Transfer of undertakings 2: relevant transfers

The second in our series of Guidance Notes on business transfers considers what amounts to a transfer of an undertaking under the domestic Transfer Regulations.

"The theme running through all the recent cases is the necessity of viewing the situation from an employment perspective, not from a perspective conditioned by principles of property, company or insolvency law. The crucial question is whether, taking a realistic view of the activities in which the employees are employed, there exists an economic entity which, despite changes, remains identifiable, though not necessarily identical, after the alleged transfer ... If, despite the changes resulting from the alleged transfer, jobs are still there to be done, albeit for a different employer, the Directive and the Regulations may apply."

(per Mr Justice Mummery in Kelman v Care Contract Services Ltd and another)

In the first part of this series, we examined the broad scope and purposes of the EC Business Transfers Directive (No.77/187/EEC - "the Directive") and the Transfer of Undertakings (Protection of Employment) Regulations 19811 ("the Regulations"), and traced the development of the jurisprudence of the European Court of Justice (the ECJ) on the question of what amounts to the transfer of an undertaking. This second article emphasises the overriding influence of the Court's thinking on the interpretation of domestic transfers legislation, and considers the types of undertaking and transfer transactions which are consequently caught by the Regulations.

Avoid mistaken assumptions

Indeed, if United Kingdom courts and industrial tribunals fail to have proper regard to the principles developed in Europe, they may well lead themselves into an appealable error of law. They must not, therefore, apply "general propositions" which run contrary to the ECJ's approach.

In Dines and others v (1) Initial Health Care Services (2) Pall Mall Services Group Ltd, for example, a tribunal held that there had been no transfer of an undertaking involving the provision of hospital cleaning services between successive contractors. It said that whenever one company enters into competition with a number of other companies, and a different company wins the contract from the one which was previously providing the services, this amounted to "a cessation of the business of the first contractors on the hospital premises, and the commencement of a new business by [the second contractor] when [it is] awarded the contract". The fact that the second contractor employed the same workforce at the same workplace was "not in this case a factor giving rise to a transfer under the Regulations". In reaching this conclusion, the tribunal took into account the facts that the new contractor provided its own management, equipment and materials; there was no contractual relationship between the two contractors; and there had been no transfer of equipment, materials or goodwill from one contractor to the other.

Allowing an appeal by affected employees, the Court of Appeal held that the tribunal's apparent assumption that a change in the contractor providing a service following a competitive tendering exercise is incapable of amounting to a transfer under the Regulations was a misdirection of "fundamental importance". The European cases demonstrated that the Directive and the Regulations can apply in such circumstances. Although in Dines there may have been some changes in the cleaning methods and organisation introduced by the second contractor when it had taken over, said Lord Justice Neill, hospital cleaning, although of the utmost importance, "is not an operation which lends itself to the employment of many different techniques. The cleaning services were to be carried out by (mainly) the same staff on the same premises and for the same authority." The Court therefore concluded that there had been a transfer of an undertaking, which had taken place in two phases - (a) the handing back by the first contractor to the health authority of the cleaning services at the hospital; and (b) the grant or handing over of those services to the second contractor on the following day, with the operation being carried out by "essentially the same labour force".

A similar error was detected by the EAT in Wren and others v Eastbourne Borough Council and UK Waste Control, where a tribunal had found that the Regulations did not apply to the contracting out of local authority refuse-collection and street-cleansing services. In the light of the ECJ's ruling in Dr Sophie Redmond Stichting v Bartol and others (see Transfer of undertakings 1: the European approach), said Mr Justice Wood, the transfer of such services is clearly capable of falling within the Regulations. There is no necessity for the transfer of assets. The fact that nothing concrete is transferred, nor any goodwill or outstanding contracts, does not of itself prevent there having been a transfer. All these matters are questions of fact and degree, and no single factor is determinative of the issue.

On the other hand, provided that tribunals apply the tests and consider the factors laid down by the ECJ, in particular in Spijkers v Gebroeders Benedik Abattoir CV and another (see Transfer of undertakings 1: the European approach ), it will be difficult to impugn their findings on the question of whether there has been a transfer of an economic entity which retains its identity. The fact that a different tribunal might have assessed the facts of a case differently, and reached a different conclusion, will not be sufficient to allow a successful appeal (see Mathieson and another v United News Shops Ltd ).

Scope of the Regulations

The Regulations apply "to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one which is so situated" (reg. 3(1)). This is known as a "relevant transfer" (reg. 2(1)). An undertaking includes "any trade or business" (reg. 2(1) - this is not, therefore, an exhaustive definition of the nature of undertakings potentially affected). A relevant transfer may be "effected by sale or by some other disposition or by operation of law" (reg. 3(2)). It may "be effected by a series of two or more transactions" (reg. 3(4)(a)), and "may take place whether or not any property is transferred to the transferee by the transferor" (reg. 3(4)(b)). As with the Directive, the Regulations do not cover acquisitions or takeovers which take place by way of share transfer (see the explanation on p.6 of part one).

Note: Before 30 August 1993, it was expressly provided that the Regulations did not apply to any undertaking (or part thereof) "which is not in the nature of a commercial venture". This exclusion was clearly contrary to the Directive as interpreted by the ECJ, in particular in Dr Sophie Redmond, and was repealed by the Trade Union Reform and Employment Rights Act 1993 (the TURERA). There remain, however, a number of cases working their way through the tribunal system involving alleged transfers which occurred before that amendment took effect. The approach currently being taken by the EAT where this issue arises is illustrated in UK Waste Control Ltd v (1) Wren (2) Eastbourne Borough Council and Birch and others v (1) Nuneaton and Bedworth Borough Council (2) Sports and Leisure Management Ltd.

Law governing transfer irrelevant

Regulation 3(3) provides that the Regulations apply even though the law governing the commercial contract giving effect to a transfer is not that of England and Wales, Scotland, or Northern Ireland. Thus the Regulations will apply if the stated law governing the transfer transaction is, for example, that of Switzerland. In addition, the Regulations apply even in respect of the employment of those persons in the undertaking or part transferred who do not ordinarily work inside the UK and where the law governing their employment contracts is not that of any part of the UK. But such employees would not be eligible to claim unfair dismissal compensation for any infringement of reg. 8 or the protection of the information and consultation provisions of regs. 10 and 11. (The general issue of which "employees" enjoy the substantive protection provided by the Regulations will be considered in detail in part three of this series.) The key is to look at where the business (or part) to be transferred is situated. If this is within the UK, the Regulations are capable of applying to it, even though there are different laws governing the employment contracts and business transaction in question.

The rest of this feature sets out the approach which is to be adopted in determining whether there has been a "relevant transfer" of an undertaking under the Regulations. In the box on p.8, we give a number of examples of transfers which are now likely to be covered.

The "employment perspective"

Historically, UK courts and tribunals approached the question of whether there was a relevant transfer by asking whether there had been a transfer of a business "as a going concern". This often led to a somewhat sterile and technical debate about whether, in addition to the transfer of tangible assets (for example premises, plant, equipment and stock), activities and/or employees, there had been a transfer of "goodwill" (that is, the value of a business relationship with customers, suppliers, staff etc, or (which may be the same thing) the amount by which the open-market value of a business as a going concern exceeds the value of the tangible assets employed in the business - see Modiwear v Wallis Fashion Group and others).

Recent domestic decisions, however, emphasise the need to adopt a "realistic and robust" approach to the interpretation of the Regulations, and the need to focus on the "substance and not the form" of transfer transactions in order to give effect to the provisions of the Directive and related ECJ decisions. An over-technical analysis is consequently no longer appropriate. In Kelman v Care Contract Services Ltd and another, Mr Justice Mummery summed up the modern approach: "The theme running through all the recent cases is the necessity of viewing the situation from an employment perspective, not from a perspective conditioned by principles of property, company or insolvency law. The crucial question is whether, taking a realistic view of the activities in which the employees are employed, there exists an economic entity which, despite changes, remains identifiable, though not necessarily identical, after the alleged transfer ... If, despite the changes resulting from the alleged transfer, jobs are still there to be done, albeit for a different employer, the Directive and the Regulations may apply."

Identifying an "economic entity"

These observations built upon the increasingly influential comments of the EAT in Council of the Isles of Scilly v Brintel Helicopters Ltd and another. There, Mr Justice Morison pointed out that the purpose of the Directive (and thus the Regulations) is to ensure, as far as possible, that employees' rights are safeguarded in the event of a change of employer by allowing them to remain in employment with the new employer on the terms and conditions agreed with the transferor. In other words, the purpose is to ensure "that in a transfer situation the employees follow their work, if the business, or part, to which they were assigned has been transferred".

The ECJ, he said, generally speaks of the transfer of an "economic entity", rather than a "business". A "business" implies an activity which is being carried out for profit, and this is not a requirement under either the Directive or the Regulations. The use of the word "business" may lead an industrial tribunal into error simply because it is associated with the idea that there must be a transfer of a business "as a going concern", which involves an emphasis on examining matters such as whether there had been a transfer of outstanding orders and goodwill. Although the distinction between a business and an economic entity may in many cases be of no consequence, Morison J suggested that by using the language of the ECJ, tribunals "will find it easier to put aside some of the old case law ... which has now been overtaken by more recent cases".

It is not, he continued, always easy to define an economic entity with precision. But it seems that, like a business, it describes "a number of different constituent parts: assets, employees and activities". Three important points should, however, always be kept in mind:

  • An economic entity may comprise just activities and employees. In service industries tangible assets may be unimportant or non-existent. For example, the economic activity might consist of the provision of services, where the real asset is goodwill, "or possibly just the right to provide the service in question". For example, in Rask and Christensen v ISS Kantineservice A/S (see part one ), the ECJ established that the contracting out of the provision of a service may fall within the Directive, even if the contractor provides the services from the transferor's premises to the transferor's employees and at prices dictated by the transferor. The economic entity survives and is transferred to the third party, so that those who did the work before are entitled to follow their work after the contracting out. This will be so even if only one of the transferor's employees was engaged in the business contracted-out (see Schmidt v Spar- und Leihkasse der früheren Ämter Bordesholm, Kiel und Cronshagen, see Transfer of undertakings 1: the European approach).

  • The economic entity does not have to be the same before and after the transfer. The fact that there is no transfer of goodwill because the old economic entity has come to an end, and the alleged transferee has started up an identical but new activity will not, in itself, prevent the application of the Directive. In Spijkers (see Transfer of undertakings 1: the European approach), for example, the ECJ ruled that the Directive could apply despite the fact that there was a break in time between the original slaughterhouse business ceasing and the new one starting, and that there had been no transfer of goodwill. The slaughterhouse business was arguably still identifiably in existence after the alleged transfer, in the sense that its operation was actually continued or resumed by the new employer, with the same or similar activities.

  • No one single factor is common to all cases in which a relevant transfer has occurred. It cannot be said that in every transfer X will occur, so that in the absence of X there can be no transfer.

    Does the job still exist?

    Morison J advised that an industrial tribunal faced with the question "has there been a transfer of an undertaking within the meaning of the Regulations ?" should start by identifying the economic entity in which the relevant employees were employed before the alleged transfer. It might wish to inquire, first, about the activities comprised in the economic entity in which the relevant employees had been employed before the transfer: "What is being done, what is going on?" This will involve identifying the tangible and intangible assets necessary to the performance of those activities, and identifying the employees who worked there and the jobs they did. The tribunal "should then examine the position after the transfer, looking at the same matters." One of the factors to take into account would be the number of employees actually taken on by the transferee. This is not to say, however, that there cannot be a transfer where the transferee has taken on none of the former employees.

    In the light of this analysis, the tribunal "should ask itself whether, having regard to all the circumstances, the economic entity identified prior to the transfer can be found after the transfer. In every case the concluding question must be: has the economic entity retained its identity?" In answering this question, tribunals might find it helpful to seek to answer a different question: "Is the job previously done by the employee still in existence?"

    Applying the new approach

    In Council of the Isles of Scilly, the transferor contractor provided baggage-handling and firefighting services at an airport owned by the council. Under the contract between the parties, the transferor undertook to provide sufficient properly qualified and experienced staff for the firefighting service; sufficient staff for the baggage-handling service; and appropriate protective clothing and training for firefighters. For its part, the council undertook to supply fire engines, firefighting equipment and the associated buildings necessary to the service, and to maintain and renew them as necessary. It reimbursed the transferor's costs, and was entitled to appoint its own staff to replace any of the transferor's staff who left employment at the airport. The council subsequently terminated the contract with the transferor and took responsibility for providing the relevant services in-house.

    Applying the principles discussed above, the EAT said that the fact that the transferor's baggage-handling and firefighting business was "labour-only" did not prevent it from being an economic entity capable of being transferred. In such circumstances, an economic entity was capable of being transferred where the transferor employer was the immediate beneficiary of the employees' services, even if day-to-day control over them was enjoyed by the person to whom services were being provided. The employer was the person who profited from the economic activity being performed for the benefit of the third party.

    Although the economic activity before and after the transfer had to be clearly identifiable, it did not have to be "separate and discrete in the sense that it is conducted separately from any other business being carried on by the employer (whether before or after transfer). It needs to be identifiable in the sense that the same work before and after the transfer is capable of being observed." Here, said the EAT, it was easy to see the same economic activity being carried out both while the firefighting and baggage-handling service was contracted out to the transferor, and after it was taken back "in-house" by the council. The same work was being performed with the same equipment in the same premises. The jobs which the applicants performed before and after the change continued in existence, and the transferor's employees "should have been entitled to follow their work". The EAT observed that there was no reason in principle why contracting in should be treated any differently from contracting out.

    Entity need not be identical

    As Mummery J emphasised in Kelman, the Regulations apply where an economic entity remains "identifiable, though not necessarily identical", after an alleged transfer. This means that changes in the plant, equipment, location or employees used, and/or the manner or methods by which an activity is carried out by the transferee, will not of themselves necessarily preclude the application of the Regulations (see, for example, Merckx and Neuhuys v Ford Motors Co Belgium SA; Porter and another v Queen's Medical Centre (Nottingham University Hospital (Transfer of undertakings 1: the European approach); and Dines (p.2 above)). Provided that the transferee resumes or continues essentially the same or similar activities to the transferor, there may well be a sufficient retention of identity.

    This will be true particularly in the context of the contracting out of services, or subsequent changes in the contractor providing those services. Indeed, the High Court has expressed the view that "where the application of the Regulations is under consideration in relation to an agreement to provide services, the manner in which the transferee chooses to provide the service (as opposed to the service it is required to perform) carries little weight" (Betts and others v Brintel Helicopters Ltd and another). It has thus been held, for example, that a "restructuring" of security and guarding duties following a change of contractor providing security services to a third party did not alter the "basic nature" of the service which had been provided by the original contractor (Securicor Guarding Ltd v Fraser Security Services Ltd and others ).

    "In our view the basic principle is that employees should be protected where the undertaking in which they work is transferred 'over their heads'. Take this case. If the tribunal are right in their conclusion the real beneficiary is Fraser, who won the Datamatic guarding contract by putting in a lower tender than Securicor on the basis that they would pay the guards less. Instead, both tenderers bid on a level playing field, that is, one where the terms and conditions are the same in either case. This provides the necessary protection for the employees who can have no influence over whether or not the undertaking in which they work changes hands."

    (per His Honour Judge Clark in Securicor Guarding Ltd v Fraser Security Services and others)

    In Betts, Brintel Helicopters Ltd (BIH) provided helicopter services ferrying personnel and equipment to and from North Sea oil rigs under contracts with Shell (UK) Ltd. When Shell put new contracts out to tender, one of the contracts (covering the "southern sector") was awarded to another contractor, KLM ERA Helicopters (UK) Ltd (KLM). BIH had operated the southern-sector contract from a small airport at Beccles (about 10 miles from Lowestoft). As a result of the change of contractor, BIH ceased that operation, and KLM serviced its contract from the much larger Norwich Airport. None of BIH's employees at Beccles was taken on by KLM.

    Mr Justice Scott-Baker observed that the transport service provided by BIH was clearly an identifiable undertaking or economic entity in the period up to the expiry of the southern-sector contract. And what was being provided was "fundamentally the same, both before and after the change of contractor". There was no change in the basic activity, although some of the details as to how it was to be provided had changed - for example, the use of different types of helicopter, different pilots and a different base. But all of the "core features" were present: the service was being provided for the same person (ie Shell); the destinations were the same; the journeys were broadly the same; the same personnel and goods were being carried; and the mode of transport (helicopters) was the same, albeit with different aircraft and pilots.

    The fact that KLM had taken on none of BIH's employees could not negate a transfer. The central question under the Regulations is whether the transferee is obliged to take on the transferor's employees. Bearing in mind that KLM had chosen not to take on any BIH employees, it seemed "to put the cart before the horse" to conclude that the fact that no employees transferred helped KLM's case. Again, it was not crucial that there was no transfer of assets between BIH and KLM. Indeed, Scott-Baker J said that he would not expect to find any transfer of assets with the kind of operation undertaken in the present case. And KLM's use of a different kind of helicopter was, in his judgment, of "peripheral importance". The type of helicopter was purely incidental to the service being provided. Whatever type of helicopter was used, essentially the same service was being performed in essentially the same way. The same could be said of the use of different personnel to fly and maintain the helicopters.

    Control may reinforce identity

    After some uncertainty, it now seems to be established that a contract between a customer or client and a service-provider which provides for the former to retain detailed control over the way a service or activity is carried out is likely to reinforce the identity of the undertaking, and may, indeed, tend to confirm a transfer.

    For example, in Birch (p.3 above), the council contracted out the management of its leisure centres. The contract signed by the successful contractor, Sports and Leisure Management Ltd (SLM), impinged on "every conceivable aspect" of the running of the centres. Although SLM was required to provide the staff to manage the centres, these staff carried out their day-to-day work in accordance with the council's instructions and policies, and subject to the council's control. SLM had to obtain the council's permission to reduce the numbers of employees engaged on the contract and, indeed, could be compelled to increase staffing levels at its own cost. Other terms of the contract preserved the status quo in relation to certain discount leisure schemes, the council retained overall control of the programme of daily events, and prices and charges had to be approved by the council "in accordance with its social objectives".

    Overruling an industrial tribunal's decision that there had been no relevant transfer, the EAT said that there may be a transfer for the purposes of the Regulations even though the council retained "a very considerable degree of control over the way in which SLM provided services under the contract with the council". In fact, the degree of control "confirms the transfer by emphasising the retention of identity of the management part of the undertaking in different hands." SLM had continued those activities the same as before, Mummery J concluded.

    Staff transfer not crucial

    It is also clear that the existence of a workforce at the time of transfer does not determine the question of whether there is an identifiable "undertaking" for the purposes of the Regulations (Secretary of State for Employment v Spence). More particularly, the fact that the transferor's employees are not taken on by the alleged transferee cannot of itself preclude a transfer. As the EAT in the Securicor Guarding case observed, it would defeat the object of the legislation "if a transferee could evade the application of [the Regulations] simply by not retaining the staff formerly working in the undertaking." Indeed, the fact that the transferee does not employ any employees under contracts of employment, but operates with a "fluid pool" of self-employed workers, cannot preclude the application of the Regulations (see BSG Property Services v Tuck and others).

    On the other hand, the movement of a group of employees between employers does not necessarily indicate that a transfer has occurred. In Carmichael and others v BRS Ltd, for example, eight lorry drivers "moved up" from one contractor providing transport delivery services to a particular customer to another. They enjoyed better terms and conditions after the move but, other than eventually using larger and different vehicles, their working practices and experience remained virtually unchanged. An industrial tribunal held that the activities of the drivers in question did not constitute an entity, economic or otherwise. The decisions to transfer had been taken by each of the drivers as individuals and there was no common purpose behind their employment, as opposed to that of others, with either of the contractors. Upholding this conclusion, the EAT said that the tribunal had properly directed itself on the law (it having referred to both Spijkers and Council of the Isles of Scilly). In view of the fact that the employees could have continued doing the same work had they stayed with their original employer, this was merely a case of employees moving from one employer to another.

    The reference in Carmichael to there having been "no common purpose" behind the employees' employment with one or other contractor, might tend to cast some doubt on the earlier decision in Banking Insurance and Finance Union v Barclays Bank plc and others. In that case, by contrast, there would seem to have been just such a common purpose behind the transfer of nearly 400 Barclays employees from various of its existing subsidiaries to a service company set up to provide staff for companies in the group and, in particular, a new investment bank which was imminently to be established. The EAT upheld a tribunal's conclusion that no assets or goodwill had been transferred, and there was no identifiable business as such which was capable of transfer. This would seem to overlook the fact that almost all of the employees transferred had hitherto been employed by the parent company under standard contracts of employment, and their services provided to subsidiaries under a supply of services agreement. On transfer, their employer changed but their work remained the same. It is at least arguable that such "labour-only" service provision might, on present principles, be capable of transfer and retention of identity.

    Identity immediately after transfer

    The fact that a transferee wishes or intends to integrate the undertaking (or part thereof) which it has acquired into its existing business or organisational structure will not of itself preclude a relevant transfer.

    In Farmer v Danzas (UK) Ltd , for example, Danzas (the transferee) agreed to bring "in-house" a transport service which it provided for its customers through a contractor (Mr Farmer's transport company). It took on all of Mr Farmer's drivers, who initially did the same work in the transport service which they had done previously. After about three months, however, most of those drivers had been "integrated" into Danzas's general undertaking. An industrial tribunal found that there had been no transfer of a business because Danzas had always intended to integrate Mr Farmer's business in this way, so that the latter had not retained its identity after transfer.

    Allowing Mr Farmer's appeal against that decision, the EAT stated that there is nothing in any European decision to suggest that an economic entity ceases to retain its identity merely because the economic activity is subsumed into the transferee's business. Were such an argument to prevail "it would emasculate the working of the Directive and the Regulations. It is likely that every business will wish to integrate, where possible, any new business which has been acquired, so that there can be flexibility of work practices and economy of scale." In this case, after the transfer, the drivers did exactly what they had been doing before, using the same equipment as they had used in the past and servicing the same customers. As at the date of the transfer, the economic activity of Mr Farmer's company was transferred across to Danzas. The transferee could carry on the activities of the predecessor without interruption and was put in a position where it was able to carry on substantially the same business as before. It was possible to identify the work being done by the employees engaged in that business before and after transfer, and that was sufficient to satisfy the requirements of the Regulations. "Whether or not the transferee intended to integrate the acquired business into its own operation is neither here nor there. Immediately after the moment of transfer the economic activity was the same as it had been immediately before, and it retained its identity. That is the crucial moment; what happened later does not alter the position," said the EAT.

    Different undertakings

    As the preceding discussion indicates, the modern approach to the Regulations militates towards the conclusion that there will be a relevant transfer of an undertaking in a much wider range of circumstances than was previously thought to be the case. In any given case, however, the issue of whether an undertaking retains its identity on transfer remains essentially a question of fact for industrial tribunals (or any other court hearing a case at first instance). It is thus difficult successfully to challenge a tribunal's conclusion on this issue on appeal, unless it has clearly failed properly to consider and/or apply the principles developed in the ECJ and related domestic decisions, or unless its conclusion is perverse. It follows that, provided it adopts the correct legal approach, a tribunal is perfectly entitled to find that the required retention of identity has not been established.

    There may thus simply be a transfer of the physical assets of a business, with the transferee of those assets operating an entirely distinct or new economic activity. In Woodhouse v Peter Brotherhood Ltd, for example, the Court of Appeal agreed with a tribunal's conclusion that the business carried on before the transfer of a factory was the manufacture of diesel engines, whilst the purchaser manufactured spinning machines, compressors and steam turbines. Notwithstanding the fact that the same workforce was employed using the same tools, "the business is different". Similarly, in Melon and others v Hector Powe Ltd, the House of Lords upheld a slightly less convincing distinction made by a tribunal between the manufacture of made-to-measure suits (the vendor's business) and the manufacture of ready-to-wear suits (the purchaser's business). In all such cases, however, we should now perhaps heed the warning given by the Advocate-General in Spijkers against transfers of undertakings which are disguised as mere assets transfers (see Transfer of undertakings 1: the European approach).

    Destruction of identity

    More recently, certain tribunals have assessed the activities of an apparently similar undertaking or business before and after transfer, and nevertheless legitimately (in the EAT's opinion) concluded that it has a fundamentally different nature or quality, and that there has not therefore been a sufficient retention of identity.

    In Mathieson , for example, the EAT upheld a tribunal's conclusion that there was no relevant transfer when an NHS trust hospital replaced a small in-house shop, catering for its patients, visitors and staff, with a much larger undertaking, selling a wider range of goods from a newly built unit, and run by an outside contractor on more commercial lines and with a different "trading philosophy". The tribunal had found that the degree of similarity between the activities carried on before and after the alleged transfer was "minimal". While the tribunal accepted that the Regulations were capable of applying to the contracting out of the provision of a service of this type, it said that the hospital had "destroyed" the original hospital shop and had an entirely new and different concept to be put in its place".

    At the EAT, Lord Coulsfield said that the tribunal had correctly directed itself as to the law to be applied (basing itself on Spijkers) and the factors to be considered. Although a different tribunal might have assessed the facts differently, the shop's employees had accepted that it was not sufficient merely to say that they would have been "shop assistants" both before and after the change, irrespective of the nature or degree of any change in the business. It was therefore possible that there could be a change in the nature of the business carried on in a shop so great as to destroy any identity between the prior business and the later one, notwithstanding the fact that the later business continues to employ many employees of the former business. This question was largely one of fact and degree for the tribunal.

    Similarly, in Smith v Duncan, an industrial tribunal held that there had been no retention of identity following a change in the proprietor of a village shop. It said that there had been no contact between the new proprietor and the old; the new proprietor was "primarily a grocer", whereas the previous custodians had been "orientated towards other lines"; and the "trading content" (that is, the nature of the goods) in the shop had been altered by 90%. In these circumstances, "there could not possibly have been any continuity of identity". Again, the EAT under Lord Coulsfield affirmed the decision and said that the tribunal was entitled to find that what the new proprietor had in effect done was to take over the premises and set up his own "independent business". This was despite the fact that the shop was apparently a "small village shop" before the change in proprietor and "continued to be a shop of that character after it" (and, indeed, continued to use the same trading name, "Spar").

    On the face of it, decisions such as these seem to conflict with the view that the Regulations may apply notwithstanding apparently significant changes in the way in which the same or a similar undertaking or economic activity is conducted in the hands of the transferee (see, for example, Dines, Betts and Council of the Isles of Scilly, above). According to the EAT in Mathieson, however, such cases had focused on the position of the employee in circumstances in which the employees, "or the work which they did, in effect [were] the undertaking". In the EAT's view, this did not modify the general guidance from the ECJ on the relevant factors to be considered by tribunals (see part one). This may mean that, paradoxically, it is now easier to establish that there is a retention of identity where there is a transfer of "undertakings" involving the provision of a discrete and identifiable service or activity, than in more traditional cases of, for example, the transfer of a shop or factory-based business.

    Parts of an undertaking

    Many of the examples we have considered demonstrate that the Regulations apply to the transfer of a part of an undertaking, just as they do to the transfer of the whole. Indeed, it is expressly provided that "references in the Regulations to the transfer of part of an undertaking are references to a transfer of a part which is being transferred as a business ..." (reg. 2(2)).

    All of the principles discussed in both part one of this series and the present feature therefore apply in determining (1) the existence of an economic entity which is capable of transfer; and (2) whether that entity retains its identity on transfer. This means that the part of the undertaking to be transferred must to some extent be a separate, self-contained and identifiable, or "clear and distinct", part of the larger undertaking which it is leaving. It does not matter how large the part transferred is, or that it carries out functions which are ancillary to the main purposes or objects of the corporate whole (for example, it may comprise the provision of cleaning or catering activities).

    The part transferred does not, however, actually have to be carried on by the transferor "separately and in a self-contained manner", although being able to identify a clear department, division, site or administrative unit will always make it easier to establish a transfer. A degree of integration with the larger undertaking is not fatal, provided the part in question is "separable without destroying its identity" (McLeod v John Rostron & Sons Ltd). "It is sufficient if it can be seen that the part transferred, which then is self-contained and separate, is a recognisable and identifiable part of the whole business out of which it has been separated" (Green v Wavertree Heating and Plumbing Co Ltd, and see Council of the Isles of Scilly ). In Green itself, for example, the transferor was a heating and plumbing contractor. The EAT held that the transfer of the gas-fitting side of the business was a transfer of a going concern. It concluded that the recognisable part of the transferor's total business which had been transferred related to the execution of gas-fitting contracts, even though this activity shared common resources with the plumbing side of the business left behind.

    Note: Regulation 2(2) also provides that the transfer of a ship without more will not constitute the transfer of a part of an undertaking. This probably adds little to the general need to show more than a mere transfer of assets. If a ship is transferred as a part of a going concern, or as an ongoing economic entity which retains its identity, the Regulations will apply. This might be indicated, inter alia, by the transfer of the crew, and the continuation of the same or a similar trade as before for largely the same customers (Watts, Watts & Co Ltd v Steeley).

    Transfer mechanisms

    As we observed on p.3 above, a relevant transfer may be effected either by sale, some other disposition, or operation of law (reg. 3(2)). This definition covers, at the very least, the transactions considered in part one of this series in the context of the Directive (see Transfer of undertakings 1: the European approach). Indeed, in Council of the Isles of Scilly, the EAT said that provided an economic entity retains its identity after transfer, a change of employer will normally have occurred as a result of a "transfer" to which the Regulations apply. Tribunals are therefore advised to concentrate on that question, and are warned that it would defeat the purpose of the Regulations "if a series of technical rules were to be applied to the question of whether a transfer has taken place". Accordingly, said Morison J, a transfer may take place in a number of ways:

  • It can occur where there is a change in the identity of the person responsible for employing people in the economic entity, even if that change comes about without any arrangement relating to the business activities as such. For example, A might lease premises to B so that B could carry on a business there. If A then takes over the lease and runs a similar business on those premises, the Regulations may well apply. Employees whose employer changes in such circumstances are as deserving of protection as employees whose employer changes due to a change in ownership of an undertaking.

  • A transfer may take place in two stages. For example, A may lease premises to B. If B then surrenders the lease, and A grants a lease to C who carries on the same type of business as B, the Regulations may apply. The business carried on by B could be said to have been transferred back to the lessor, and then on to the second lessee. Provided that the business continues, in the sense that the economic unit retained its identity (for example, restaurants and bars being run before and after the change in employer), employees in that business should not, said the EAT, be prejudiced by a series of transactions which merely changed the identity of the employer.

  • Similarly, A might contract out part of its business to B, and after a further competitive tender, contract it out to C, or win back the work for itself. Technically, when B ceases to be the contractor, the business reverts to A and is then contracted out again to C. Even though there is no contract between B and C, the Regulations may apply (see Dines ). It is not necessary for there to be discussions, or contracts, between the first employer and the second.

    "Sale"

    Looking at some of the specific elements of reg. 3(2), a "sale" will in most cases mean the contractual disposition of absolute ownership of a business or undertaking (or part thereof) in consideration of a price paid in money. There may, however, be separate agreements dealing with various aspects of a business (see further below). But only those which relate to any real property (ie premises or land) which is to be sold (or otherwise disposed of, including under a lease) must necessarily, for property law purposes, be made (or at least evidenced) in writing. Agreements for the sale of movable assets (eg plant, equipment and stock) or goodwill may be oral and unwritten.

    A sale, for the purposes of the Regulations, probably also includes "conditional" sales of the type considered by the ECJ in Berg and Busschers v Besselsen (see Transfer of undertakings 1: the European approach), where "ownership" of the undertaking would only have been acquired by the transferee on the payment of the final instalment of the purchase price. Indeed, it seems that it is open to tribunals to conclude that such an agreement has in effect been reached, irrespective of whether or not the parties believe that the transaction has been completed.

    For example, in Spindler & Hodges Ltd v Stock, the transferor and transferee of a confectionery baking business signed a document, entitled "heads of agreement", which recorded the basis of an agreement to purchase the undertaking and the "payment of the first consideration". The balance of the purchase price was to be made up of 15% of the value of sales to the transferor's existing customers for three years from the date of the document, subject to a maximum of £90,000. Despite the fact that the document was said to be "subject to formal written agreement to be signed between the parties as soon as possible", an industrial tribunal rejected the argument that it was merely a conditional "agreement to agree". Consideration had been paid, some stock had been transferred and orders placed prior to the date of the document had been taken over by the transferee. The heads of agreement had, said the tribunal, effected a transfer of an undertaking, whatever may have been the actual intentions of the transferor. This decision was upheld by the EAT, notwithstanding the fact that no final agreement had in fact ever been reached and the deal was ultimately called off following further inquiries by the transferor into the state of the business.

    "Some other disposition"

    Even if such transactions are not strictly speaking "sales", they are likely to fall within the catch-all category of "some other disposition". It is this heading which covers transfers by way of the grant, transfer or assignment of leases, licences, franchises, dealerships or contracts (considered above and see further examples in box opposite), and transfers by way of gift. In addition, it may well cover a variety of other situations in which there is a de facto transfer of a business or undertaking as a result of a new employer assuming responsibility for the operation of the undertaking in which employees work. Again, this may occur even though no formal agreement is reached between the transferor and transferee, and there is no formal or recognised vehicle or mechanism facilitating the transfer.

    In Dabell v Vale Industrial Services (Nottingham) Ltd and others, for example (a case decided under the continuity provisions of what is now s.218(2) of the Employment Rights Act 1996, see Transfer of undertakings 1: the European approach), the transferor closed down its business, and its equipment, goodwill, existing customer contracts, and employees were handed over to the transferee (which continued to operate the business from a different site). A circular was also sent to the transferor's customers informing them that the transferee had taken over the business. All of this was done while negotiations over the transfer were continuing, and no legal formalities or sale agreements had been completed. The Court of Appeal nevertheless upheld an industrial tribunal's conclusion that there had been a transfer of an undertaking in these circumstances, even though there remained a possibility that the business might be transferred back to the transferor if the final negotiations fell through (as, indeed, actually happened in this case).

    Again, in Charlton and Charlton v (1) Charlton Thermosystems (Romsey) Ltd (2) Ellis, Mr and Mrs Charlton were directors and sole shareholders of Charlton Thermosystems (Romsey) Ltd. On 30 October 1990, the company was struck off the register of companies for failure to file annual accounts, and was dissolved. Mr and Mrs Charlton nevertheless carried on business, employing Mr Ellis and other employees of the company, until 16 November, when they were informed by Mrs Charlton that the company had been dissolved and their contracts of employment were terminated. An industrial tribunal held that in these circumstances there had been a transfer of the undertaking of the company (as a heating and ventilating contractor) to the Charltons, who were consequently personally liable to meet Mr Ellis's claims for redundancy payments and outstanding wages and holiday pay.

    Upholding that decision, the EAT said that, although the company had ceased trading, no receiver, administrator or liquidator had ever been appointed to deal with its property or wind up its affairs. In determining whether there had been a transfer effected by "some other disposition", the EAT observed that the rulings of the ECJ establish that the decisive issue is whether an undertaking retains its identity, following a change in the natural or legal person responsible for carrying on the business and who in fact incurs obligations as an employer towards employees in the business, regardless of whether ownership of the undertaking is transferred. The undertaking carried on by the company was a heating and ventilation business, and the applicant employees were employed in that business. Although the company had been dissolved, the business retained its identity in the hands of the Charltons, who continued its operation using the same assets and employees as had the company. It was irrelevant for present purposes that the Charltons' continued use of the company's name and property may have been unlawful in a number of other respects.

    Who was running the show?

    A similar approach was endorsed recently by the EAT in Vaux Breweries Ltd v Tutty and others. Vaux Breweries was found by an industrial tribunal to have taken over de facto control of the business of an insolvent social club on 22 December 1993. This occurred because of the brewery's anxiety that the club should continue trading pending the outcome of negotiations for its sale as a going concern (which eventually reached fruition on 2 February 1994), in order to protect the brewery's financial interest (which took the form of loans secured by a mortgage on the club's premises). Although one of the prospective purchasers, Mr Jones, was already running the club on a day-to-day basis during this period, he was held to be a "bare licensee" and there was no evidence that it was he who employed the club's staff at this stage. The brewery paid the significant running costs of the club (although staff wages were paid out of the till), and if the brewery had been dissatisfied with the way Mr Jones carried out his "limited duties", it could have "turned him out peremptorily".

    Looking at "the substance of the transaction and not the form", the EAT concluded that the industrial tribunal had been entitled to find that there had been a relevant transfer of the club's business to the brewery on 22 December 1993. In the EAT's view, the vital consideration in determining whether there has been a transfer is whether the effect of the transaction is to put the transferee in effective possession and control of a going concern, the activities of which it can carry on without interruption. What matters is the transfer of responsibility for the operation of the undertaking in question. Taking a robust and sensible view of the facts, said the EAT, the reality was that the brewery was "running the show" during the relevant period. The club had in effect voluntarily relinquished to the brewery its rights to continue to operate the business.

    Operation of law

    Transfer by operation of law would seem to cover, for example, transfers on the death of a personal employer under the law of succession, the expiry of a lease and its automatic reversion to the landlord, the frustration of a commercial contract such as a franchise or concession agreement, the appointment of a trustee in bankruptcy (see Belhaven Brewery Company Ltd v Berekis and others), and a transfer as a result of a court order (in line with the ECJ's approach to the judicial dissolution of the lease-purchase agreement in Berg and Busschers above and Transfer of undertakings 1: the European approach).

    Series of transactions

    It is expressly provided in the Regulations that a transfer "may be effected by a series of two or more transactions" (reg. 3(4)(a)). There is no longer any reference to these transactions being between the same parties (this qualification was repealed by the TURERA). To this extent, the provision reflects the ECJ's view that the Directive and the Regulations may apply even though a transfer takes place in two "phases" or "stages".

    Thus it may cover, for example, a situation in which, as a first step, the undertaking is transferred back from the original lessee to the owner, who then transfers it (whether by a further lease or sale) to a new lessee or owner (Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall A/S and P Bork International A/S (in liquidation) v Foreningen af Arbejdsledere i Danmark - see Transfer of undertakings 1: the European approach); a switch of public funding between two charitable foundations (see Dr Sophie Redmond, Transfer of undertakings 1: the European approach ); and the handing back by a contractor to a health authority of cleaning services at a hospital and the grant or handing over of those services to the second contractor on the following day (see Dines ). The implication in such cases is that the transfer is to be treated as a single transfer between the two lessees, foundations or contractors, notwithstanding the involvement of a third party (in the form of the owner, public authority, customer or client). (The question of whether there is one transfer or two in such "tripartite" situations will be further explored in subsequent parts of this series.)

    On the other hand, if the third party actually assumes, for any period, responsibility for the running of the undertaking, and therefore takes on the obligations of an employer towards the employees employed therein, there will almost certainly be two separate transfers. In Vaux Breweries , for example, the EAT upheld the tribunal's conclusion that there were two discrete transfers: one from the social club to the brewery in December 1993, and a second from the brewery to the new owners some weeks later.

    Primarily, however, reg 3(4)(a) has an anti-avoidance purpose, and must be construed in a purposive manner "in order to defeat ingenious devices and schemes" designed to deprive employees of the protection to which they are entitled (Longden and Paisley v Ferrari Ltd and Kennedy International). As the EAT warned in Longden, the parties to a proposed transfer of an undertaking may, with professional advice, arrange for a transfer to be effected by a series of two or more transactions dealing with separate assets, none of which, taken individually, could be regarded as a relevant transfer. A composite plan of subdivision or fragmentation of a transfer may be adopted for no sensible commercial purpose other than to avoid the application of the Regulations. Tribunals are therefore directed by the Regulations to treat "what might in form be a series of separate transactions as, in substance, a single transfer."

    Those transactions must, however, be material in effecting the transfer (for example, they could be separate agreements dealing with such different aspects of the business as premises, plant and goodwill) and not merely a part of a chain of events or negotiations leading to the transfer. In Longden, for example, the receipt of a draft contract dealing with certain of the transferor's assets, communication of the transferor's oral acceptance of the transferee's offer (although at this stage the latter expressly refused to sign a binding agreement pending further enquiries), and the payment of £4,000 to the receiver of the transferor's business to keep the business "ticking over" pending those enquiries and further negotiations, were not transactions which effected the transfer. The transfer was effected by a receivership sale of assets agreement completed some two weeks later. What had happened previously, said the EAT, "was a succession of events which can loosely be described as causally related to one another and to the ultimate conclusion of the [sale agreement]."

    The question of whether there has been a series of transactions effecting a transfer within the meaning of reg. 3(4)(a) may be crucial in determining the rights of employees and the liability of employers under the Regulations. For example, an employee who is employed in the undertaking (or part) transferred immediately before any one of a series of transactions leading to a transfer will be protected by the "automatic transfer principle" contained in reg. 5 (see reg. 5(3)). Accordingly, in Longden, the employees' only redress was against the insolvent transferor, since they were dismissed before the sale agreement. We return to this and related issues in part three of this series.

    What amounts to a transfer? Main points to note2

  • According to recent domestic decisions, the purpose of the EC Business Transfers Directive and the 1981 Transfer of Undertakings Regulations is to ensure that employees "follow their work" if the undertaking or business, or part thereof, in which they are employed is transferred.

  • In applying the Regulations, it is necessary to identify an "economic entity" or undertaking, rather than a "business" in the traditional sense of that word, which is capable of being transferred.

  • The decisive criterion for determining whether there has been a transfer of such an undertaking is whether, after the alleged transfer, the undertaking has retained its identity, so that employment in the undertaking is continued or resumed in the hands of the transferee. In answering this question, it may be helpful to seek to answer a different question: "is the job previously done by the employee still in existence?"

  • In determining whether there has been a retention of identity, it is necessary to examine all the facts relating both to the identity of the undertaking and the relevant transaction and assess their cumulative effect, looking at the substance and not the form of the arrangements. The mode or method of transfer is immaterial. The emphasis is on a comparison between the actual activities of, and employment situation in an undertaking before and after the alleged transfer.

  • A change in the employer responsible for the activities of an undertaking which continues to be identifiable will usually mean that there has been a relevant transfer.

  • Such a transfer may occur even though there has been no transfer of tangible or intangible assets (including goodwill). The undertaking may even remain under the ultimate control of the transferor. And the size of the undertaking is irrelevant. It may comprise only one of the transferor's employees.

  • The undertaking transferred may consist only in the provision of, or the right to provide, services. The Regulations may therefore apply in the context of competitive tendering procedures whereby a contract for the provision of services is granted, or where there is a subsequent change in the contractor providing the services. It is irrelevant that there may be no contractual relationship, and no transfer of management structure, stock, supplies or equipment, between the successive contractors.

  • Similarly, the Regulations can apply on the transfer of undertakings under leases, licences, franchises and concessions.

  • No single factor is common to all cases in which a transfer under the Regulations has occurred. It cannot be said that in every transfer X will occur, so that in the absence of X there can be no transfer.

    RELEVANT TRANSFERS - SOME INSTRUCTIVE EXAMPLES

  • Contracting out. The Regulations (interpreted in the light of ECJ decisions) are capable of applying to many contracting-out situations in both the public and private sectors, as well as subsequent changes of contractor or service-provider (including the contracting-back in of services by the customer or client).

    They may thus cover, for example, the transfer of local authority refuse and street cleansing services (see Wren, p.2 of main text); council housing maintenance services (see BSG v Tuck ); the provision of cleaning services for a specific undertaking (see Schmidt, Transfer of undertakings 1: the European approach, and Dines, above ); the provision of security services (see Securicor Guarding ); the provision of catering services (see Rask and Campion Hall v Waine and Gardner Merchant Ltd, Transfer of undertakings 1: the European approach ); airport firefighting and baggage-handling services (see Council of the Isles of Scilly ); the provision of transport services (see Betts ); healthcare services (see Porter, Transfer of undertakings 1: the European approach ); and prison education services (see Kenny and others v South Manchester College, Transfer of undertakings 1: the European approach ).

  • Management and administrative functions. The Regulations may similarly, in appropriate circumstances, cover changes in the employer responsible for carrying out management or administrative functions - see, for example, Birch on the contracting-out of the management of local authority leisure centres, Mannin Management Services Ltd v Ward, in which the owner of a shopping centre resumed responsibility for managing the precinct from a contracted managing agent and Lumley Insurance Consultants Ltd v Pruddah & TSB Trust Company Ltd, where a firm of insurance brokers administered a credit insurance scheme for the TSB using one of its branch offices exclusively for this purpose. The TSB subsequently (and with LIC's agreement) took over the running of this activity itself. It took over the lease for the computer which had been used by LIC, and paid LIC a substantial licence fee for the relevant computer software. TSB also took on some of the LIC staff who had been involved in the work. The EAT said that it was necessary to focus on the nature of the activity carried out by LIC, which was the provision of credit insurance for borrowers from TSB. There was, the EAT concluded, a transfer of a going concern to TSB when TSB decided to acquire LIC's valuable intangible assets (ie the computer software) and some of the tangible assets for that activity and carry it on in-house.

  • Leases. The Regulations are also likely to apply in many cases where transfers occur in the context of leasing, licensing and franchising arrangements.

    In Norris t/a Little Brickhill Service Station v Bedwell and another, for example, Mr Bedwell was carrying on the business of running a petrol station as a tenant under a non-assignable lease with the owner of the premises. He wished to dispose of the business, but he was not permitted to transfer the lease directly to a prospective purchaser. The lease had to be surrendered to the lessor. Finding that there had been a transfer between Mr Bedwell and the purchaser, the EAT said that this was "really nothing more than the transfer of a lease as machinery to get the purchaser onto the premises. This is no different from the case of a shopkeeper who wants to retire and sell his business but cannot do so because of a covenant restricting his power to deal with the lease and transfer the lease directly to the purchaser. What he does is to surrender the lease to the lessor and then, a lease having been transferred to the transferee, the vendor of the business then simply sells it to his purchaser."

    More recently, in Fleetwood Sports Development Ltd t/a Fleetwood Football Club v Layton, the EAT upheld an industrial tribunal's conclusion that there was continuity of activity in the form of an undertaking, namely a football club, which continued without break after December 1993 in different hands. This followed the termination by the owner of the ground where the club played of the transferor's lease thereon, and the granting (on the same day) of a licence to the transferee to use those premises. This was, said the EAT, "a paradigm case for the application of the Regulations".

    And, reflecting the ECJ's approach in Bork, the EAT has accepted that a short period of closure of an undertaking following the termination of a lease, and prior to the granting of a new lease or licence on (or the sale of) premises will not preclude the operation of the Regulations. In Gaines v Picturedrome Theatres Ltd and another, the EAT remitted to the industrial tribunal the question of whether there was an economic entity, namely the undertaking of a cinema, which retained its identity in different hands, notwithstanding the fact that it was closed for some five weeks before its resumption by the alleged transferee.

  • Licenses. In Safebid v Ramiro, the EAT held that there was a transfer of the business of running a discotheque and club between successive licensees. The mere fact that the licensor retained absolute ownership of the business and premises, and expressly reserved the goodwill of the business and the right to the trade name of the club, did not preclude a transfer under the Regulations. It seems likely that the same conclusion would now be reached in respect of the transfer of licences or concessions granted by an owner of property allowing others to conduct specific activities on their premises. To this extent the decision of the EAT in Journey's Friend Ltd v Hayes and another - upholding a tribunal's finding that there had been a transfer between successive licensees of a concession to run a gift shop on hotel premises - reflects modern thinking, and is to be preferred to earlier cases to the contrary (see, for example, Robert Seligman Corporation v Baker and another - the EAT's view in that case that there had been no transfer of a concession to run a hairdressing salon in a well-known department store is almost certainly now unsustainable).

  • Franchises. The EAT in LMC Drains Ltd v Waugh agreed with a tribunal's conclusion that there had been successive transfers of a business - in the form of a change in the franchisee who had the right and licence to operate the "metro-rod" (drain maintenance and clearance) business in a particular area. Again, this was unaffected by the fact that the franchise agreements gave the franchisor extensive powers to regulate the operation of the franchises. On each occasion the franchisor entered into an agreement with a new franchisee who continued to run the business without any interruption.

  • Tenancies. A number of cases have established that the grant or transfer of a tenancy on licensed premises, or the surrender of a tenancy to the owner of the premises (who continues or resumes the same or similar activities), can effect a business transfer which may fall within the Regulations. If employees are employed by the transferor tenant at the time of transfer they will consequently attract the protection of the Regulations (see, for example, Young v Daniel Thwaites & Co Ltd; McLellan v Cody and another and Cummings v Acosta). Indeed, the same may be true if employees are employed personally by successive pub managers who are themselves employed by the pub owner (see, for example, Cartwright v Norton, where the transferor manager personally ran and employed the staff in the catering side of the business - in modern terms this case could be said to reflect the emphasis on protecting employees whenever there is a change in the identity of their employer). By the same token, the transfer of a tenancy on a farm is likely to be covered by the Regulations (as would be the sale of a farm followed by the resumption or continuation of the same or similar activities - see Lloyd v Brassey).

  • Complex structures. Finally, the application of the Regulations will not be defeated by the intricacies of the corporate structure of a group of companies. In APA International Ltd v Beechey and others, for example, the EAT upheld a tribunal's decision that APA International was continuing the activities (that is, as motor industry consultants providing training for dealers in certain cars) previously carried on by a sister company which had gone into liquidation. There was in this case "ample evidence" for the tribunal's finding that the same staff, except the applicant employees, were carrying out the same work (under the same contracts) for the same customers, using the same equipment. It was irrelevant that the transferor's assets had not been transferred directly to APA, but had instead been transferred to yet another group company, which then leased them to APA.

    IRLB guide to the transfer of undertakings

    Part 1 : Scope and fundamental purposes of the Business Transfers Directive and the Transfer Regulations, covering: the common law position in the UK and the pre-eminence of EC law as an aid to the interpretation of the Regulations; and tracing the development of the ECJ's thinking on the question of what constitutes a transfer of an undertaking or business.

    Part 2: Transfers under the Regulations, including: the application of EC law; the modern "employment"-orientated approach based on whether an undertaking "retains its identity"; and examples of the types of undertakings and transfer transactions consequently covered by the Regulations.

    Part 3 : The automatic transfer principle, comprising: the employees covered by the Regulations; the rights, obligations, duties and liabilities transferred; and the employee's right to object to transfer.

    Part 4 : Unfair dismissal protection in the context of transfers, information and consultation provisions; and the possible revision of the Directive.

    1SI 1981/1794.

    2This summary should be read in conjunction with that which appears in part one of this series (Transfer of undertakings 1: the European approach ).

    CASE LIST

    APA International Ltd v Beechey and others 12.3.96 EAT 1014/95

    Banking Insurance and Finance Union v Barclays Bank plc and others [1987] ICR 495

    Belhaven Brewery Company Ltd v Berekis and others 24.3.93 EAT 724/92

    Berg and Busschers v Besselsen [1989] IRLR 447

    Betts and others v Brintel Helicopters Ltd and another [1996] IRLR 45

    Birch and others v (1) Nuneaton and Bedworth Borough Council (2) Sports and Leisure Management Ltd [1995] IRLR 518

    Bork P International A/S (in liquidation) v Foreningen af Arbejdsledere i Danmark [1989] IRLR 41

    BSG Property Services v Tuck and others [1996] IRLR 134

    Campion Hall v Waine and Gardner Merchant Ltd 23.11.95 EAT 1112/94

    Carmichael and others v BRS Ltd 29.11.95 EAT 409/95

    Cartwright v Norton 19.10.82 EAT 91/82

    Charlton and Charlton v (1) Charlton Thermosystems (Romsey) Ltd (2) Ellis [1995] IRLR 79

    Council of the Isles of Scilly v Brintel Helicopters Ltd and another [1995] IRLR 6

    Cummings v Acosta 16.1.85 EAT 149/84

    Dabell v Vale Industrial Services (Nottingham) Ltd and others [1988] IRLR 439

    Dines and others v (1) Initial Health Care Services (2) Pall Mall Services Group Ltd [1994] IRLR 336

    Dr Sophie Redmond Stichting v Bartol and others [1992] IRLR 366

    Farmer v Danzas (UK) Ltd 6.10.94 EAT 858/93

    Fleetwood Sports Development Ltd t/a Fleetwood Football Club v Layton 9.2.96 EAT 1230/94

    Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall A/S [1988] IRLR 315

    Gaines v Picturedrome Theatres Ltd and another 4.11.95 EAT 661/95

    Green v Wavertree Heating and Plumbing Co Ltd [1978] ICR 928

    Journey's Friend Ltd v Hayes and another 17.7.85 EAT 707/84

    Kelman v Care Contract Services Ltd and another [1995] ICR 260

    Kenny and others v South Manchester College [1993] IRLR 265

    Lloyd v Brassey [1969] ITR 100

    LMC Drains Ltd v Waugh [1991] 3 CMLR 172

    Longden and Paisley v Ferrari Ltd and Kennedy International [1994] IRLR 157

    Lumley Insurance Consultants Ltd v Pruddah & TSB Trust Co Ltd 26.1.84 EAT 150/83

    McLellan v Cody and another 7.10.86 EAT 14/86

    McLeod v John Rostron & Sons Ltd [1972] 7 ITR 144

    Mannin Management Services Ltd v Ward 7.2.89 Court of Appeal

    Mathieson and another v United News Shops Ltd 15.2.95 EAT 554/94

    Melon and others v Hector Powe Ltd [1980] IRLR 477

    Merckx and Neuhuys v Ford Motors Co Belgium SA [1996] IRLR 467

    Modiwear v Wallis Fashion Group and others 15.4.81 EAT 535/80

    Norris t/a Little Brickhill Service Station v Bedwell and another 30.10.84 EAT 738 & 875/83

    Porter and another v Queen's Medical Centre (Nottingham University Hospital) [1993] IRLR 486

    Rask and Christensen v ISS Kantineservice A/S [1993] IRLR 133

    Robert Seligman Corporation v Baker and another [1983] ICR 770

    Safebid v Ramiro 12.6.90 EAT 446/89

    Schmidt v Spar- und Leihkasse der früheren Ämter Bordesholm, Kiel und Cronshagen [1994] IRLR 302

    Secretary of State for Employment v Spence and others [1986] IRLR 248

    Securicor Guarding Ltd v Fraser Security Services Ltd and others 11.3.96 EAT 350/95

    Smith v Duncan 27.6.95 EAT 83/95

    Spijkers v Gebroeders Benedik Abattoir CV and another [1986] 2 CMLR 296

    Spindler & Hodges Ltd v Stock 7.3.95 EAT 805/94

    UK Waste Control Ltd v (1) Wren (2) Eastbourne Borough Council 16.6.95 EAT 568/94

    Vaux Breweries Ltd v Tutty and others 1.5.96 EAT 33/95

    Watts, Watts & Co Ltd v Steeley [1968] 3 ITR 363

    Woodhouse v Peter Brotherhood Ltd [1972] ICR 186

    Wren and others v Eastbourne Borough Council and UK Waste Control [1993] IRLR 425

    Young v Daniel Thwaites & Co Ltd [1977] ICR 877