expires.

(b) where either prior notice of such termination is not given or the notice given does not comply with the provisions of the contract of employment or the Minimum Notice and Terms of Employment Act, 1973, the date on which such a notice would have expired, if it had been given on the date of such termination and had been expressed to expire on the later of the following dates—

(i) the earliest date that would be in compliance with the provisions of the contract of employment,

(ii) the earliest date that would be in compliance with the provisions of the Minimum Notice and Terms of Employment Act, 1973,

Redundancy is a form of dismissal for the purposes of the Unfair Dismissals Act 1977. The Complainant received notice of the  termination of her employment by the Transferor when she/they closed the business on June 11th. In accordance with the terms of the Unfair Dismissals Act as set out above, irrespective of when the notice was given to the Complainant or what notice she received, the statutory notice she was entitled to  was six  weeks’ notice in accordance with the Minimum Notice and Terms of Employment Act 1973. The number of weeks due to her is based on the employee’s length of continuous employment i.e., in excess of ten years in her case. Applying the provisions of the Unfair Dismissals Act 1977, the date of termination with the former employer cannot  be said to have occurred until the end of the notice period , unless the service transferred to a transferee in the meantime, in which a dismissal would not arise and the unserved part of the notice would also transfer. It follows therefore that whether the legal transfer occurred as early as June 11th or July 4th  or as late as July 13th the Complainant was still an employee of the former business on each of those dates  as her statutory  notice period had not expired and her date of dismissal could not predate the expiry of that notice under national legislation. On the basis of these conclusions, having found that a legal transfer for the purposes of the transfer of undertakings regulations did occur in this instance, as the Complainant was in the employment on the date of the legal transfer, I find that her rights acquired under Directive 2001/23/EC as transposed into National Law under S.I. 131/2003,including her previous service and all other contractual agreements with the transferor, her previous employer, transferred to the transferee, Homestyle Meats Ltd on the date of the transfer of the undertaking to the transferee.

 In light of this finding, the effect of the gap in trading and the transfer does not require a decision per se. However, I would note that in reality there was a gap of, at most, two weeks between the closure of one business and the date of the legal  transfer. The Complainant was offered employment with Homestyle Meats on or around July 4th before the actual date of reopening  so it may be added that arrangements to transfer the employment and the business were also in train during the gap period. In the circumstances of this case a declaration that the gap would undermine the position of the Complainant would not be reflective of the facts. I am also mindful that any other conclusion could be seen as a licence to use such a device to undermine the rights of the employees in any undertaking, something which an employee would find very difficult to prove by way of evidence. ‘ End. 

On the basis of the Findings in the complaints against Homestyle Meats Ltd as set out above, the Respondent in this case is deemed to have been  the transferor for the purposes of the TUPE Regulations. The effect of the decisions in those other cases where Homestyle Meats Ltd is the Respondent, is that the service of the Complainant transferred from the Respondent in this case to that other legal entity. Consequently, it follows that the appeal against  the Decision of the current Respondent not to pay  statutory redundancy  is not upheld.

CA-00053794-001 The appeal by Eileen Cox against the refusal of her former employer, Gallery Café, to  pay her statutory redundancy pay is dismissed.

Redundancy/Transfer of Undertakings