For information on the implications of this decision, please click here.
1. The UK courts have rejected the concept that employees can be transferred to more than one employer where activities are split on transfer. Employees are either sufficiently assigned to one employer that they transfer or, if there is no discernible pattern in the reallocation of work for them to follow, they will not transfer and liability for any redundancy will reside with the transferor. However, the European Court of Justice (‘ECJ’) recently came to a different conclusion in ISS Facility Services NV v Sonia Govaerts & Atalian NV, formerly Euroclean NV (C-344/18).
2. In essence the ECJ held that where a transfer involves a number of transferees, the rights and obligations arising from the contracts of employment of assigned employees are transferred to each of the transferees in proportion to the tasks performed by the individuals concerned provided that the division of the contract as a result of the transfer is possible and doesn’t worsen the individuals working conditions or otherwise adversely affect their rights. Moreover, if division of the contract is not possible or would adversely affect the individual’s rights, then the transferees will then be liable for any consequent termination of the employment relationship (see paragraph 38 of the Judgment).
3. The key facts are as follows:
a) Govaerts (‘G’) was employed by ISS who were responsible for the cleaning and maintenance of various buildings in Ghent.
b) The work was divided into three lots which G became responsible for as Project Manager.
c) On conclusion of a retendering exercise two lots were awarded to Atalian NV and one to Cleaning Masters NV. ISS asserted that G transferred to Atalian, which they disputed.
d) G issued proceedings against ISS and Atalian before the Labour Court in Ghent, seeking compensation in lieu of notice, an end-of‑year bonus and holiday pay.
e) The Labour Court held that G’s dismissal was unlawful and ordered ISS to pay compensation. The case against Atalian was dismissed as G performed administrative and organisational tasks rather than the cleaning work that was the subject of the transfer.
f) ISS appealed to the Higher Labour Court maintaining that G’s contract of employment was transferred in a proportion of 85% to Atalian and in a proportion of 15% to Cleaning Masters.
g) The Higher Court held that an economic entity had retained its identity and that there had been a transfer of undertaking within the meaning of Collective Agreement No. 32a which transposes the Acquired Rights Directive 2001/23 into Belgium law. Acknowledging that G’s tasks related exclusively to the work which was subject to the transfer it stayed proceedings and referred the following question to the ECJ:
“Is Article 3(1) of Directive [2001/23] to be interpreted as meaning that in the event of a simultaneous transfer of various parts of an undertaking … to various transferees, the rights and obligations arising from the contract of employment, as it existed at the time of transfer of a worker who was employed in each of the parts transferred, are to be transferred to each of the transferees, albeit in proportion to the extent of employment of the worker in question in the part of the undertaking acquired by each of the transferees,
or is Article 3(1) to be interpreted as meaning that the aforementioned rights and obligations are to be transferred in their entirety to the transferee that acquired the part of the undertaking in which the worker in question was principally employed
or as meaning that, if the provisions of the directive cannot be interpreted in any of the aforementioned ways, there is no transfer to any transferee of the rights and obligations arising from the employment contract of the aforementioned worker, which is also the case if it is not possible to determine separately the extent of the worker’s employment in each of the transferred parts of the undertaking?”
4. In arriving at its decision, the ECJ acknowledged that the Directive does not envisage a situation where a transfer involves a number of transferees but reminding itself that the Directive is intended to safeguard the rights of employees in the event of a change of employer by enabling them to continue to work for the new employer on the same terms and conditions as those with the transferor. Its purpose is to ensure, as far as possible, that the contract of employment continues unchanged with the transferee to prevent workers being placed in a less favourable position because of the transfer.
5. The ECJ said that the fact that the ‘economic entity’ was transferred to more than one transferee did not stop the relevant employees’ employment being preserved by the Directive. Instead, that employment transferred to the various transferees (on a part-time basis) in the same proportions as the economic entity itself was divided amongst the various transferees. Recognising that the effect of this might actually negatively affect employees, the ECJ raised the possibility that the employment could be terminated by the employee themselves, relying on the fact that the transfer has involved a substantial change in working conditions to the employee’s detriment, or potentially by the transferee for an economic, technical or organisational (‘ETO’) reason which entailed a change in the workforce. In either case, the ECJ said that the transferees were ‘responsible’ for the termination of employment, in other words, for any compensation due to the employee that flowed from it.
6. Unfortunately, the ECJ did not address its mind to how, in practical terms, the division of a role into part-time ones, working for different employers, could be achieved. Instead, it left it to the national courts to decide this question, suggesting only that they could consider the ‘economic value’ or time to which the worker devoted their time to each part of the contract as a factor to consider’. In our view, this means that further litigation on this point alone is very likely.
7. One thing is certain, the transfer of employees to more than one transferee on a part-time basis or their becoming liable for termination payments will be a radical departure from the orthodox position in respect of business transfers under Regulation 3(1)(a) of TUPE.
For further information or questions about this case please contact Tim Cross on 07795 373 925.
Or, as this is likely to trigger more litigation, you can sign up for updates via our monthly employment law update below.