Colino Sigüenza v Ayuntamiento de Valladolid and others (Court of Justice of the European Union)

The Court of Justice of the European Union ("CJEU") has determined that a five-month suspension of an undertaking’s activities did not inhibit the subsequent transfer of that undertaking under the terms of the Acquired Rights Directive (implemented as TUPE in the UK), to which its statutory protections - including the protection against dismissal for a reason connected with such transfer - would apply.

The Claimant, a teacher at a Spanish music school, was engaged by a contractor assigned to manage teaching operations on behalf of the local authority. Due primarily to falling pupil numbers and consequent financial difficulties, the contractor dismissed its entire staff (including the Claimant) and ceased activities in April 2013. The local authority subsequently re-tendered the contract for services, which commenced with a new provider in September 2013, at the beginning of the new academic year. Whilst the new contractor used the same premises, equipment and resources, it did not re-hire any of the previous employees. The Claimant claimed that his employment should have automatically transferred to the new provider under the EU’s Acquired Rights Directive (“ARD”), which has been implemented in the UK as TUPE.

At first instance, the Spanish court found that there had been no transfer of an economic entity which had retained its identity, as required by the ARD, because of the 5-month gap between the Claimant’s dismissal, the winding-up of the initial service provider and the subsequent outsourcing of services. Upon a request for a preliminary reference made as part of appeal proceedings, the CJEU disagreed with this approach. It held that the fact that an undertaking is inactive at the time of a transfer is not determinative; each case should be assessed on its own facts. Here, the subsequent contractor managed the same premises, for the same purposes and using the same equipment. All material assets had – in effect - transferred between contractors, the latter of which was now providing largely identical services on behalf of the local authority. Further, whilst the gap in time was a relevant factor to be taken into account as part of any assessment, 3 months of this 5-month suspension represented the annual school holiday, during which the school would normally be closed. The CJEU therefore considered that a TUPE transfer was possible and the case was remitted back to the national appeal court for determination.

This decision does not significantly affect the legal position in the UK, where TUPE recognises the additional, broader concept of a ‘service provision change’ (which covers the subsequent outsourcing scenario as occurred in this case) as qualifying for the protections envisaged by the ARD. It does, however, serve as a helpful reminder that gaps in services or suspended activities – even if they last for a period of months - will not be sufficient to preclude the operation of TUPE in themselves.