ECM (Vehicle Delivery Service) Ltd v Cox

A transfer of an undertaking under the Transfer of Undertakings (Transfer of Employment) Regulations 1981 depends on whether an economic entity retains its identity after the transaction. The tribunal must make a factual appraisal of all relevant circumstances. Similarity of the service, a lost contract, or the absence of an acquired workforce cannot alone determine the issue.

Suzen limits the circumstances in which a mere change of contractor amounts to a transfer. It does not displace the wider Spijkers assessment. A tribunal may treat the reason why the transferee did not engage the former workforce as a relevant circumstance.

Axial Ltd lost its contract to deliver Audi and Volkswagen vehicles from Grimsby docks to ECM. Twenty-four former drivers and yardmen claimed unfair dismissal, contending that their contracts had transferred to ECM under the Transfer of Undertakings (Transfer of Employment) Regulations 1981.

The Employment Tribunal held that the VAG contract and the activities surrounding it were a discrete economic entity which retained its identity in ECM's hands. The Employment Appeal Tribunal dismissed ECM's appeal: [1998] ICR 631.

ECM appealed on a question of law, principally contending that Suzen showed that the tribunal could not lawfully find a transfer where ECM had taken on none of Axial's staff and had reorganised the service.

Appeal dismissed unanimously. Mummery LJ gave the judgment, with which Laws and Henry LJJ agreed.

1. The Employment Tribunal had applied the correct approach. Whether there is a transfer under the Transfer of Undertakings (Transfer of Employment) Regulations 1981 requires the necessary factual appraisal of all circumstances bearing on whether the relevant economic entity retained its identity. Applying Spijkers [1986] ECR 1119, the tribunal was entitled to weigh both the operational differences introduced by ECM and the continued customers, activity and result of the operation.

2. The tribunal could conclude that the undertaking was the VAG contract together with the activities dependent on it, rather than merely an activity of delivering vehicles. It remained identifiable in different hands, despite ECM's networked administration and its decision not to appoint former Axial employees.

3. Suzen [1997] ICR 662 did not overrule or cast doubt on Spijkers or Schmidt [1995] ICR 237. It confirms that similarity of service, or the mere loss of a customer contract, does not by itself establish a transfer. The type of undertaking, workforce, management, methods and operational resources remain relevant factual considerations.

4. This was not a case resting merely on similar services after a change of contractor, nor a case comparable to the loss of a contract at one location in Betts v Brintel Helicopters Ltd [1997] ICR 792. The tribunal reached its conclusion after considering all relevant facts. It was also entitled to regard ECM's reason for not appointing the former employees as relevant. No European authority made either that reason irrelevant or the absence of workforce transfer conclusive against a transfer.

The appeal was dismissed with costs. Permission to appeal to the House of Lords was refused.

• Court of Appeal: ECM's appeal on a question of law was dismissed, with costs. Permission to appeal to the House of Lords was refused.
• Employment Appeal Tribunal: ECM's appeal was dismissed on 15 May 1998. The tribunal had made no error of law: [1998] ICR 631.
• Employment Tribunal: In extended reasons sent on 13 November 1995, it held that the Transfer of Undertakings (Transfer of Employment) Regulations 1981 applied. The former employees' unfair-dismissal claims succeeded against ECM and failed against Axial.