Factual and Procedural Background
On 16 December 1998, the Employment Tribunal received a claim from Plaintiff alleging unpaid debts owed by their insolvent former employer, Company A. Plaintiff asserted employment from 1993 until Company A's insolvency in October 1998 and claimed subsequent employment by Company B. Company B and another employee also submitted similar claims. The Secretary of State for Trade and Industry ("the Secretary of State") admitted Company A's insolvency but contended a relevant transfer of undertakings from Company A to Company B had occurred under the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"), thus negating claims against the National Insurance Fund.
Company B was joined as a Respondent in February 1999. The Employment Tribunal heard the combined cases in April 1999. The Tribunal found a relevant transfer had occurred, dismissing claims against the Secretary of State but upholding claims against Company B for unlawful deductions from wages. Company B and another claimant appealed, but the original claimants did not resist the appeal. The Secretary of State opposed the appeals, raising new issues concerning the conduct of the hearing and whether the Tribunal was Article 6 compliant, i.e., independent and impartial when the Secretary of State is a party.
The Employment Appeal Tribunal held a preliminary hearing in February 2000, limiting the full hearing to the TUPE issues and the Article 6 issue. The appeal was divided between counsel addressing these two issues respectively. The Tribunal first considered the TUPE issues before addressing the Article 6 compliance question.
Legal Issues Presented
- Whether the Employment Tribunal erred in law in its application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") in determining that a relevant transfer had occurred from Company A to Company B.
- Whether the Employment Tribunal, when adjudicating cases involving the Secretary of State as a party, was compliant with Article 6 of the European Convention on Human Rights, requiring a fair and public hearing by an independent and impartial tribunal.
Arguments of the Parties
Appellants' Arguments
- The Tribunal failed to identify a stable and discrete economic entity capable of transfer under TUPE.
- Insufficient consideration was given to certain precedents (Szen v Zehnacker and Betts v Brintel Helicopters) that might undermine the finding of transfer.
- The transfer could not have occurred as Company A was under liquidation control, and the liquidator had not taken steps or shown intent to effect any transfer.
- The Tribunal failed to identify precisely which employees were employed in the transferred part of the undertaking.
- Regarding Article 6, the Tribunal was not independent or impartial because lay members were appointed, remunerated, and removable by the Secretary of State, a party to the proceedings, raising an appearance of bias or lack of independence.
Respondent's Arguments (Secretary of State)
- The Tribunal correctly applied TUPE principles and relevant case law, including the primacy of Spijkers v Gebroeders Benedik Abattoir CV.
- The Secretary of State denied any breach of Article 6, arguing that no actual bias existed and that the Tribunal's structure and appointment processes did not undermine its independence or impartiality.
- The Employment Appeal Tribunal has limited jurisdiction to review findings of fact, and the appeal should be confined to errors of law.
- Reliance was placed on precedent holding that subsequent judicial review with full jurisdiction may cure any procedural defects in earlier tribunals.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Charlton -v- Charlton [1995] IRLR 79 |
Consideration in TUPE transfer cases. |
Deemed not helpful and not addressed substantively by the Court. |
| Szen -v- Zehnacker [1997] IRLR 255 (ECJ) |
Relevant to transfer of undertakings under TUPE. |
Primacy of Spijkers confirmed; Szen's importance overstated. |
| Betts -v- Brintel Helicopters [1997] IRLR 361 (CA) |
Transfer of undertakings principles. |
Considered but later Court of Appeal and EAT decisions preferred. |
| Spijkers -v- Gebroeders Benedik Abattoir CV [1986] ECR 119 |
Decisive criterion for relevant transfer is retention of identity of undertaking or part thereof. |
Applied as primary test by the Employment Tribunal and upheld by the Court. |
| ECM (Vehicle Delivery Services) -v- Brian Cox [1999] IRLR 559 (CA) |
Clarified the relative importance of transfer cases and the role of intention. |
Supported the Tribunal's approach to transfers without asset passage or liquidator involvement. |
| RCO Support Services & Aintree Hospital Trust -v- UNISON [2000] IRLR 624 |
On following later Court of Appeal decisions over earlier conflicting cases. |
Supported reliance on ECM and Spijkers principles. |
| Findlay -v- The United Kingdom (1997) 24 EHRR 221 |
Criteria for independence and impartiality of tribunals under Article 6. |
Guided the Court's analysis of Tribunal independence and impartiality. |
| Ciraklar -v- Turkey (1998) VII R.J.D. 3071 |
Interpretation of independence and impartiality under Article 6. |
Reinforced standards for assessing tribunal impartiality. |
| McGonnell -v- The United Kingdom (2000) 8 B.H.R.C. 56 |
Appearance of bias and legitimate fear of lack of impartiality. |
Illustrated how prior associations may create an appearance of bias. |
| R -v- Bow Street Metropolitan Stipendiary Magistrate, Ex parte Pinochet Ugarte (No. 2) [1999] 1 All ER 577 |
Automatic disqualification due to interest in outcome. |
Distinguished as involving actual bias, not mere appearance. |
| Director General of Fair Trading -v- The Proprietary Association of Great Britain [2001] C/2000/3582 (CA) |
Objective test for bias and independence under Article 6. |
Outlined principles and test for legitimate fear of bias applied by the Court. |
| Eccles, McPhillips and McShane -v- Ireland (1988) 59 DR 212 |
Consideration of realities over theoretical possibilities in assessing independence. |
Supported the view that practical experience can dispel theoretical doubts. |
| Lithgow -v- United Kingdom (1986) 8 EHRR 329 |
Appointment of judges by Executive does not necessarily breach independence. |
Referenced in assessing Tribunal independence despite Executive involvement. |
| Langborger -v- Sweden (1989) 12 EHRR 416 |
Instances where Executive appointment may affect independence. |
Noted as a possible exception to Lithgow principle. |
| Starrs and Chalmers -v- Procurator Fiscal, Linlithgow [2000] HRLR 191 |
Frameworks protecting against improper interference. |
Supported the necessity of structural safeguards for impartiality. |
| Belilos -v- Switzerland (1988) EHRR 466 |
Executive appointment of judges not necessarily undermining independence. |
Referenced in support of modern appointment systems. |
| Bryan -v- United Kingdom (1995) 21 EHRR 342 |
Subsequent control by a judicial body with full jurisdiction can cure Article 6 defects. |
Distinguished on facts; limited appellate jurisdiction in current case means no cure. |
Court's Reasoning and Analysis
The Court first examined the TUPE issues, affirming the Employment Tribunal's factual findings that a part of Company A's design consultancy business was transferred to Company B, retaining its identity despite no transfer of assets or buildings. The Tribunal correctly applied the decisive Spijkers test considering all relevant factors, including transfer of customers, continuity of activities, and staff transfer. The Court found no legal error in the Tribunal's reasoning or findings on the transfer.
Regarding the Article 6 issue, the Court analyzed the requirements of independence and impartiality under the European Convention on Human Rights and the Human Rights Act 1998. It reviewed relevant case law, distinguishing between actual bias and the appearance of bias, and emphasizing the importance of the appearance of impartiality to maintain public confidence.
The Court considered the Tribunal's structure in 1999, noting that Lay Members were appointed, remunerated, and removable by the Secretary of State, a party to the proceedings, without sufficient safeguards to exclude legitimate doubts about independence or impartiality. Although no evidence of actual bias or improper influence was found, the Court held that the fair-minded and informed observer would have an objectively justifiable fear of lack of independence and impartiality in the Tribunal as constituted at that time.
The Court rejected the argument that subsequent appellate review by the Employment Appeal Tribunal cured this defect, emphasizing that the Appeal Tribunal's limited jurisdiction over errors of law only did not amount to a "full jurisdiction" capable of remedying Article 6 breaches related to disputed primary facts.
However, the Court noted significant reforms since 1999, including open competition in appointments, longer renewable terms, judicial involvement in removal and non-renewal decisions, and continued judicial advice in panel selection. These changes provide sufficient guarantees to exclude any legitimate doubt as to independence and impartiality under Article 6 in current Employment Tribunal proceedings involving the Secretary of State.
Consequently, the Court concluded that while the Tribunal in 1999 was not Article 6 compliant, the current system is sufficiently robust to ensure compliance.
Finally, the Court allowed the appeal, set aside the 1999 decision, and ordered a fresh hearing before a Tribunal constituted under the current system, but delayed the remission for 14 days to allow the parties to decide whether they wished to pursue a new hearing.
Holding and Implications
Holding: The Court held that the Employment Tribunal as constituted in 1999 was not compliant with Article 6 of the European Convention on Human Rights due to legitimate fears about its independence and impartiality when adjudicating claims involving the Secretary of State. The 1999 Tribunal decision was set aside. However, the Court found that reforms since 1999 have remedied these defects, and the current Employment Tribunal system is Article 6 compliant.
Implications: The direct effect is that the original Tribunal decision is quashed and the case is to be reheard by a newly constituted Tribunal under the reformed system. The Court emphasized that no improper conduct or bias was found in the original Tribunal, but structural and procedural safeguards were insufficient at that time. No new legal precedent was established beyond confirming the necessity of Tribunal independence and impartiality under Article 6 and endorsing the adequacy of the current appointment and removal procedures for Lay Members. The decision underscores the importance of procedural fairness and public confidence in tribunals, especially when a government department is a party.