Wilson v St Helens Borough Council (British Fuels Ltd v Baxendale, Meade v British Fuels Ltd)

Under the Transfer of Undertakings (Protection of Employment) Regulations 1981, a dismissal because of a transfer is effective, although it may be unfair. It is not a nullity and creates no general right to continued work with the transferee. The transferee assumes the contractual and statutory liabilities which the employee could have enforced against the transferor.

Where employment continues, the contract transfers automatically on its existing terms. The employee cannot waive the mandatory protection against transfer-related changes. The parties may nevertheless vary the contract for a reason independent of the transfer. An economic, technical or organisational reason entailing workforce changes may provide such an independent reason.

These conjoined appeals concerned employees dismissed immediately before transfers of undertakings and then employed by the transferees on less favourable terms. Mr Baxendale and Mr Meade succeeded in the Court of Appeal against British Fuels Ltd. Mr Wilson and the other former Lancashire County Council employees failed there against St Helens Borough Council.

The principal issues were whether dismissals connected with a transfer were nullities, so that employment necessarily continued with the transferee, and whether transferred terms could subsequently be varied. In the St Helens appeal, the House also considered whether economic or organisational restructuring, rather than the transfer itself, caused the contractual changes.

1. Disposition. Lord Slynn of Hadley delivered the leading speech. Lord Browne-Wilkinson, Lord Steyn, Lord Clyde and Lord Hutton agreed. The House unanimously allowed British Fuels Ltd's appeals in the Baxendale and Meade cases and dismissed the employees' appeal in the Wilson case.

2. Effect of dismissal. Per Lord Slynn, regulations 5 and 8 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 treat a transfer-related dismissal as effective, although it may be unfair. The dismissal ends the working relationship and is not a nullity. The transferee is therefore under no automatic obligation to continue employing, or to provide work for, an employee dismissed by the transferor.

   The transferee instead assumes the transferor's contractual and statutory liabilities. An employee dismissed because of the transfer is deemed to have remained employed at the transfer date so that those liabilities pass to the transferee. This preserves claims for wrongful or unfair dismissal and any available statutory remedies, but creates no general right to specific enforcement of the employment relationship.

3. Compatibility with the Directive. Per Lord Slynn, that construction complied with Council Directive 77/187/EEC. The Directive safeguarded the rights and remedies available under national law; it did not create a uniform Community-law right to continued employment. Where the transferee takes on the employee, the existing contract transfers automatically on its former terms. The employee cannot waive the Directive's mandatory protections. Where the employee has already been dismissed and is not taken on, the transferred rights are those arising from the dismissal under national law.

4. Contractual variation. Lord Slynn regarded the variation issue in the Baxendale and Meade appeals as unnecessary to the decision. He nevertheless rejected the proposition that only a variation made at the transfer could be invalid: a later variation may remain attributable to the transfer, although the causal link may eventually be broken.

   In Wilson, the industrial tribunal was entitled to find that the school could continue only through economic or organisational changes which reduced both staffing and costs. Those reasons, rather than the transfer itself, caused the new terms. A variation made for a reason independent of the transfer could validly be agreed to the same extent as between the employee and transferor.

5. Reference to the European Court. The existing decisions of the European Court gave a sufficiently clear answer on the effect of dismissal. No reference under article 177 of the EC Treaty was necessary.

1. House of Lords: Unanimously allowed British Fuels Ltd's appeals concerning Mr Baxendale and Mr Meade, and dismissed the Wilson employees' appeal against St Helens Borough Council.
2. Court of Appeal: Held for Mr Baxendale and Mr Meade because their transfer-related dismissals were ineffective and their original terms continued. Held for St Helens because economic or organisational reasons caused the termination and replacement of the Wilson employees' contracts.
3. Employment Appeal Tribunal: Dismissed the Baxendale and Meade appeals on the basis that the dismissals were effective. In Wilson, held that transfer-related variations were ineffective and that the original terms remained in force.
4. Industrial Tribunals: Dismissed the employees' claims. The tribunals relied variously on the effectiveness of dismissal, acceptance or affirmation of new terms, and economic or organisational reasons for restructuring.