141 / 346
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JULY/AUGUST
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M. & M. argued that the business was in such poor
financial state when they took over that there was effec-
tively no business to transfer and that they had simply
acquired the premises with a view to starting afresh. The
Tribunal, however, held that the state of the business was
not relevant and that there was a transfer as envisaged by
the Acquired Rights Regulations and continuity of
employment should be preserved for the two employees
who were retained by M. & M. and that the two employees
who were not kept on could claim unfair dismissal
compensation from M. & M.
In
Pengelly v. Norm Cable Ltd.,
COIT 13 45/57, Ms.
Pengelly worked as an assistant head waitress in a
restaurant. Her employer sold the restaurant to new
owners and the completion date was 1st June 1982. On that
date, Ms. Pengelly was handed a letter of dismissal by her
former employer, to take effect immediately. Ms. Pengelly
continued to work for the new owners and some time later
was dismissed. The question raised was whether or not the
transfer of business and her dismissal by her former
employers broke continuity of employment. If it did, Ms.
Pengelly would not have had the necessary 52 weeks
continuous employment to qualify for unfair dismissal
protection.
The Tribunal held that under the regulations Ms.
Pengelly's employment was not terminated by the transfer
itself. Since completion took place on 1st June 1982 and on
that date Ms. Pengelly became employed by the new
owners, the purported dismissal by her former employer
was ineffective because by 1st June 1982 she was no longer
working for them. It was held that Ms. Pengelly was not
dismissed on 1 st June 1982 and should have been treated as
having being employed by the new owners throughout
under the provisions of the regulations. Continuity was
preserved and she was entitled to proceed with her unfair
dismissal claim.
In
Skilling v. Reed,
COIT 1345/1, Mrs. Skilling worked
as a shop assistant in a small business which was sold to
Mr. & Mrs. Reed. It was known that the business would be
run by Mr. & Mrs. Reed as partners and that Mrs. Skilling
would not be required. Mr. Reed gave Mrs. Skilling her
pay in lieu of notice and she subsequently claimed unfair
dismissal and a redundancy payment. The Tribunal held
that the reason for dismissal was economic and/or
organisational, as Mr. & Mrs. Reed had made a careful
appraisal of the requirements of the business and come to
the conclusion that Mrs. Skilling's work could be spread
between them. The dismissal was not automatically unfair
under the terms of the regulations and, as there were
substantial grounds justifying the dismissal, the Tribunal
considered the dismissal to be fair. The Tribunal,
however, held that the reason for termination came within
the definition of redundancy and awarded Mrs. Skillirtg a
redundancy payment.
In
Shipp v. D.J. Catering Limited & Anor.,
COIT
1348/49, Mrs. Shipp worked for a small family company,
D.J. Catering Limited, as a barmaid in a wine bar. The
business was not successful and the wine bar was sold. The
new owner decided the only way the business could
succeed was for manning levels to be reduced and he made
it quite clear to D.J. Catering Limited that he would not
require any of the existing staff. D.J. Catering Limited
wrote to Mrs. Shipp terminating her employment. The
Tribunal held that the reason for dismissal was an
economic one, the business being in a deteriorating finan-
cial position and that the dismissal was not, therefore,
automatically unfair under the terms of the regulations.
The remaining question, however, was whether or not
Mrs. Shipp had been fairly dismissed under the normal
unfair dismissal provisions and, on this point, the Tribunal
held that since all ernployees had been dismissed, there was
po unfair discrimination against any one and, as there had
been sufficient warning and consultation with Mrs. Shipp,
her dismissal was found to be fair.
All of these cases deal with termination of employment
consequent on a transfer. It should also be kept in mind
that the regulations cover situations where employees
remain in employment and where the regulations effec-
tively preserve their contractual rights, be they expressed,
implied, contained in a collective agreement, or arise by
custom or practice. The provisions relating to pensions are
also of considerable importance.
In relation to the termination of employment of
employees consequent on or otherwise linked with the
transfer of a business, there are three questions to be
answered:—
(1) Has there been a transfer of a business?
In
Kenmir v.
Frizzel,
[ 1968] 1 WLR 329, Widgery J. stated that a trans-
fer of a business only occurs if the effect of the transaction is
to put the transferee into possession of a going-concern, the
activities of which he would carry on without interruption
and that the question of whether or not there was a transfer
is one of substance rather than form, consideration being
given to the whole of the circumstances by weighing
pro
and
contra
the transfer of a business. In
Evendon v.
Guildford City Association Football Club,
[1975] QB 917,
Lord Denning stated that transfer of a business means
"that on the transfer, the whole complex of activity must
be transferred from the old owner to the new owner; or a
separate and severable part of
them.ltis not sufficient that
the premises alone or the physical assets alone are
transferred". A case of particular importance is
Port Talbot
EngineeringCompany Limited v. Passmore,
[1975] ICR 234.
In that case, a Steel Plant was maintained by a series of
contractors.
The maintenance contracts each lasted for a 12 month
period and a successful contractor had to re-tender at the
end of each such period. The Court held that there was no
transfer of the business of maintaining the plant when one
contractor was replaced by another. There was nothing for
the outgoing contractor to transfer. He had simply lost the
contract to another contractor as a result of a competitive
tender.
Mrs. Justice Griffiths stated that the relevant test to be
applied was that found in the judgment of Widgery J. in
Kenmir Limited v. Frizzell & Others
and held that, in
applying this test, the question must be asked what
evidence was there that the employer, when they obtained
the contract, were put in possession of a going concern
previously owned by the outgoing contractor? The answer
was that there was no such evidence and there was, there-
fore, held not to be a transfer of a business.
(2)
Has there been a change of employer?
This would seem
to be the simplest question to answer. If the identity of the
employer remains unchanged, the fact of the change in the
controlling interest of the employer appears to be
immaterial.
(3)
Is the termination justified by one of the allowable
reasons in Regulation 5?
This, again, is a question of fact
and would appear to come within the normal definitions of
133