Thu, 08 Dec 2011
By Anthony Korn
In Enterprise Managed Services Ltd v Dance and ors (EAT/0200/11), EMS provided appliance maintenance service to Modern Housing Solutions. Another contractor (W) provided MHS with building maintenance services. From October 2008, MHS advised all its contractors of the need to improve performance. Following this, in January 2009, EMS reviewed the terms of employment of its appliance maintenance engineers and introduced measures designed to produce improvements in service delivery which included performance related pay and different hours. These changes were accepted by its employees in February and March 2009. W, however, made no such changes. In April 2009, EMS won the contract from W and, following consultation, decided to harmonise the terms of the former W employees with its own employees. Most of W’s employees accepted the changes but 20 did not and they were dismissed and re-employed on the new terms. Those who were dismissed argued that their dismissals were automatically unfair contrary to Regulation 7 of the Transfer of Undertakings (Protection of Employment) Regulations 2006. The Employment Tribunal, in a majority judgment, ruled in favour of the Claimants. They found that although the reason for the dismissal of the Claimants was not the transfer itself, it was a reason connected with the transfer namely the harmonisation of terms. The Employment Judge, however, dissented: on the issue of causation he was satisfied that if the Respondent had not taken the steps it had taken to harmonise the contracts for a reason connected with the transfer but because the employers wanted to their new employees to achieve the same standards of productivity and efficiency as had been achieved in relation to their existing work and believed that there was a serious risk that the contract ultimately would have been lost if it did not ensure that those standards were met. The ET Judge’s view prevailed in the EAT. HHJ McMullen ruled that on the findings of the ET the principal reason for the variation in terms was not the transfer itself but the need to improve performance and efficiency in order to retain the contract with MHS. The changes had been driven by the success of the productivity changes which preceded the transfer and harmonisation had merely been a by-product of the variation, not the principal reason for it. What was important, said McMullen J, was the reason in the minds of management for invoking proposals to change the terms and conditions and, on resistance by the workers, to dismiss them.
The question of the employer’s mental process also lies at the heart of the EAT’s ruling in Smith and ors v Trustees of Brooklands College (EAT/0128/11). In that case the terms and conditions of the transferring employees were changed post transfer in circumstances where their pre-transfer rate of pay was genuinely believed to be incorrect and out of line with normal practice. The Clamants were all employed at Spelthone College, a sixth form college. They worked for 83% of the weeks of the year, that is 43 out of 52 weeks and the salary paid to them was divided accordingly. The salary effectively treated them as having been employed on a full time contract which was deemed to be a 36 hour contract whereas they worked respectively either 25 or 22 hours a week. Their pay were therefore calculated on a pro-rata basis based on a comparison with a full time worker on 25 hours rather 36 hours. When the college transferred to Brooklands in August 2007 the HR Director looked at the rates of pay and thought there had been a mistake and concluded that the Claimants had been overpaid in error and took steps to reduces their rates of pay to bring the transferring employees into line with the employees at Brooklands. The Employment Judge found that the agreed variations which took place on 1 January 2010 were made on the basis of the belief that the original pay rates were incorrect and were not for a reason connected with the transfer. McMullen J in the EAT agreed: the question in the present case was what was the reason for the decision to reduce the Claimant’s pay (as established by the evidence)? What caused the reduction in pay? As accepted by the ET, this was found to be the view that the Claimants were “overpaid by reason of a mistake”. Although the employer got the premise wrong, “there was no doubt what her reason was” and those reasons did not fall within Regulation 4(4) of the 2006 Regulations. Furthermore, the steps taken by the Respondent could have been taken at any stage, irrespective of TUPE provided that the transfer or a reason connected with it was not the sole or principal reason.
In one sense both these judgements do no more than confirm what was stated by Lord Slynn in the well known case of Wilson v St Helens Borough Council  IRLR 706 that the question whether Regulation 7(1), or in the case of agreed variations, Regulation 4(4), applies is a question of causation and that if the reason for the change is not the transfer itself and not connected with the transfer on the facts as found by the tribunal, then those provisions will not apply. Of the two decision, the former is likely to be more controversial because hitherto it was through that where the new employer seeks to bring the terms and conditions of the transferring employees into line with his existing employees, this did fall within the scope of the above provisions (whatever his motives or the reasons for introducing the changes to the existing workforce).