Monday 29 January 2001

Government launches 'Equality Direct'

The government has today launched 'Equality Direct' - an information and advice service for businesses on a whole range of equality issues such as providing better access for disabled people or equal pay. The telephone advice centre and supporting website will help employers resolve management issues, offer information and advice on both good practice and the law and provide information on effective equal opportunities strategies.

The service is provided in collaboration with DLA.

It can be reached via 0845 600 3444 or, apparently, via (although when I tried at 2.00pm, it stated the website was 'under development').

Friday 26 January 2001

Oy Liikenne Ab v Liskojarvi - Big new ECJ TUPE case!!!

Instructions on how to subscribe to this bulletin appear at the bottom of this Email.

Yesterday (25th Jan) the ECJ handed down its decision in the TUPE case Oy Liikenne Ab v Liskojarivi & Juntunen, a case referred by the Supreme Court of Finland.

In summary, the ECJ follows Suzen and emphasises the need for the transfer of assets or, where there are few/no assets, the transfer of a significant part of the workforce. It relies heavily on Suzen and emphasises sections of the decision in Suzen that the English courts have been moving away from.

The Greater Helsinki Council tendered for the right to run seven local bus routes. The outgoing contractor lost the contract, and it was awarded to Oy Liikenne Ab ('the incoming contractor').

The outgoing contractor owned 26 buses and dismissed 45 people. The incoming contractor bought its own buses - ie not taking over the outgoing contractor's buses - and re-engaged all 33 of the 45 drivers who applied (hiring another 18 of their own) on less favourable terms. It therefore took over a majority of the workforce but no assets, with the exception of buying some (not all) of the bus drivers' uniforms from the outgoing contractor.

The incoming contractor argued that there was no transfer of undertaking because:
(a) it had no contractual relationship with the outgoing contractor, and there was no third party whom the undertaking could transfer 'through' because the Greater Helsinki Council never operated the bus routes;

(b) a bus route, or a group of routes, does not amount to an 'economic entity';

(c) the assets of the outgoing contractor were not taken over by the incoming contractor;

(d) the drivers who were engaged were taken over at their own request - the incoming contractor was free to hire who it wanted; and,

(e) because there is mandatory competitive tendering in the transport sector (under EC Directive 92/50), it is undesirable to apply the traditional transfer of undertaking approach because it acts as a disincentive to contractors in the tendering process.

Adopting the same enumeration:
(a) the absence of a direct contractual relationship may point to the lack of a transfer, but it is not conclusive;

(b) see below

(c) see below

(d) see below

(e) the aim of the Acquired Rights Directive is to protect the interests of workers when there is a change of ownership of an economic entity. The fact that this is pursuant to a competitive tendering exercise does not detract from that purpose - Directive 92/50 is not intended to exempt service providers from obligations that apply to all other employers. Contractors can take the effect of the Acquired Rights Directive into account when putting their tenders together.

The important part of the decision was the guidance on what is an economic entity, and whether a transfer has taken place. The court held:
(i) "the transfer must relate to a stable economic entity whose activity is not limited to performing one specific works contract...The term 'entity' thus refers to an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective." (para. 31)

COMMENT: this is a strong statement following Suzen, indicating that a mere grouping of staff, without any assets, for the purpose of a specific contract, may not be enough to amount to an 'undertaking' within the meaning of TUPE. However, the court then goes on to contradict itself - see (iii) below.

(ii) "...the degree of importance to be attached to the various criteria for determining whether or not there has been a transfer...will necessarily vary according to the activity carried on, and indeed the production or operating methods employed in the relevant undertaking, business or part of a business." (para. 35)

COMMENT: the court does recognise that some entities may be more person-orientated than asset-orientated, which should be taken into account when deciding whether there has been a transfer, but this does not seem to be relevant to the issue of WHETHER there is a discrete economic entity in the first place.

(iii) "The Court has indeed held that an economic entity may, in certain sectors, be able to function without any significant tangible or intangible assets, so that the maintenance of the identity of such an entity following the transaction affecting it cannot, logically, depend on the transfer of such assets." (para. 37)

COMMENT: This does not rest easily with the paragraph quoted at (i) above - however, this paragraph does reflect recent thinking on what constitutes an economic entity. It supports the argument that a person-orientated undertaking can transfer despite the lack of transfer of any assets.

(iv) "The Court has thus held that, since in certain sectors in which activities are based essentially on manpower, a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, it must be recognised that such an entity is capable of maintaing its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task..." (para. 38)

COMMENT: This is following the controversial element of Suzen, and uses almost identical wording to the equally controversial passage in Hernandez . It suggests that, in a person-orientated undertaking, the fact that the putative transferee does NOT take on any of the staff means that there is no transfer of an undertaking. No thought is given by the ECJ for the possibility of a putative transferee deliberately avoiding taking on staff so as to avoid TUPE. This is the problem with Suzen that the more recent Court of Appeal and EAT decisions (such as OCS Cleaning and ECM v Cox) have sought to move away from - however, it is now back in the spotlight.

On the facts, the ECJ held that (despite the majority of the workforce moving over), the lack of the transfer of the main assets (ie the buses) "must lead to the conclusion that the entity does not retain its identity" - ie no transfer!

The English text of the judgment is at:

Tuesday 23 January 2001

Cerebus Software v Rowley (+ other matters)

1. Court of Appeal decision - Cerebus Software v Rowley
2. Extensions to Working Time Directive
3. Jobs - Solicitor seeking new position

1. Court of Appeal Decision - Cerebus Software v Rowley

"This is an interesting appeal on a troublesome little point of employment law."

So starts Ward LJ's judgment in this controversial case, handed down on 18th January 2001.

Facts: Mr Rowley was entitled to six-months' notice of termination of employment. His contract provided that the employers could pay a lump sum in lieu of notice. He was dismissed summarily on various charges, which the employment tribunal found to be fabricated. The employment tribunal awarded him the full six months' pay, despite him having earned monies during that period in a new job, on the basis that the six months' pay was a contractual payment and not damages for breach of contract. Thus it was a straightforward claim for a debt, not an action for damages, and no duty to mitigate (or to give credit for other earnings) arose. The EAT upheld the employment tribunal's reasoning.

Issue: Where an employer dismisses and employee of grounds of misconduct, later held to be unfounded, is the employee's claim one for damages for wrongful dismissal (subject to the employee's duty to mitigate his loss) or is the employee entitled to assert a contractual right to payment in lieu of notice without credit having to be given for earnings received in new employment obtained within the period of notice? (this is the wording set out in para. 1 of Ward LJ's judgment)

Held (Ward & Parker LJJ, in the majority): The wording of the contract, namely "it is agreed that the employer may make a payment in lieu of notice to the employee" meant that the employer had a right to elect whether to pay the lump sum or not. It did not give rise to the employee being able to insist on 6-months' salary in lieu of notice. The employee's action was for damages for breach of contract and, with it being a straightforward wrongful dismissal claim, he was obliged to give credit for the earnings received during the 6-month notice period.

Held (Sedley LJ, in the minority): In a powerful and scathing judgment, Sedley LJ attacks the contractual orthodoxy as being unfair and immoral. He considers that a company which is guilty of wrongful dismissal should not be permitted to avoid its contractual and moral obligation to pay 6 months' salary by taking advantage of the employee getting another job. Yet his reasoning depends on a somewhat complicated theoretical analysis, without reliance on any authorities in support, and whilst he comes to an undoubtedly 'just' result, it is difficult to reconcile his reasoning with a more traditional approach to contractual interpretation.

The full decision can be found at the court service website on


2. Extensions to Working Time Directive

Readers will be aware that the Working Time Directive (and the UK Working Time Regulations 1998) exclude certain sectors such as road, rail, air and sea workers from the legislation.

These sectors are now, under new EC Directives, to be covered.

The main Directive is the Horizontal Amending Directive (in fact, there are 5 Directives in total!). The majority of these new rights must be implemented by 1st August 2003.

Of particular political importance is the introduction of a maximum working week for junior doctors.

(a) Road Workers
The Horizontal Amending Directive allows non-mobile road workers to benefit from the Working Time Regulations ('WTR') in full. Mobile workers (ie drivers) become entitled to paid annual leave, a 48-hour working week and health checks for night workers, but NOT to minimum breaks and rest periods. These are to be the subject of the separate Road Transport Directive (the one which has not yet been adopted).

(b) Rail Workers
The Horizontal Amending Directive extends the WTR to mobile and non-mobile rail workers in full, with derogations from the entitlements to daily rest, rest breaks, weekly rest and the night work provisions for specific workers.

(c) Air Workers
The Horizontal Amending Directive provides that non-mobile workers receive benefit of WTR in full. Mobile workers (pilots, stewards etc.) receive paid annual leave, 48-hour week, health checks for night workers and adequate rests.

(d) Sea Workers
The Horizontal Amending Directive extends the WTR in full to non-mobile sea workers. For mobile workers (fishermen), the Directive provides for maximum daily and weekly hours, with the weekly hours not exceeding 48-hours per week over a 12 month average and limited to 72 hours in any 7-day period. There are also minimum rest hours, entitlement to paid holiday, and health checks for night workers. Member states can exceed these limits only after consultation with industry representatives.

(e) Junior Doctors
All of the WTR provisions shall apply, to be implemented by 1st August 2004, with the exception of the 48-hour week which is to be phased over a possible total 12 years. An initial 4-year implementation period will be followed by a transitional period of 5 years (with weekly working limits of 58 hours for 3 years, and 56 hours for the next 2 years). States with particular operationsal difficulties can seek an additional 3-year period, taking the final implementation date to 1st August 2012.
For further details, visit


3. Jobs - Solicitor seeking new position

A solicitor who instructs me regularly is looking for a new position. I have worked with her for over 4 years, and have no hesitation in recommending her as an experienced, dedicated, highly able and very personable practitioner.

Her summary CV follows:

Second career Employment lawyer looking for move to larger more commercially-oriented firm. First career as a TV researcher. Five years qualified, salaried partner. 50% of my work is Employment, both contentious and non-contentious, employer and employee. Caseload includes DDA claim in ECHR (early stages). The other 50% is commercial litigation and Personal Injury work.

Member of ELA and contributor to SW working party on CRE's proposed changes to Race Relations Act. Fully IT literate (including responsibility for current firm's website). Particularly interested in PSL/TKL position as I like the prospect of varied project-based work with input into management. Based in the SW - Bristol, Birmingham, Cheltenham, Gloucester and Oxford all commutable.

If you are interested, please contact her directly on

Thursday 18 January 2001

New Draft Legislation + other matters

1. New draft legislation
2. Lord Irvine's appeal
3. New EAT decision

1. New draft legislation

I am told two Bills received first readings in the House of Commons yesterday (I have not yet seen the text of the Bills). The first, the Employee Consultation Rights Bill, apparently requires employers with more than 50 employees to consult workforce representatives on large business issues which directly affect employees. The second, the Outworking Bill, seeks to restrict fraudulent outworking schemes by prohibiting demands for advance payments from outworkers in order for them to obtain work.


2. Lord Irvine's Appeal

According to newspaper reports, the EAT yesterday allowed the Lord Chancellor's appeal (by a 2:1 majority) in Coker v Lord Chancellor - thus he did not indirectly discriminate against Jane Coker when appointing Gary Hart as his special advisor.

I have not seen the transcript yet, but will summarise the reasons once it is available.


3. New EAT Decision

This case has been placed on the EAT website ( in the last 24 hours. It is unreported, although it may be reported in due course.

Jones v ICS Cleaning Services Ltd. [11.4.2000, Lindsay P.]
An old case (pre- MacDonald v Ministry of Defence) in which the EAT held that the Sex Discrimination Act 1975 requires a homosexual man to be compared with a homosexual woman when deciding whether less favourable treatment has occurred. The case sets out some of the "very crude and very coarse" practices that went on "in the male restroom" at Stanstead airport during the 1990s. Anyone reading this decision is unlikely to want to fly from Stanstead again!

Wednesday 17 January 2001

Increase in Tribunal Awards

1. Increase in Tribunal Awards
2. Addition to previous bulletin - O'Neill v HSBC Bank


1. Increase in Tribunal Awards

It's that time of the year again. The Employment Rights (Increase of Limits) Order 2001 (SI 2001/21) has just been publised, setting out the annual increase in the limits for tribunal awards (which are now linked to increases in the Retail Price Index under the Employment Relations Act 1999).

The most important increases are:
'A week's pay' for a basic award or redundancy payment - £240pw (was £230pw)

Maximum compensatory award for unfair dismissal - £51,700 (was £50,000)
The new limits come into force on 1st February 2001. For unfair dismissal cases, the effective date of termination (rather than the date of the hearing) must be on or after 1st February 2001. The Regulations set out the transitional provisions for other types of claim.

I attach a copy of the Order to this Email (HTML format, reproduced with permission of Her Majesty's Stationery Office), which contains the full list of increases.

2. Addition to Previous Bulletin

The bulletin on 9th January 2001 contained a summary of O'Neill v HSBC Bank (on justification under the Disability Discrimination Act 1995 regarding performance related bonus schemes).

I have received the following message from Sue Ashtiany of Morgan Cole. She says (reproduced with her permission):

"I notice that you have noted O'Neill in which I appeared for the bank. There is an important point of correction which you should also note.

"The respondent bank admitted that O'Neill was disabled (for the purpose of this case) and that the scheme discriminated against him within the meaning of section 5(1), but NOT that it discriminated against disabled people generally within the meaning of section 5(2) so as to give rise to a duty to make reasonable adjustments under section 6(1). This was an important plank of the alternative argument, which the tribunal accepted. So the case is maybe even a little more interesting than at first sight."

Thursday 11 January 2001

Important TUPE case - Cheesman v Brewer Contracts

Cheesman v Brewer Contracts [30.11.00, Lindsay P.]
An extremely authoritative decision on the EAT, tying together the strings of the myriad of recent TUPE cases post-Suzen, was posted on the EAT website yesterday afternoon.

This decision is a must read for readers involved with TUPE cases (the web address is at the bottom of the bulletin).

In the decision, the EAT states that it will usually be an error of law NOT to consider, separately, the two questions:

(1) what is the entity that constitutes an undertaking? and,
(2) has it transferred?

In respect of each of the two questions, Lindsay P. brought together all relevant authorities to create a list of criteria. These are:

Question 1: Is there an undertaking?

I copy an extract from paragraph 10 of the decision:
"10. (i) As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective - Sanchez Hidalgo paragraph 25; Allen paragraph 24 and Vidal para 6 (which, confusingly, places the reference to "an economic activity" a little differently). It has been held that the reference to "one specific works contract" is to be restricted to a contract for building works - see Argyll Training infra EAT at paras 14-19.

"(ii) In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible - Vidal paragraph 27; Sanchez Hidalgo paragraph 26.

"(iii) In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower - Sanchez Hidalgo paragraph 26.

"(iv) An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity - Vidal paragraph 27; Sanchez Hidalgo paragraph 26.

"(v) An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it - Vidal paragraph 30; Sanchez Hidalgo paragraph 30; Allen paragraph 27."

Question 2: Has the undertaking transferred?

Paragraph 11 of the decision:

"(i) As to whether there is any relevant sense a transfer, the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, inter alia, by the fact that its operation is actually continued or resumed - Vidal paragraph 22 and the case there cited; Spijkers -v- Gebrobroeders Benedik Abattoir C.V. [1986] ECR 1119 ECJ; Schmidt -v- Spar-und Leihkasse [1994] IRLR 302 ECJ para 17; Sanchez Hidalgo paragraph 21; Allen paragraph 23.

"(ii) In a labour intensive sector it is to be recognised that an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessors to that task. That follows from the fact that in certain labour intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity - Sanchez Hidalgo paragraph 32.

"(iii) In considering whether the conditions for existence of a transfer are met it is necessary to consider all the factors characterising the transaction in question but each is a single factor and none is to be considered in isolation - Vidal paragraph 29; Sanchez Hidalgo paragraph 29; Allen paragraph 26. However, whilst no authority so holds, it may, presumably, not be an error of law to consider "the decisive criterion" in (i) above in isolation; that, surely, is an aspect of its being "decisive", although, as one sees from the "inter alia" in (i) above, "the decisive criterion" is not itself said to depend on a single factor.

"(iv) Amongst the matters thus falling for consideration are the type of undertaking, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new company, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, in which they are suspended - Sanchez Hidalgo paragraph 29; Allen paragraph 26.

"(v) In determining whether or not there has been a transfer, account has to be taken, inter alia, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on - Vidal paragraph 31; Sanchez Hidalgo paragraph 31; Allen paragraph 28.

"(vi) Where an economic entity is able to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction being examined cannot logically depend on the transfer of such assets - Vidal paragraph 31; Sanchez Hidalgo paragraph 31; Allen paragraph 28.

"(vii) Even where assets are owned and are required to run the undertaking, the fact that they do not pass does not preclude a transfer - Allen paragraph 30.

"(viii) Where maintenance work is carried out by a cleaning firm and then next by the owner of the premises concerned, that mere fact does not justify the conclusion that there has been a transfer - Vidal paragraph 35.

"(ix) More broadly, the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor - Sanchez Hidalgo paragraph 30.

"(x) The absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is certainly not conclusive as there is no need for any such direct contractual relationship Sanchez Hidalgo paragraphs 22 and 23.

"(xi) When no employees are transferred, the reasons why that is the case can be relevant as to whether or not there was a transfer - ECM page 1169 e-f.

"(xii) The fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but there is no particular importance to be attached to a gap between the end of the work by one sub-contractor and the start by the successor - Allen paragraphs 32-33."

The full transcript can be downloaded from

Tuesday 9 January 2001

Various cases

1. Central Arbitration Committee - Red Letter Bradford Ltd v GPMU
2. Recent EAT Decisions
3. Employment Tribunal decision on disability discrimination justification - O'Neill v HSBC Bank


1. Red Letter Bradford Ltd v GPMU
Central Arbitration Committee, December 2000 (Professor Roy Lewis, chair)

An example of the CAC deciding what amounts to a 'bargaining unit'. Red Letter Bradford was a mail order business employing 67 people. Of these, 58 were shopfloor workers/IT workers, and the remaining 9 were managers and non-shopfloor workers.

The GPMU, which is a media trade union, submitted an application that it should be recognised for the purpose of collective bargaining, with the 58 shopfloor workers/IT workers as the bargaining unit. It did not want to include the remaining 9 in the bargaining unit, because it said the terms and conditions were significantly different.

The employer submitted all 67 employees should be in the bargaining unit, since to include just 58 would result in a fragmented workforce with a small 'rump' of workers without representation, thereby hindering company management.

The CAC found as facts that there were a number of differences between the groups, including the former being paid overtime (with management and non-shopfloor workers not receiving overtime), the former being paid on a hourly rate (the others on a salary), the former having to clock on and off, and wage being linked to a grading system based on skills and experience (unlike the managers and non-shopfloor workers).

Accordingly the CAC held that the shopfloor workers/IT workers were a discrete group and capable of forming an independent bargaining unit. Although the CAC recognised that this made management slightly more difficult, it noted that Red Letter's associated companies adopted a similar system of recognition for shopfloor workers only, and held that a balancing exercise favoured the union's position.


2. Recent EAT Decisions

These cases are unreported (although some may be reported in due course). All transcripts can be found at

Lilburne-Byford v Essex County Council [13.11.2000, HHJ Wilson]
A (welcome!) example of the EAT upholding the tribunal's decision to award costs. Authority for the proposition that there is no obligation on a tribunal to investigate the Applicant's means prior to making a costs order.

ValueUnion Limited v White [7.11.2000, HHJ Wilkie QC]
Confirming that, in redundancy cases where it is genuinely unclear whether a fair procedure would have made a difference, the tribunal is entitled to refuse to make any Polkey reduction.


3. O'Neill v HSBC Bank

HSBC bank introduced a pay scheme which awarded an annual bonus to employees based upon three factors: achievement of a job target, personal performance factor and corporate performance factor. This yielded a multiplier which was applied to the annual salary to calculate the bonus.

However, a matrix system was also introduced to discount the bonus depending on the number of days absence for an employee. Employees who were absent for less than 20 days were not penalised. However, employees who were absent for more than 20 days suffered staggered discounts to their bonus. This scheme, which was introduced after extensive consultation with the recognised union, was designed to combat sick absence (which was a significant problem for the bank).

Mr O'Neill complained that this discriminated against disabled persons, since they were more likely to be absent from work. That was accepted by the bank, and the only issue was justification.

The tribunal held, in a thorough and well-reasoned decision, that the bonus scheme was a performance-related pay scheme - and it was not prevented from being so by the use of absence from work as a factor. It therefore fell within regulation 3 of the Disability Discrimination (Employment) Regulations 1996, which indicated that such a scheme was justified, and within paragraph 5.29 of the Code of Practice (also indicating that such a scheme was justified).