Appeal No.UKEAT/0698/05/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 30 March 2006

Before
HIS HONOUR JUDGE PETER CLARK
(SITTING ALONE)

G4S JUSTICE SERVICES (UK) LTD	APPELLANT

(1) MR S ANSTEY (2) MR A SIMPSON (3) GSL UK LTD 	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR J KENDALL
(of Counsel)
Instructed by:
Group 4 Securicor, Legal Department
Sutton Park House
15 Carshalton Road
Sutton 
Surrey SM1 4LD	
For the First Respondent 

For the Second & Third Respondents	MISS S PRESLAND
(of Counsel)
Instructed by:
Messrs Rowley Ashworth 
Solicitors
247 The Broadway
Wimbledon 
London SW19 1SE

MR T LINDEN
(of Counsel)
Instructed by:
Lees Lloyd Whitley
Solicitors
Castle Chambers
43 Castle Street
Liverpool 
Merseyside L2 9TJ	

SUMMARY

Transfer of Undertakings: Transfer & Continuity of Employment 

Relevant transfer under TUPE – employees dismissed for misconduct with internal appeals pending at date of transfer.  Appeals heard by Transferor and allowed; reinstatement directed.  Whether employed by Transferor immediately before transfer and employment transferred to Transferee.  

HIS HONOUR JUDGE PETER CLARK

1.	The parties before the Reading Employment Tribunal in this case were the Claimants: 1) Mr Anstey and 2) Mr Simpson and the Respondents: 1) GSL UK Ltd (“GSL”) and 2) G4S Justice Services UK Ltd (“G4S”).  The issue before a Chairman, Mrs C M Green, sitting alone at a Pre-Hearing Review on 28 September 2005 was whether the employment of the Claimants had transferred from GSL to G4S as a result of a relevant transfer, applying the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”).  She found that it had.  Against that judgment, promulgated with reasons on 27 October, G4S now appeals.

The Facts
2.	Based on an agreed statement of facts and the findings of the Chairman, the material facts are these.  Both Claimants were employed by GSL as Detainee Custody Officers wholly assigned to the In-Country Escorting Contract (“the Escort Contract”) under which GSL provided services to the Home Office in relation to the escorting of immigrants to this country.  Mr Simpson was a member of the Prison Officers’ Association (“POA”); Mr Anstey was not.

3.	Following allegations made in a BBC documentary the Claimants and other employees were subject to internal disciplinary procedures brought against them by GSL.  Under their contracts of employment, Schedule D, each employee had a contractual right of appeal against dismissal, appeals to be lodged within 14 days.  Both Claimants were summarily dismissed for alleged gross misconduct on 13 April 2005.  Both lodged internal appeals against dismissal within 14 days, that is on 17 and 22 April respectively.  

4.	GSL also entered into a collective agreement with the POA which included a disciplinary procedure.  Under the heading “Appeals Against Final Written Warnings and Dismissals” this provision appeared:
“If an appeal against dismissal is successful, continuity of employment shall be classed as unbroken service with full restitution of earnings lost”.

5.	The Escort Contract held by GSL terminated on 30 April 2005.  G4S took over the contract on 1 May 2005.  G4S provided a similar service to that given by GSL and it was common ground that a relevant transfer then took place.  

6.	What of the dismissed Claimants and their colleagues subject to the same disciplinary proceedings?  One fellow employee, Mr Richardson, had his appeal against dismissal heard before the transfer date.  His appeal succeeded and he was reinstated by GSL.  His employment transferred to G4S.  On 23 March, at a pre-transfer meeting, G4S were informed of the position as to all GSL employees then going through the disciplinary process and the question was raised as to what would happen if an employee successfully appealed against disciplinary action.  The point was then left undecided and Miss Lovell, G4S’Human Resources Manager, said that she would consult with her director.  

7.	On 4 April Miss Lovell made a note following another pre-transfer meeting.  In oral evidence before the Chairman, she accepted that it was initially agreed that G4S would hear any disciplinary appeals post 1 May.  The Claimants’ appeals were not heard by GSL prior to the transfer date for want of time. 

8.	On 9 May GSL informed G4S of the need to hear the Claimants’ appeals.  However, acting on legal advice, G4S indicated that it would be more appropriate for GSL to hear the appeals.  On 13 May, GSL’s Human Resources Manager, Ms Parsons, responded, expressing the view that G4S should hear the appeals.  On 25 May, Miss Lovell requested the GSL disciplinary procedure but on 6 June she declined, on behalf of G4S to hear the appeals on the basis that G4S had never been the Claimants’ employer.  As a result, GSL heard the Claimants’ appeals in late June/early July 2005; both appeals were successful, the dismissals were overturned and their reinstatement was directed.  However, GSL had no work for the Claimants on the Escort Contract which had been taken over by G4S and G4S refused to reinstate the Claimants on that contract on the basis that they were not employed by GSL immediately before the transfer and consequently, their employment had not transferred to G4S under TUPE.  Jobless, both Claimants then brought unfair dismissal claims against both potential employers in the Employment Tribunal.  Hence the preliminary issue as to who was the correct employer, which came before Mrs Green.

TUPE
9.	The question for me in this appeal is formulated by Mr Kendall on behalf of the Appellant, G4S in this way:
“Is an employee who has been dismissed by the transferor but whose appeal is yet to be heard employed in the undertaking that is transferred within the meaning of regulation 5 of TUPE?”
My answer to that question is: it depends.  I should explain.

10.	I begin with the material parts of Regulation 5, headed “Effect of Relevant Transfer on Contracts of Employment, Etc”.  
“(1)		…a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred…
(2)		Without prejudice to paragraph 1 above…on the completion of a relevant transfer –
(a)	all the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred…to the transferee and
(b)	anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be done by or in relation to the transferee.  
(3)		Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer…”

11.	Applying the plain words of Regulation 5, Mr Kendall’s submission here, as it was below, appears simple and straightforward.  Both Claimants were summarily dismissed by GSL on 13 April.  Their contracts were ended on that day.  That remained the position on the transfer date.  They were not employed by GSL immediately before the transfer.  Therefore, by virtue of Regulation 5(3) their employment did not transfer to G4S under Regulation 5(2).  The Chairman was wrong in law to find otherwise.  Alas, the position is not, in my view, that simple.  

Internal Appeals
12.	In Sainsbury v Savage [1981] ICR 1 (CA), the Claimant began his employment on 3 October 1977 and was summarily dismissed for gross misconduct on a date not later than 3 March 1978.  His employer’s disciplinary procedure provided for an appeal against dismissal.  It said this:  
“Pending the decision of an appeal to a director against dismissal the employee will be suspended without pay, but, if reinstated, will receive full back pay for the period of suspension”.
The Claimant’s appeal was heard and dismissed by letter dated 1 June.  In July he presented his complaint of unfair dismissal to the Industrial Tribunal.  The issue was whether he had completed the then minimum qualifying period of 26 weeks continuous service.  If the effective date of termination of the contract was the date of summary dismissal, he had not; if the contract was, as the Employment Tribunal held, suspended pending determination of his internal appeal; he had.  The EAT allowed the employer’s appeal.  That decision was upheld by the Court of Appeal.  

13.	In giving the leading judgment of the Court, Brightman LJ (page 5) approved this passage from the judgment of Slynn (P) in the EAT (1979) ICR 96, 102: 
“In our view, when a notice of immediate dismissal is given, a dismissal takes immediate effect.  The provisions of this contract as to the appeal procedure continue to apply.  If an appeal is entered, then the dismissed employee is to be treated as being ‘suspended’ without pay during the determination of his appeal, in the sense that if the appeal is successful, then he reinstated and he will receive full back pay for the period of the suspension”.  
If the appeal is not successful and it is decided that the original decision of instant dismissal was right and is affirmed, then the dismissal takes effect for the purposes of the Act”.  
It will be recalled that the disciplinary procedure in Savage expressly provided for the contract to be suspended pending appeal.   

14.	In West Midlands Co-Operative Society Limited v Tipton [1986] ICR 192, the issue before the House of Lords was whether, in considering whether the employer had acted reasonably in dismissing the employee for the purposes of what is now s98(4) of the Employment Rights Act 1996 (“ERA”), the Tribunal was entitled to take into account the fact that the employer had refused to entertain the employee’s contractual right of appeal.  That question required consideration of the principle laid down by the House in Devis v Atkins [1977] ICR 662, that in determining the employer’s reason for dismissal, it was not permissible to rely on after-acquired knowledge of the employee’s wrongdoings which were not in the mind of the employer at the time of dismissal.  Devis was distinguished in Tipton, it being held that provided that reason remained the same, the reasonableness of dismissal for that reason may include consideration of what happened in relation to an appeal or lack of appeal.  

15.	In the course of giving the leading speech in Tipton, Lord Bridge approved the reasoning in Savage to which I have referred with these words (P198):
“I entirely agree with this reasoning in the absence of an express contractual provision to the contrary”.

16.	I regard the terms of that endorsement of Savage, particularly the formulation by Slynn (P) as important.  In Savage the terms of the disciplinary procedure expressly provided that the employee would be suspended without pay pending appeal.  There was no such express provision in the disciplinary procedure in Tipton as I read Lord Bridge’s summary of the facts (p196).  Lord Bridge’s formulation at page 198 did not rely on a similar provision in the Tipton case, rather that the principle stated by Slynn (P) applies unless there is an express contractual term to the contrary effect i.e. stating that the employee will not be suspended with or without pay, pending the appeal.  There is no such contractual term in the present case.

17.	Mr Kendall seeks to rely upon Savage, as endorsed in Tipton, for the proposition that it rejected the contention that dismissal does not take effect until the refusal to entertain the appeal or its ultimate rejection effectively confirms dismissal.  I agree with that proposition.  However, that is only part of the story; what if the appeal is successful, the dismissal is overturned and the employee is reinstated?

18.	That question arose directly for consideration by the Court of Appeal in Roberts v West Coast Trains Ltd [2005] 254.  There, the Claimant was dismissed for misconduct on 6 November 2001 following a disciplinary hearing.  He appealed internally against that decision and on 5 February 2002, whilst the appeal was pending, he presented a complaint of unfair dismissal to the Employment Tribunal.  On 8 February the employer allowed his appeal to the extent that the sanction of dismissal was replaced by demotion and a final written warning; penalties permitted under the disciplinary procedure.  The Claimant did not return to work and in May 2002 the employer wrote to him treating his employment as terminated by resignation. The issue for the Employment Tribunal was whether he had been dismissed for the purposes of founding the Tribunal’s jurisdiction to entertain his complaint of unfair dismissal.  The Employment Tribunal found that he was not dismissed as at the date of the hearing; the EAT dismissed his appeal; so too did the Court of Appeal.

19.	The reasoning of the Court of Appeal, to be found in the leading judgment of Mummery LJ is, in my view, instructive in the present case.  I note that the contractual disciplinary procedure operated in Mr Roberts’ case did not expressly provide for suspension pending appeal (see Tipton cf Savage).  At paragraph 27 Mummery LJ said this:
“The fact that he [the Claimant] had made a complaint of unfair dismissal to the tribunal at a date when he was still in a state of dismissal and before the appeal had been heard, does not affect the legal position.  It is legally irrelevant.  It would have been relevant, if he had never instituted an appeal and/or, if he had instituted an appeal, he had withdrawn his appeal before a decision had been made.  I am unable to accept the submission made by Mr Clement [Counsel for the Claimant] that somehow the date of the issue of the proceedings freezes the position on jurisdiction and that it is not permissible for the Employment Tribunal to look at the real world as it existed at the date when the case came on before them at the hearing”.

20.	In upholding the decisions of the lower Tribunals, Mummery LJ was satisfied that those decisions were consistent with the general principles laid down in Savage and approved in Tipton, to which I have alluded.  

21.	What I draw from Roberts is the concept of the vanishing dismissal, viewed retrospectively.  Mr Roberts was dismissed at the time when he presented his complaint of unfair dismissal to the Tribunal, thus giving the Tribunal jurisdiction to hear that complaint.  However, the dismissal vanished, looking back, as a result of the internal appeal which he had initiated.  

22.	Such an approach is not new.  I put to Counsel, without dissent, the analogy of s138(1) ERA 1996 and the concept there of the ‘vanishing dismissal’, as it is termed by the learned editors of Harvey, volume 1 E1557.  S138(1) is concerned with the case of the employee, dismissed by reason of redundancy, whose contract is renewed or he is re-engaged under a new contract, subject to certain conditions including a trial period.  The question as to whether there is no dismissal entitling the employee to a redundancy payment is viewed retrospectively.  The same is true of the provision for statutory continuity of employment to be found in s212(3)(b) ERA, where an employee is absent from work on account of a temporary cessation of work.  Whether the cessation of work was temporary is to be judged after the event with the benefit of hindsight (see Ford v Warwickshire County Council [1983] ICR 273 (House of Lords).

23.	The issue of continuity of employment following a successful internal appeal arose in London Probation Board v Kirkpatrick [2005] ICR 965 (EAT HHJ McMullen QC presiding).  There, the Claimant was dismissed by his employer.  His appeal succeeded and the appeal panel decided that he should be reinstated.  One month later the employer rejected the finding of the appeal panel and dismissed the Claimant.  The question was whether his employment was continuous under s212(3)(c) ERA; absence from work by arrangement or custom.  The EAT held that continuity was preserved; the consequence of the decision to reinstate the Claimant as a matter of contract was that he was not regarded as having been initially dismissed.  In arriving at that conclusion, the EAT drew on the principles in Tipton and Savage (paras 18-19).  I respectfully agree with that approach.  

“Immediately Before”
24.	How, if at all, do the principles emerging from the cases to which I have referred above as to the effect of successful internal appeals translate to the TUPE question posed in the present case?

25.	Mr Kendall argues that if there was no transfer of the Claimant’s contracts of employment to G4S from GSL because, as he submits, they were not employed by GSL immediately before the transfer, then the obligation to hear the appeals lay with GSL.  They did hear the appeals, allowed them and ordered reinstatement.  That must be reinstatement with GSL, not G4S.  Central to this submission is the proposition that the dismissals on 13 April remained effective as at the transfer date, 1 May.  

26.	Mr Linden, whose submissions Miss Presland adopts, put the case in support of the Chairman’s judgment on four alternative bases on paper in his Skeleton Argument.  In oral submissions, correctly in my view, he focused on what was described as his second route to that conclusion.  

27.	Like Mr Kendall, his propositions proceeds on the premise that the contractual obligation to hear and determine the appeals lay with GSL, notwithstanding the transfer.  Having determined those appeals in favour of reinstatement, the original dismissals were expunged and the Claimants were to be treated as having been employed by GSL up until the transfer date.  Therefore, the obligation on GSL to reinstate the Claimants to the Escort Contract transferred to G4S under TUPE.  That, submits, Mr Linden, is the proper application of national law as represented by the cases of Savage, Tipton and Roberts.  

28.	I accept Mr Linden’s analysis.  Further, I am quite satisfied that this outcome is consistent not only with the domestic learning as to the effect of a successful internal appeal on the contract of employment and its termination by dismissal, as related earlier, it also accords with the purpose of the Regulations designed to implement the Acquired Rights Directive EC2001/23, replacing 77/187.  

29.	As Mr Linden points out, by reference to the Third Recital to the Preamble, the purpose of the Directive is 
“to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded”
(see also Wilson v St Helen’s Borough Council [1998] ICR 1141, 1160 per Lord Slynn of Hadleigh).

30.	Having been summarily dismissed by GLS, these Claimants had a contractual right to appeal that decision and have that appeal heard and determined by their employer.  They had, of course, no right to succeed in those appeals but if they did they would be put in the same position as their colleague, Mr Richardson.  They would have been reinstated by GSL and their employment then transferred under TUPE to G4S, thus preserving their original employment.

31.	Does it make a difference that their appeals were not heard before the transfer date?  In my judgment, it does not.  In the event reinstatement was decided upon; consistent with their obligations under Regulation 5(2)(a) G4S were bound to reinstate the Claimants in their old employment on the Escort contract now held by G4S.

32.	The right to have their appeals heard and determined arose under the contracts of employment or, at any rate, in connection with those contracts for the purposes of Regulation 5(2)(a).  I note, for example, that claims by employees against their employers for damages for personal injury arose in connection with the contract of employment in Bernadone v Pall Mall Services Group Ltd [2001] ICR 197, so that liability for those claims transferred to the transferee following a relevant transfer.  

33.	Finally, there is the purposive approach to the Regulations, endorsed by the House of Lords in Litster v Forth [1989] ICR 341, to be considered.  In that case the workforce was dismissed by receivers one hour before the transfer of the business took place.  The issue was whether those employees were employed in the business immediately before the transfer.  The House of Lords held that the UK Courts were under a duty to give a purposive approach to the construction of the TUPE Regulations which would accord with the decisions of the European Court of Justice on the Directive to the extent of implying words to achieve that effect.  Thus, the words of Regulation 5(3) were to be read as “employed immediately before the transfer or would have been so employed if he had not been unfairly dismissed in the circumstances described by Regulation 8(1)” (automatic unfair dismissal for a reason connected with the transfer).  Applying that formulation, the House of Lords held that the employees in that case were employed by the transferor for the purposes of Regulation 5(3).  

34.	Mr Kendall submits, correctly in my view, that the Claimants were not dismissed by GSL for a reason connected with the transfer; it was for misconduct.  The case is thus not on all fours with Litster.  However, in my judgment, the principle in Litster applies in this way.  The Claimants would have been employed by GSL immediately before the transfer if their successful appeals had been heard and determined before the transfer date.  The Claimants’ rights to have their appeals heard arose under or in connection with their contracts of employment.  Thus, the employment was preserved for the purposes only of determining their appeals.  They were to be treated as being ‘suspended’ without pay, to apply the approach in Savage, approved in Tipton.  If the appeal succeeded and the dismissals were set aside, they continued in employment, but with G4S as a result of the transfer.  Viewed retrospectively, they were employed by GSL immediately before the transfer and Regulation 5(3) provides no bar to the obligation to reinstate transferring to G4S.  If not, the original dismissals by GSL stood and the Claimants’ employment was not to be treated as transferred, applying the reasoning in Roberts.  They would not then have been employed by GSL immediately before the transfer.  

Conclusion
35.	It follows, in my judgment, that the Chairman was correct in law in concluding that, on the facts of the present case, the Claimants’ employment was transferred to G4S.  I said at the outset that my answer to the question posed by Mr Kendall was: “it depends”.  It depended on whether the appeals against dismissal succeeded and reinstatement was ordered.  GSL did uphold the appeals and revoked the earlier dismissal.  The Claimants, under TUPE, were in no worse position than their colleague, Mr Richardson.  In these circumstances, the appeal fails and is dismissed.