TUPE decision - ADI v Firm Security

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On Friday (22nd June 2001), the Court of Appeal handed down its decision in ADI (UK) Ltd v Firm Security Group Ltd..

Facts
ADI provided security services at a shopping center. ADI terminated the contract, and the shopping centre initially stated it would take over the employment of the nine security officers. However, following a dispute over terms (prior to the 'transfer'), with the officers apparently indicating reluctance to be transferred, the shopping centre announced it would not be taking on any of the nine security officers.

The Employment Tribunal
The employment tribunal held (by a majority) that the provision of security services was not a discrete economic entitity and, in any event, there had been no transfer because neither assets nor staff were taken on by the shopping centre.

The Employment Appeal Tribunal
The EAT held (again, by a majority) that there had been a discrete economic entity, but that - due to the lack of transfer of assets and staff - there had been no transfer of the undertaking.

Issues for the Court of Appeal
The Court of Appeal (in line with precedent, by a majority!) allowed the transferor's appeal. It considered the following issues:
1. whether the tribunal was under a duty to consider whether the shopping centre had avoided taking staff on the avoid the effect of the TUPE regulations; and,
2. if so, what the effect of that was.

Issue 1: Was there a duty to investigate the motive behind not taking on any staff?
Both May and Dyson LJJ considered that there was an active duty on tribunals to investigate the motive behind not taking on any workers - provided the issue was raised by one of the parties. May LJ went further, and stated that there was not a positive burden of proof on the person arguing against the transfer to establish the reason for not taking on the workforce.

Issue 2: What is the effect of deliberately not taking on the workforce?
May and Dyson LJJ held that transferees could not escape the effect of the TUPE Regulations by the simple device of refusing to take on a workforce - the very mischief which the Regulations are designed to prevent. Thus, if it is decided that the transferee failed to take on the workforce so as to avoid there being a transfer, the tribunal should treat the case as if they had taken on all of the workforce. It must be noted that this point, whilst clearly agreed with by the majority of the Court of Appeal, was conceded by the transferee and was not fully argued.

In the minority, Simon Brown LJ held that the reason for not taking on the workforce was not relevant. The simple question was whether the workforce transferred (this being one of the many factors in deciding whether a TUPE-transfer had taken place). The reason was immaterial - either the workforce transferred (pointing to a TUPE-transfer), or it did not.

Comment
Because the point about the effect of a deliberate refusal to take on the workforce was conceded by the transferee, this is not as authoratitive a ruling as would otherwise be hoped for. Nevertheless, it follows the clear and useful dicta of the Court of Appeal in ECM v Cox. A purposive construction of the Acquired Rights Directive has always been adopted, and this approach is more consistent with a purposive construction.

To all people with TUPE headaches - take courage! May LJ stated that sections of the 1977 Directive have been "emasculated out of existence by purposive judicial interpretation", and that "the concept of transfer is now a judicially constructed fiction derived from the purpose of the Directive and the Regulations...". It is always heartening to know the Court of Appeal has trouble with TUPE concepts too!

Please note that I have prepared this note from a copy of the transcript which has been approved by the Court but which is subject to editorial corrections. Any quotations from the decision cannot be regarded as authoritative.