The ECJ has recently held that the Acquired Rights Directive (ARD) applies on the transfer of an undertaking by a group company where a different group company employs the affected employees, provided they are permanently assigned to the undertaking being transferred (Albron Catering v FNV Bondgenoten and Roest).

The Heineken Group employs its employees in the Netherlands through a service company, Heineken Nederlands Beheer BV (HNB). HNB then seconds its personnel to the various operating companies of the Heineken group in the Netherlands. Seventy employees of HNB, including Mr Roest, worked in the catering department and were seconded to Heineken Nederland BV, which provided catering for workers in the Heineken group on various sites. On 1 March 2005, this catering function was outsourced to Albron Catering. Mr Roest became an employee of Albron on that date.

Mr Roest and his trade union subsequently brought an action before the Dutch courts seeking a judgement that the transfer of the catering operations was a transfer of undertaking within the meaning of the ARD and asking the Dutch courts to enforce the terms of his employment relationship with Heineken and to backdate this to the point where Albron took over the catering for Heineken. The question about whether the ARD applied was referred to the ECJ.

The ECJ took a purposive approach in deciding that the ARD can provide protection to employees in this situation, provided they are assigned permanently to the undertaking being transferred. This is because the automatic transfer principle, as set out in the ARD, applies not only where there is a contract of employment but also where there is an employment relationship. In practical terms this means that a group company which has no contractual relationship with the affected employees but which is responsible for running the business in which the employees work can be a transferor.

Impact on employers

  • In this case, the ECJ was prepared to pierce the corporate veil so that the purpose of ARD was achieved.
  • The wording of TUPE does not, on a literal interpretation, apply to a non-contractual employer. It provides for the transfer of employees who are employed by the transferor and assigned to the undertaking. Generally, the courts and tribunals in the UK have so far been reluctant to look behind the corporate structure, except where it is being relied on as a sham.
  • However, if a similar case were to come before a tribunal in the UK now, it would be required to take account of this decision in order to interpret TUPE purposively and achieve an outcome consistent with the objectives of the ARD. If necessary, a tribunal can go so far as to add words into national legislation to achieve this (as happened in the case of Coleman, in relation to associative disability discrimination).
  • It is likely that tribunals in the UK would follow this decision and interpret TUPE as applying in the case of non-contractual as well as contractual employment relationships, so that group employment structures, set up for administrative and management convenience, would not frustrate the protections granted by TUPE.
  • Parties involved in the sale and purchase of businesses whose employees are employed by another group company should, therefore, pay heed to this potential TUPE risk and take service company employees into account. In those circumstances, the seller should, prior to a transfer:
  1. provide information to and consult with representatives of the affected employees (including service company employees engaged in the business being transferred);
  2. disclose information about all such employees; and
  3. consider whether it is necessary to re-assign any such employees to other areas of the business so that they do not transfer.