TRANSFER OF UNDERTAKING

NUMAST and another v P & O Scottish Ferries Ltd

EAT(Sc): Bean J, Dr A H Bridge and Miss A Martin: 24 February 2005

The respondent shipping company operated ferry services, using four ships, between Scotland and the Northern Isles. In October 2002, following a tendering exercise, the contract to provide the ferry services was awarded to a different company, which employed the majority of the seafarers working on the ferries but not the shore staff and which did not acquire the ships. In a test case, the claimants, a ship's carpenter and a trade union, sought from the respondent, on the ground that there had been no transfer of an undertaking for the purposes of the Transfer of Employment (Protection of Employment) Regulations 1981, a redundancy payment and a protective award under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992, respectively. The employment tribunal held, as preliminary issues of law, that the ferry services together with the assets deployed and the employees engaged in the provision of those services constituted a stable economic entity; that there had been a transfer of an undertaking for the purposes of the 1981 Regulations; and that regulation 2(2) of the Regulations did not exclude the ferry crews from the protection of the Regulations and was not ultra vires article 1(3) of the Acquired Rights Directive 77/187 and section 2(2) of the European Communities Act 1972.

The claimants appealed.

The Employment Appeal Tribunal held:
(1) Where there was a transfer of a whole business, constituting more than the mere transfer of a ship, on a proper construction of regulation 2(2) of the Transfer of Undertakings (Protection of Employment) Regulations 1981, the crew would not be excluded from the benefit of the Regulations. While article 1(3) of Directive 77/187, from which regulation 2(2) was derived, appeared not to apply to seafarers, it did not follow that as a matter of Community law the Directive could not be applied to seafarers, and to include within the scope of the 1981 Regulations a group of workers who might otherwise be excluded from protection was not an improper use of the regulation-making power in section 2(2) of the European Communities Act 1972. Accordingly, regulation 2(2) was not ultra vires.
(2) A "stable" economic entity was to be contrasted with one which was carrying out a single contract or operation and was likely to have a limited duration, and the tribunal was clearly entitled to conclude that the ferry service, which had been provided by the respondent for a considerable number of years, was a stable economic entity. Although the major tangible assets, the ships, were not transferred, numerous premises and piers and the government subsidy were, a high percentage of seafarers were taken on by the new provider, the service continued to be used by the same passengers and there was a high degree of similarity in the activities carried on. Accordingly, the tribunal's conclusion that the undertaking had been transferred was unimpeachable.

The appeal was dismissed.

Appearances: David Stevenson, solicitor, (Thompsons, Edinburgh) for the appellant claimants; Paul Goulding QC and Shaheed Fatima (Osborne Clarke, Bristol) for P & O Scottish Ferries Ltd.