In a Spanish case considered by the European Court of Justice (ECJ), the court ruled that a five month cessation of activities did not prevent an employee’s employment from transferring to an incoming contractor. In this short update, we consider what this case means for employers.
The claimant was a music teacher, employed to teach at a music school in Spain. The school was initially run by a public authority. However, the school was subsequently outsourced, following a tender process, to a small private company (set up specifically to take on the activities of the music school).
The relationship between the public authority and the company deteriorated. A decline in the number of pupils meant that the school was no longer profitable. In April 2013, following a collective dismissal process, the company dismissed all of its employees (including the claimant) and ceased all activities.
Following a further tender process, a new contract to run the music school was awarded to a different company. The new contract began in September 2013. The school re-opened, using the same premises, instruments and other resources. However, new employees (rather than any employees of the old company) were engaged to run the music school by the new company.
The claimant, who had been employed by the old company, brought claims in Spain along with some of his colleagues. The court in Spain held that there had not been a transfer because of the five month ‘gap’ in the activities of the music school.
Following an appeal by the claimant and others, the court in Spain made a referral to the ECJ for a preliminary ruling.
The ECJ noted that, whilst the relevant activities had ceased for five months, three of those months related to school holidays. It concluded that the temporary cessation of the activities, and the new company’s failure to engage the dismissed employees, could not preclude the possibility of a transfer. As a starting point, it was possible for the claimant’s employment to have transferred to the new company even though there had been a five month ‘gap’.
Turning back to the UK, ‘gaps’ in activities being provided by old and new service providers have been explored in a number of cases. In one particular case, the Employment Appeal Tribunal noted that there is nothing in domestic legislation that requires an organised grouping of employees, for the purposes of TUPE, to be engaged in the relevant activity immediately before any transfer. Similarly, there is nothing to suggest that a temporary cessation of activities will mean that an organised grouping of employees cannot continue to exist.
As always, the particular facts of a case will be important. In this Spanish case, it was relevant that three of the relevant five months had coincided with school holidays.
The purpose, nature and length of any cessation of activities will be relevant. Employers should not, however, assume that a 'gap' in activities will prevent the operation of TUPE and the liabilities that TUPE will bring.