The CJEU has held that a transfer of an undertaking could occur under the Acquired Rights Directive (2001/23/EC) (the ‘Directive’) where a contract to provide services was terminated and the service resumed by another contractor some five months later.
The claimant worked as a music teacher at a school in Spain. The local authority had outsourced the running of the school to a small private company. In April 2013, due to declining student numbers, the company running the school ceased its activities and dismissed the entire staff body. The local authority duly terminated its contract with the company and, following a new tender process, awarded a new contract to another private company to run the school. That new contract started in September 2013 at the start of the new academic year. The company that took over the running of the school used the same premises, instruments and resources to provide the services, but appointed a new staff body.
The employees that had been dismissed brought proceedings for unfair dismissal in the Spanish courts. As part of those proceedings, the Spanish court held that there was no transfer of an undertaking because the activities were only resumed after a gap of five months. On appeal, the Spanish court referred the case to the CJEU to determine (inter alia) whether there could be a transfer of an undertaking under the Directive. The CJEU, departing from the Advocate General’s opinion, held that there could in principle be a transfer within the scope of the Directive (albeit it was of the view that the dismissals were for an ETO reason entailing changes in the workforce). Central to the CJEU’s decision was the fact that the economic activity was asset reliant and the new contractor used the same premises, instruments and resources, as well as the fact that the school would have been closed in any event for a three month period over the summer holidays.
Why this matters
This case is a helpful reminder of the issues to consider when deciding whether there is a traditional TUPE transfer when you have a temporary cessation of activities. A similar analysis needs to be carried out when deciding whether there is a service provision change under TUPE.