North Wales Training and Enterprise Council Limited (t/a Celtec) (Appellants) v. Astley and others (Respondents) (formerly Celtec Limited (Appellants) v. Astley and others (Respondents))

Under article 3(1) of the Council Directive 77/187/EEC, a transfer occurs at the single point when responsibility as employer for carrying on the transferred business moves from the transferor to the transferee. The parties cannot postpone that date.

Contracts or employment relationships then existing between the transferor and workers assigned to the undertaking pass automatically to the transferee, irrespective of contrary arrangements. An employee may freely decline to continue with the transferee, but that exception requires an actual choice not to do so. Continuing the same work in the transferred undertaking under an intended secondment does not satisfy the exception merely because the parties believed that employment with the transferor continued.

The respondents were civil servants whose work was wholly devoted to vocational training activities transferred by the Department of Employment to Newtec, Celtec's predecessor. They continued the same work after Newtec became operational in September 1990, but under arrangements described as secondments. They resigned from the civil service and entered direct contracts with Newtec in 1993.

The employment tribunal held that their service was continuous. The Employment Appeal Tribunal reversed that determination: [2001] IRLR 788. The Court of Appeal restored the tribunal's decision: [2002] EWCA Civ 1035; [2002] ICR 1289. Following a reference in the same proceedings, the European Court of Justice ruled that the transfer date was a single point when responsibility as employer moved to the transferee and that assigned workers' employment relationships were deemed to pass then.

The issues were whether the respondents could rely on that ruling despite changing their argument, whether further findings were required, and whether their intended secondments prevented automatic transfer and continuity of employment.

1. Appeal dismissed by a majority of four to one. Lord Hope delivered the principal majority reasoning. Lord Bingham and Lord Carswell agreed that the relevant transfer occurred in September 1990 and that the respondents' employment relationships were deemed to pass to Newtec then. Lord Rodger also dismissed the appeal, but on the different basis that responsibility as employer moved in 1993. Lord Mance would have allowed the appeal and remitted the case.

2. Per Lord Hope, article 3(1) of the Council Directive 77/187/EEC required the identification of one transfer date. That was the date when responsibility as employer for carrying on the business moved from the transferor to the transferee. It could not be postponed by agreement. Newtec became operational in September 1990 and assumed the transferred training activities then. The respondents were assigned to that undertaking and were essential to its operation.

3. Per Lord Hope, their employment relationships therefore transferred automatically to Newtec in September 1990. The Directive's mandatory protection could not depend on the consent of the Department, Newtec, employee representatives or the employees themselves. The parties' intended secondment arrangements could not derogate from the statutory protection in a manner unfavourable to the employees.

4. The sole reservation protected an employee's freedom to decline employment with the transferee. Its application required both an opportunity to choose whether to enter the transferee's employment and an actual, freely made decision not to do so. Although the respondents could have declined to work for Newtec, they did not. They continued without interruption to perform the same work in the transferred offices. Their belief that they remained civil servants did not amount to an exercise of the reservation.

5. Per Lord Hope and Lord Bingham, the House had to give effect to the European Court's ruling even though it enabled the respondents to advance a substantially different argument. The existing findings were sufficient. Remittal would serve no purpose because Celtec had long accepted September 1990 as the effective transfer date and the respondents formed the operational core of the transferred undertaking.

6. The employment tribunal's conclusion was affirmed on different grounds. Each respondent's employment with Celtec was continuous from the commencement of his or her civil service employment. Written submissions on costs were invited within 21 days.

1. House of Lords: The appeal was dismissed by a majority of four to one: [2006] UKHL 29. The employment tribunal's determination of continuity was affirmed, although on different grounds.

2. Court of Appeal: The employees' appeal was allowed. The court held that the undertaking could be transferred over a period and restored the employment tribunal's determination: [2002] EWCA Civ 1035; [2002] ICR 1289.

3. Employment Appeal Tribunal: Celtec's appeal was allowed by a majority. The transfer was held to have been completed around September 1990 and before the respondents entered direct employment in 1993: [2001] IRLR 788.

4. Employment tribunal: The tribunal determined that the respondents' employment was continuous from the commencement of their civil service employment. It treated the transfer as a process beginning in September 1990 and continuing as seconded employees entered direct employment.