North Wales Training and Enterprise Council Ltd v. Astley & Ors

The House considered the date at which a transfer under Council Directive 77/187/EEC (the Acquired Rights Directive) takes effect and the consequences for continuity of employment. The European Court of Justice was held to have decided that the relevant date is the particular point in time when responsibility as employer for carrying on the business moves from the transferor to the transferee (article 3(1) of the Directive). Contracts of employment in force on that date and relating to workers assigned to the transferred undertaking are deemed to be transferred to the transferee, subject only to the reservation that an employee may, by a decision freely taken, decline after the transfer to continue the employment relationship with the transferee. Applying those principles to the facts, the majority held that the transfer date relevant to Celtec's case was September 1990 and that the respondents' contracts were therefore deemed to have passed to Newtec/Celtec; the respondents had not, by free decision, avoided that deemed transfer and so their continuity of employment was preserved for redundancy and related rights. The court applied article 3(1) of the Directive, regulation 5(1) of the Transfer of Undertakings Regulations and section 218 of the Employment Rights Act 1996 as relevant domestic law provisions.

This was an appeal about whether periods of service by former civil servants should count as continuous employment with a successor private employer for the purpose of redundancy and other employment rights.

Background and nature of the claim

• The claimants were civil servants seconded to local Training and Enterprise Councils (TECs). The issue was whether their employment with the Department of Employment prior to taking direct contracts with Newtec/Celtec should be treated as continuous with their employment by Newtec/Celtec for statutory employment rights.
• They sought a tribunal declaration that their continuity of employment ran from their civil service start dates; Celtec contended that continuity began only when they entered direct contracts with Newtec/Celtec in 1993.

Procedural history and issues referred

• Employment tribunal sided with the employees; the Employment Appeal Tribunal allowed Celtec's appeal; the Court of Appeal restored the tribunal's decision. The House referred questions to the European Court of Justice on whether article 3(1) required a single transfer date and how that date is identified.
• The ECJ (Case C-478/03) held that the date is the point when responsibility as employer moves to the transferee and that contracts in force on that date are deemed to have transferred.

Issues for the House

1. Whether, in light of the ECJ ruling, the respondents could rely on the deemed transfer to preserve continuity despite having remained civil servants on secondment and only taking direct contracts in 1993.
2. Whether the respondents had, by a free decision, elected not to continue the employment relationship with the transferee (the sole reservation recognised by ECJ case law).
3. Whether the matter needed to be remitted to the tribunal for further factual findings.

Court's reasoning and outcome

• The majority treated the ECJ ruling as authoritative: the transfer date was a single point (here, September 1990) and contracts in force on that date were deemed transferred. The court inspected the factual matrix (letters of secondment, departmental practice and the fact that employees continued working in the unit) and concluded the respondents did not, by a free choice, decline the deemed transfer. Accordingly their continuity was preserved and the appeal was dismissed.
• There were divergent concurring and dissenting reasonings: one Law Lord preferred to treat the factual effect as that the responsibility 'as employer' did not move until July 1993 and reached the same outcome on that basis; another would have remitted the case for further factual inquiry.

Appeal dismissed. Applying the European Court of Justice ruling on article 3(1) of Directive 77/187/EEC, the court held that the date of transfer is the particular point when responsibility as employer moves from transferor to transferee and that contracts in force on that date are deemed transferred; on the facts (and in the majority's view) the transfer date was September 1990 and the respondents had not freely chosen so as to avoid the deemed transfer, so their continuity of employment was preserved.

Employment Tribunal (Abergele) 22 December 1999: found continuity from civil service and that transfer was a continuing process; Employment Appeal Tribunal (majority) allowed Celtec's appeal [2001] IRLR 788; Court of Appeal allowed respondents [2002] EWCA Civ 1035; House of Lords referred questions to the ECJ (Case C-478/03) which answered on 26 May 2005 ([2005] IRLR 647); House of Lords ([2006] UKHL 29) dismissed Celtec's appeal.