SECTION 8A, UNFAIR DISMISSAL ACTS, 1977 TO 2015
AN CLOCHAN LIATH PUB LIMITED
(REPRESENTED BY MARK O'CONNELL, B.L., INSTRUCTED BY SWEENEY MCHUGH, SOLICITORS)
- AND -
(REPRESENTED BY SEÁN BONER & COMPANY, SOLICITORS)
Chairman: Ms Jenkinson
Employer Member: Ms Doyle
Worker Member: Mr McCarthy
1. An appeal of an Adjudication Officer's Decision No. ADJ-00016502.
2. The Respondent appealed the decision of the Adjudication Officer to the Labour Court in accordance with Section 8 (A) of the Unfair Dismissals Act, 1977 to 2015 on 16 January 2019.
A Labour Court hearing took place on 11 July 2019.
This is an appeal by An Clochán Liath Pub Limited t/a The Stepping Stone against the decision of an Adjudication Officer ADJ-00016502, CA-00021459 dated 6th December 2018 under the Unfair Dismissals Act 1977—2015 (the Acts) in a claim of unfair dismissal by Ms Margaret Doyle against her former employer.
The Adjudication Officer found that there had been a Transfer of Undertaking within the meaning of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (which gave effect to Council Directive No. 2001/23/EC of 12 March 2001) (herein after referred to as “the Regulations “) when Playside Limited surrendered its lease of premises known as The Stepping Stone, to its landlord company Danbar Properties Limited and a new lease was granted by Danbar Properties Limited to the Appellant Company An Clochán Liath Pub Limited trading as The Stepping Stone. The Adjudication Officer held that rather than a redundancy situation, the employment was terminated unfairly and awarded the Complainant the sum of €15,000 in compensation.
For ease of reference the parties are given the same designation as they had at first instance. Hence Ms Margaret Doyle will be referred to as “the Complainant” and An Clochán Liath Pub Limited t/a The Stepping Stone will be referred to as “the Respondent”.
The Complainant submitted her claim under the Acts to the Workplace Relations Commission on 29th August 2018.
Playside Limited leased a bar restaurant premises at Main Street, Dungloe, County Donegal. The premises were taken back by the landlord company Danbar Properties Limited and then re let to An Clochán Liath Pub Limited. Playside Limited held a licence to sell alcohol, run a restaurant and host functions such as weddings and dances.
The freehold of the property is owned by Danbar Properties Limited under a Land Registry title. Mr David Harvey is the sole owner of the shareholdings of all three companies.
The Complainant commenced employment with the Respondent as chef/kitchen worker with Playside Limited trading as The Stepping Stone on 2nd February 2015. On 15th February 2018 she received notice from Playside Limited that her employment was being terminated by reason of redundancy. She was paid until 1stMarch 2018 and received a statutory redundancy payment.
Summary of the Respondent’s Position
Mr Mark O’Connell, B.L., instructed by Sweeney McHugh Solicitors, on behalf of the Respondent argued that Playside Limited was the Complainant’s employer. He said that the Complainant had brought proceedings against Playside Limited but subsequently dropped those proceedings and instead took unfair dismissal proceedings against An Clochán Liath Pub Limited, a company which was not formed until the 15thMarch 2018 and did not begin trading as The Stepping Stone Pub until the 30th March 2018.
Mr O’Connell said that the lease under which The Stepping Stone Pub operated was withdrawn by the holding company, Danbar Properties Limited. Subsequently, the lease was granted to An Clochán Liath Pub Limited. Both companies were owned by Danbar Properties Limited, the sole shareholder of which is Mr David Harvey, who is the sole shareholder of Playside Limited and An Clochán Liath Pub Limited.
Mr O’Connell said that Playside Limited experienced tough trading conditions and despite several attempts to reorganise the management structure raise new finance and re-focus its marketing policy, the premises never prospered. He said that early in 2018, it was apparent that its efforts were not successful. In response, moves were made to reduce working hours to save money. There was no pick-up in sales and Playside Limited was unable to discharge its liabilities to staff and suppliers without continuing capital injections from the single shareholder.
This led to the decision on 15th February 2018 to cease trading. All 13 staff were notified in accordance with statutory obligation that their jobs were being terminated because the business for which they were hired had ceased to exist. Additional funds were provided by the shareholder to discharge all outstanding debts including the redundancy payments and monies owed to suppliers. The lease was surrendered to Danbar Properties Limited. On 1st March 2018, Playside Limited ceased trading and was de-registered.
Mr O’Connell told the Court that after the cessation of trade by Playside Limited, consideration was given to sell or transfer the business as a going concern. However, due to its trading losses that was not considered a viable option. Therefore, a business plan for re-opening the premises with a varied style of business was prepared, and it was decided to let the premises as it was no longer Mr. Harvey’s intention to be involved in the running of the business. Ultimately a decision was made to recommence trading under a new company in the premises under the terms of the business plan prepared.
Mr O’Connell stated that on ceasing trade Playside Limited had surrendered its interest under the lease of the premises which reverted back to Danbar Properties Limited. Danbar Properties Limited later granted a new lease to a new company called An Clochán Liath Pub Limited which was incorporated on 15th March 2018. He argued that at no point in time was the Complainant ever employed by An Clochán Liath Pub Limited. The premises partly re opened on 30th March 2018. A Manager was appointed, and other staff were recruited.
Mr O’Connell submitted that in the first instance, the Complainant’s employer sought to cease trading when on 15th February 2018, it notified her that The Stepping Stone Pub was to close. In the event, the premises re opened six weeks later under a separate company, An Clochán Liath Pub Limited, having been granted a lease from Danbar Properties Limited. The three companies were commonly owned. Therefore, Mr O’Connell argued that there was no change of ownership.
He said that a transfer was considered but ultimately, in February and March 2018, a decision was taken to retain the premises within the group. There was no transfer because the employer, at the point at which redundancy notice was given, did not envisage re-opening the business and had no intention of transferring it to a new owner. He said that no business transfer was contemplated, and none was executed.
Mr O’Connell said that the principal business of the new company was also to sell food and alcohol and to host discos and other social functions, but it differed from the operation run by Playsidc Limited in that it marketed itself as a sports bar and targeted younger audiences interested in watching English Premier League and Champions League soccer matches and other events. The venue was refurbished and had different food and drinks menus. The kitchen, where the Respondent had previously been employed, did not re-open until the 14th May 2018.
Mr O’Connell relied upon the case ofSpijkers v Gebroeders Benedik AbbatoirCV  2 CMLR 296, where Advocate General Slynn urged that when determining whether a transfer of undertakings had taken place, the Court should avoid undue focus on technical rules. Instead, examination should be made of the substance of what had happened. He said:-
“The essential question is whether the transferee has obtained a business or undertaking (or part thereof) which he can operate. That at the time of the transfer, the business is still active, that machinery is being used, customers supplied, workers employed and that all the physical assets and goodwill are sold are strong indications that a transfer ... has taken place.”
It is submitted that for Advocate General Slynn, it is vital that before any analysis of the factual mechanics of the case can take place, the Court should satisfy itself of a fundamental prerequisite which is that there must be a transfer, a sale of the assets and goodwill. In the present case, no such transfer or sale ever took place.
He made reference to the case ofPonisi v JVC Europe Ltd E1.R 70 in which Charleton J warned at paragraph 5 of his judgment:
“In an unfair dismissal claim, where the answer is asserting to be redundancy, the employer bears the burden of establishing redundancy and of showing which kind of redundancy is apposite. Without that requirement, vagueness would replace the precision
necessary to ensure the upholding of employee rights. Redundancy is impersonal. It must result from, as Section 7(2) of the Redundancy Payments Act 1967, as amended, provides, ‘reasons not related to the employee concerned. ‘Redundancy, cannot,
therefore, be used as a cloak for the weeding out of those employees who are regarded as less competent than others or who appear to have health or age-related issues. If that is the reason for letting an employee go, then it is not a redundancy but a dismissal”
Mr O’Connell submitted that in the herein case, there was no issue with the performance of the Complainant in the course of her employment. Her employment was terminated wholly or mainly because the business in which she worked was, despite the best endeavours of the proprietors, no longer financially viable.
Summary of the Complainant’s Case
Mr Boner, Séan Boner & Company, Solicitors, on behalf of the Complainant, disputed that the dismissal arose from a genuine redundancy. He maintained that there was a transfer of undertaking and that the business retained its identity after the transfer and was substantially the same type of business.
He said that the business now run by An Clochán Liath Pub Limited is essentially the same as the business run by Playside Limited. It is a restaurant and bar doing bar food during the day with an evening trade. The equipment is the same. The hours of opening are the same. The customers are the same mix of locals and tourists. The Manager and staff are different with one or two exceptions. The premises is still called The Stepping Stone.
Mr Boner argued that as Danbar Properties Limited paid all debts of Playside Ltd it was not insolvent, and it could have assigned the lease to a new company or Plavside Ltd could have continued to trade but it could not claim that the Complainant’s employment was terminated on the basis of redundancy. He maintained that theraison d’etreof the surrender and granting of a new lease had nothing to do with the commercial workings of the business but had everything to do with evading the consequences of complying with the Regulations. He submitted that there was no reason why the Complainant could not have been re-employed, as other employees were, when the business got up and running. He quoted the case ofFerreira da Silva e Brito and others2015 EUECJ Cl 60/14 as authority for the view that insolvency of a transferor is not incompatible with a transfer of an undertaking finding under the Regulations.
Mr Boner said that the Respondent may argue that since the ownership of the companies is the same there was no transfer of undertaking. He said that the closing of Playside Limited was not a court supervised liquidation. While the Respondent may rely on the fact that the new company An Clochán Liath Pub Limited was a separate legal entity to the old company, the two tenant companies and the landlord company are in legal terms not a group. There is no holding company, they have in common that they have the same person, Mr. David Harvey, as the sole share ownership of all three companies. Mr Boner submitted that there was no bar to availing of the protection of the Regulations even where one company owns the other, where one is a subsidiary of the other. That was the finding of the ECJ inAllen v Amalgamated Construction Co Limited1999 ECR. Also quoting fromPonisi v JVC Europe LtdMr Boner reiterated Charlton J’s words‘Redundancy cannot be used as a cloak’for getting rid of employees.
The Law Applicable
The European Communities (Protection of Employee on Transfer of Undertakings) Regulations 2003 were enacted to give effect in Irish law to Directive 2001/23/EC of 12th March 2001 (the Acquired Rights Directive). This Directive replaced two earlier Acquired Rights Directives — 77/187/EEC and 98/50/EC, which laid down the rights of workers and the obligations of employers where a business or part of a business is transferred. The 2001 Directive was intended to update the earlier Directives so as to reflect the decisions of the Court of Justice of the European Union on the interpretation and application of the Directives.
Article 2(1)(a) defines a “transferor” as:
- “any natural or legal person who, by reasons of a transfer within themeaning of Article1(1), ceases to be the employer in respect of the undertaking, business or part of the undertaking or business.”
Article 2(1)(b) of the said Regulations, a “transferee”
- “any natural or legal person who, by reasons of a transfer within the meaning of the Regulations, becomes the employer hr respect of the undertaking, business or part of the undertaking or business,”
The purpose of the Regulations is to provide protection to workers in the event of a change in employer as a result of a business sale or merger. It also provides for consultation with worker representatives, with a view to reaching agreement, on measures that involve or may involve changes in employment conditions mooted in the context of a legal transfer.
The safeguarding of an employee’s rights in a transfer of undertakings is governed by the Regulations.
“These Regulations shall apply to any transferofan undertaking, business, or part of an undertaking or business from one employer to another employer as a result of a legal transfer (including the assignment or forfeiture of a lease) or in merger.”
Regulation 4 (1) states:
“The transferor’s rights and obligations arising from a contract of employment existing on the date of a transfer shall, by reason of such transfer be transferred to the transferee.”
Regulation 5 provides: -
- (1) The transfer of an undertaking, business or part of an undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee and such a dismissal, the grounds for which are such a transfer, by a transferor or a transferee is prohibited.
(2) Nothing in this Regulation shall be construed as prohibiting dismissals for economic, technical or organisational reasons which entail changes in the workforce.
(3) lf a contract of employment is terminated because the transfer involves a substantial change in working conditions to the detriment of the employee concerned, the employer concerned shall be regarded as having been responsible for the termination of the contract of employment.
(4) If a dismissal of an employee, in contravention of paragraph (1), constitutes a dismissal of the employee within the meaning of the Unfair Dismissals Acts 1977 to 2015, relief may not be granted to the employee in respect of that dismissal both under these Regulations and under those Acts.
This Regulations prohibits dismissal for reasons connected with the transfer. This prohibition is not confined to dismissal at the time of the transfer. If the dismissal occurs before the transfer or at any time after the transfer and is for a reason connected with the transfer, the Regulation will have been contravened.
Discussion and Conclusions of the Court
- Did a transfer of undertaking within the meaning of the Regulations occur as between Playside Limited and An Clochán Liath Pub in March 2018?
In order to determine whether a transfer of undertaking within the meaning of the Regulations occurred in March 2018, this Court has firstly to determine whether Playside Limited could be characterised as a stable economic entity. If the Court answers that in the affirmative, it then has to consider whether or not the essential characteristics of that economic entity were maintained following the transfer of the lease in March 2018 to An Clochán Liath Pub Limited. The Court notes that the transfer of a lease is now expressly recognised as constituting a transfer for the purpose of the Regulations by Regulation 3(1).
The Court of Justice has developed a considerable body of jurisprudence in relation to transfer of undertakings. It is widely accepted that the Court’s judgment in Case 24/85Spijkers v Gebroeders Benedik Abbatoir CVremains a cornerstone of that jurisprudence. The Court stated the following: -
- …..a transfer of an undertaking, business or part of a business does not occur merely because its assets are disposed of. Instead it is necessary to consider, in a case such as the present, whether the business was disposed of as a going concern, as would be indicated, inter alia, by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities.
A transfer can occur where there is no change in the actual ownership of a business but responsibility for running and managing the business transfers from one legal entity to another. InForeningen AF Arbejdsledere I Danmark v Daddy’s Dance Hall A/S(1988) C-324/86 the CJEU held that the Regulations apply to a situation where a lease was terminated and then granted to a new lessee there was a transfer from the old employer to the new tenant of the lease as long as the economic entity retains its identity. It held“it is of no importance whether the ownership of the undertaking has been transferred”.Here, a worker was employed by the holder of a lease on a bar and restaurant. The business was owned by a third-party who leased it to the lease holder. The owner of the business terminated the lease and sometime later entered into a lease with another entity. The worker was taken on by the new lease holder but was subsequently dismissed. An issue arose as to whether his service with the previous lease holder should be taken into account for the purpose of the length of notice to which he was entitled. It was held that the Directive applied and the worker’s prior service with the previous lease holder carried forward.
Similarly, inLandsorganisationen I Danmark v NY MoIIe Kro[19891 IRLR 37 ECJ the CJEU held that there was transfer within the meaning of the Directive. “whenever as a result of a legal transfer or merger there was a change in the natural or legal person responsible for the running of the undertaking”. InDaddy’s Dance Hallthe CJEU held: -
- “As the Court has already held, most recently in the judgment of 17 December 1987 (Case 28 7/86 Ny Molle Kro  ECR 5465), that the purpose of Directive 77/187/EEC is to ensure, so far as possible, that the rights of employees are safe guarded in the event of a change of employer by allowing them to remain in employment with the new employer on the terms and conditions agreed with the transferor. The directive is therefore, applicable where, following a legal transfer or merger, there is a change in the natural or legal person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-�-vis employees of the undertaking,regardless of whether or not ownership of the undertaking is transferred.” (our emphasis)
This decision was relied upon by the EAT inGuidon v Hugh FarringtonandUshers Island Petrol Station[19931 ELR98. This case involved a convenience store owned by Mr Farrington who also owned the petrol station within which the store was located. It was operated by Local Store (Trading) Ltd trading as Seven to Eleven under a lease from Mr Farrington. Local Store (Trading) Limited went into receivership and the lease was surrendered on 14th June 1991 which was a Friday. The Claimant returned to work on the following Monday and was told that her employment was terminated. She claimed to have been unfairly dismissed by Mr Farrington. It was held that on the surrender of the lease the business reverted to the owner, Mr Farrington and that this constituted a transfer within the meaning of the Regulations.
Applying these principles, it would seem that the Regulations apply to the granting, terminating, surrendering or assigning of a lease where the business is intrinsically linked to the property and where the business changes hands but continues to be run essentially as the same business. Equally it could apply to the granting of a licence.Daddy’s Dance Hallclearly indicates that the words “legal transfer or merger” in the Directive do not require there to be a contract between transferor and transferee. The CJEU inDr Sophie Redmond v Stichting v Bartol and othersC-29/91, held that the words “legal transfer” must be given a broad interpretation It held that in order to ascertain whether or not there was a transfer it is necessary to determine whether the functions performed are in fact carried out or resumed by the new legal entity with the same or similar activities.
Likewise, inSchmidt Spar und Leibkasse der Fruheren amter BordesholmCase C—392192, the Court identified the decisive criterion for establishing whether there is a transfer:-
- “is whether the business in question retains its identity. ... the retention of that identity is indicated inter alia by the actual continuation or resumption by the new employer of the same or similar activity “.
The Respondent told the Court that when Playside Limited’s business experienced tough trading conditions, it considered all its options and decided to retain its premises within the group; to surrender its lease to Danbar Properties in February 2018 and to set up a new legal entity to take over the lease from 22nd March 2018 so that the business could continue in operation. The premises re-opened six weeks after Playside Limited had ceased trading under a separate company, An Clochán Liath Pub Limited, having been granted a lease from Danbar Properties Limited.
The Respondent told the Court that ultimately a decision was made to recommence trading under a new company in the premises under the terms of the business plan prepared. Playside Limited t/a The Stepping Stone had operated as a pub/restaurant, An Clochán Liath Pub Limited t/a The Stepping Stone commenced trading as a pub/restaurant with an emphasis on a younger clientele interested in watching sports and with the introduction of a new menu designed to attract younger clientele.
The Court cannot accept the Respondent’s arguments that as the three companies were commonly owned there was no transfer within the meaning of the Regulations. In that regard, this Court considers that the decision of the Court of Justice inDaddy’s Dance Hallis relevant to the
determination of the issues before it in the within appeal. As was the case in Daddy’s Dance Hall, the Court is satisfied that Regulation 3 (1) applies to any transfer of a business from one employer to another employer as a result of a legal transfer including the assignment or forfeiture of a lease.
The Court is satisfied that there was a degree of similarity between the activities carried on before and while there was a period for which those activities were suspended, the activities carried on after that suspension were similar. The Court is satisfied that Playside Limited’s operation as a pub/restaurant was resumed by An Clochán Liath Pub Limited with similar activities, thereby essentially retaining its identity. The Court is of the view that it is quite significant that both held the same trading name.
In all the circumstances of this case, the Court is satisfied that the functions performed by Playside Limited were carried out or resumed by the new legal entity with the same or similar activities, therefore, there was a transfer of undertakings within the meaning of the Regulations when the Respondent entered into the lease arrangement on 22nd March 2018. The Court is satisfied that the business in question retained its identity following the transfer of the lease.
As the CJEU held in its judgmentin Spijker,this Court is of the view that the facts herein indicate that activities which was theraison d’�treof the Playside Limited were continued by An Clochán Liath Pub Limited. And as it held inNY Molle Kroas result of the legal transfer there was a change in the natural or legal person responsible for the running of the undertaking, therefore, the Court is satisfied that the Respondent became the Complainant’s employer following the transfer of the lease on 22nd March 2018. Therefore, the Court is satisfied that An Clochán Liath Pub Limited became the transferee within the terms of Article 2(1)(b) of the said Regulations, and accordingly became “the employer in respect of the undertaking, business or part of the undertaking or business,” and in accordance with Regulation 4 (1) became her employer. In such circumstances the Court is satisfied that her rights and obligations should have been transferred to the transferee and accordingly, she should not have been made redundant. Therefore, the Court finds that her dismissal was unfair.
The Court, for the reasons outlined above, and having regard to the extensive body of caselaw on the application of the Directives, finds that a transfer of undertakings within the meaning of the Regulations occurred as between the Playside Limited t/a The Stepping Stone and An Clochán Liath Pub Limited t/a The Stepping Stone on 22nd March 2018 such that the Complainant was entitled to transfer her employment to the Respondent with effect from that date. It follows that the termination of the Complainant’s employment was an unfair dismissal within the meaning of the Act. Therefore, the Decision of the Adjudication Officer is upheld, and the appeal fails.
Turning to the issue of redress under the Act, the Court notes the details supplied to the Court on the Complainant’s losses following the termination of her employment. Taking into account the efforts made by the Complainant to mitigate her losses, the Court measures the appropriate compensation at €10,000.
Therefore, the Court awards the Complainant the sum of €10,000 by way of redress for her unfair dismissal. The Adjudication Officer’s decision is varied accordingly.
The Court so Determines.
Signed on behalf of the Labour Court
1 August, 2019Deputy Chairman
Enquiries concerning this Determination should be addressed to Ciaran Roche, Court Secretary.