Unfair dismissal - Reason for dismissal
Ackroyd & others v Meter U Ltd and another case: Employment Appeal Tribunal (Mrs Justice Slade, Mrs M McArthur and Mr A Harris): 28 February 2012
The employer company provided meter reading services across the UK to suppliers of electricity. Since 1999, it had done so by means of franchises with independent franchise limited companies, typically owned by individual meter readers. The employer had no meter readers that it employed. In December 2009, both the first set of employees (the Ackroyd employees) and the second set of employees (the Hardy employees) transferred to the employer. The employer then undertook consultations with all of the employees and they were all offered the opportunity of forming franchise companies.
None of the employees took up that opportunity and, in April 2010, the Ackroyd and Hardy employees were dismissed on the grounds of redundancy. They brought claims in separate employment tribunals (the tribunals) claiming automatically unfair dismissal as their dismissals had been for a reason connected with the transfer. Both tribunals found that the employees had been dismissed for a reason connected with the transfer and that there had not been an economic, technical or organisational reason that had entailed changes in the workforce pursuant to regulation 7(2) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246 (the Regulations). In reaching that conclusion the tribunals concluded that the term 'workforce' in regulation 7(2) of the Regulations included the franchises utilised by the employer. The employer appealed to the Employment Appeal Tribunal.
The employer submitted that the change of contractual arrangements from employment to franchise was an economic and organisational reason which entailed changes in the workforce and that ‘workforce’ did not extend to the workforce of third party franchise companies to which meter reading had been contracted. The employees contended, inter alia, that dismissing a transferred employee in order that he could be re-engaged under a different commercial arrangement was a dismissal in order to change terms and conditions of service, not a change in the workforce. Consideration was given to Council Directive (EC) 2001/23 (the Directive). The appeals would be allowed.
On its proper construction ‘workforce’ did not include limited companies. Limited companies had an identity separate from their directors or controlling shareholders. They were not people, workers or employees although they would employ or engage them. Employees of corporate franchises were part of their employer's workforce (see  of the judgment). In the instant case, the central point was whether the tribunals had erred in holding that the ‘workforce’ of the employer had included not only employees but also the individuals employed by the franchise companies or, possibly, the franchisee companies themselves.
Although the term ‘workforce’ was not defined in either the Regulations or the Directive, applying an ordinary common sense use of the word 'workforce' it did not include limited companies. Accordingly, both tribunals had erred in holding that the franchises were included in the employer's workforce (see , ,  of the judgment).
The appeals would be allowed and the findings of automatically unfair dismissal set aside. The Ackroyd employees' claims would be remitted to the tribunal for determination of whether the dismissals of the employees had been fair or unfair. The Hardy employees' claims would be remitted to the tribunal for determination of whether the employer’s franchise business model was a sham, and, if it was found not to be a sham, for determination of whether the dismissals of the employees had been fair or unfair (see  of the judgment). Berriman v Delabole Slate Ltd  IRLR 305 applied; Crawford v Swinton Insurance Brokers Ltd  IRLR 42 applied; Bromby & Hoare Ltd v Evans  ICR 113 considered.
Andrew Allen (instructed by Thompsons Solicitors, Leeds) for the Ackroyd employees; James Laddie (instructed by UNISON Employment Rights Unit) for the Hardy employees; Andrew Stafford QC and James Boyd (instructed by HBJ Gateley Wareing (Manchester) LLP, Manchester) for the employer.