| Date | 17 September 1997 |
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| Judgment | Wilson and Others -v- St Helens Metropolitan Borough Council. Court of Appeal (unreported) |
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| The Issue | Whether employees may agree new terms and conditions with their new employer following a transfer of an undertaking. |
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| Implication |
If it can be established that dismissals occurring before or immediately after a transfer of an undertaking are for economic, technical or organisational reasons, subsequent changes in terms and conditions agreed between the new employer and employee will be effective. Otherwise pre-existing terms of employment will continue to have effect, even in the case where employees have agreed to the change. |
printI have occasionally in the past spoken of the difficulties that the EC Acquired Rights Directive and the TUPE Regulations have presented to the construction industry. The regulations seek to protect the employment rights of an individual when the undertaking in which he or she is employed is transferred to another entity. This might occur when a local authority, for example, seeks to contract out the activities of its works or maintenance departments. A company bidding for these activities must carefully consider its position in respect of the staff already engaged to carry out the work. Under the regulations the contracts of employment of such staff may automatically transfer to the incoming contractor. These considerations equally apply when the contract comes up for renewal in future years. Against the background of these issues the Court of Appeal has recently, in the case of Wilson and Others -v- St Helens Metropolitan Borough Council, considered the simple question: What happens if at the time of the transfer of an undertaking, employees agree to new terms and conditions with the incoming entity? At the time the case attracted popular press attention, not because of any general interest in the tortures of the TUPE Regulations, but instead because of the presence in the Court of Appeal of the new Prime Minister's wife, Cheri Booth QC, who was instructed by St Helens. The background to the case is typical of cases where similar problems have been encountered. Lancashire County Council decided it could no longer afford to run the Redbank Controlled Community Home and accordingly it gave two years' notice to the trustees of the home that it would cease to run the home at the end of that period. The trustees thought carefully about their position and finally agreed with St Helens Metropolitan Borough Council that they would run the home on the basis of a major reorganisation involving a substantial reduction in staff. Lancashire County Council dealt with the staff from the home either by finding new jobs elsewhere for those that wish to stay with the council, or by dismissing for redundancy those who wished to stay with the home. These latter individuals would be permitted to apply for jobs with St Helens. The jobs they were to take up, however, were slightly different. Some were promoted, others demoted, and generally the terms and conditions were not as favourable as they had been used to. Before too long their Trade Union began to take notice, taking the point that TUPE should apply to the transfer. When negotiations with St Helens failed they applied to the Industrial Tribunal for a ruling that wrongful deductions from salaries had been made. The Industrial Tribunal rejected their claim on the basis that the redundancies had properly been made on the basis of an "economic, technical or organisational reason". Such a reason is justified under the terms of the TUPE Regulations and effectively means that the redundancies had been properly made and that the transfer occurring after the date of the redundancies was unconnected with the redundancies. This was not sufficient for the employees and their Trade Union organisers, and the case was subsequently taken to the Employment Appeal Tribunal. The Appeal Tribunal reversed the earlier decision. The contracts of employment with Lancashire were preserved by TUPE and even though the employees had entered into separate agreements with their new employers, this could not act in such a way as to vary the terms of their original employment with Lancashire. In effect the transfer of the undertaking was the reason for the dismissals. This is one of these cases where, however, you must read the story to the end. The matter then came before the Court of Appeal who once again reversed the decision of the lower court favouring the views of the Industrial Tribunal who had first heard the case. They held that the economic, technical or organisational reasons were sufficiently proven, and justified the case for the dismissals for redundancy. Accordingly, when the employees took up their new jobs with St Helens they did so on the terms and conditions offered by St Helens and therefore there had been no unlawful deduction from their wages.
CJ-9734
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