According to the Supreme Court, the line of business is an economic entity that must have its own identity before the transfer and must keep such identity also after the transfer. The purpose is that of protecting workers when a transfer takes place, thus avoiding that forms of expulsion of portions of the business created ad hoc on the occasion of said transfer may constitute a transfer pursuant to Article 2112 of the Italian Civil Code.
– Cass., Labour Division, no. 1316 of 19 January 2017
The case at issue
The ruling under examination refers to the transfer of a line of business consisting of part of the customer care activity carried out via call centre by a big telecommunication company. The aforesaid transaction was classified by the Trial Court and the Appeal Court as transfer of business pursuant to Article 2112 of the Italian Civil Code since, according to the judges, the transferred call centre activity was already carried out by the seller in a functionally autonomous and duly structured form and the line of business transferred was, therefore, a set of assets and human resources suitable to achieve an economic-productive purpose.
So the transferred employees appealed to the Supreme Court, maintaining that the transaction was not a transfer of line of business (and hence there was no reason for the transfer of employees) and claiming, inter alia, (i) the lack of a unitary economic entity due to the fact that the customer care activity was carried out in various sites locate all over Italy; (ii) the lack of transfer of the tangible assets essential and indispensable in order to carry out the activity at issue, thus making it impossible to identify an entity able to establish a complete production cycle; (iii) the lack of operational autonomy of the persons in charge of the customer care activity, which necessarily implied intervention of and interaction with external personnel for the implementation of the activity.
The principle confirmed by the Supreme Court
The Supreme Court, after having recalled prevailing case law, expressed most recently by judgement no. 10542 of 25 February 2016, overturned the judgement of the Court of Appeal. According to said guidance, the functional autonomy of the transferred line of business, that is to say its capability, already at the time of its demerger from the transferor complex, to pursue a productive purpose with its own functional and organisational means, and hence to carry out autonomously from the transferor and without relevant integrations by the transferee the service or function it used to perform within the transferring enterprise at the time of the transfer, represents an element establishing the transfer of line of business under Article 2112 of the Italian Civil Code. So, the analysis of the validity of the transaction must not be based on the organisation adopted by the transferee after the transfer, may be owing to integrations determined by contemporary or subsequent service contracts entered into between the parties, but on the organisation already permitted by the portion of the pre-existing production complex represented by the transferred line of business.
As previously mentioned, according to the Court, the line of business is an economic entity that must have its own identity before the transfer and must keep such identity also after the transfer. The purpose of the principle is that of protecting workers when transfers take place and aims at avoiding that forms of expulsion of portions of the business, created ad hoc on the occasion of said transfer, may automatically imply the transfer of the relevant employment relationships to the transferee, without the prior consent of the relevant employees.
In the case at issue, along with the transfer agreement, a five-year service contract was entered into, whereby the transferor appointed the transferee for the supply in its favour of the customer care services for its “Non Top” customers. Hence, the Court pointed out the lack of unity in the transfer due to the circumstance that employees dedicated to a specific set of customers (“Top” customers), and the part of the customer care service relating to them were not included in the transfer.
Moreover, the Supreme Court highlighted that in the case at issue the assets and personnel component was significantly split, since essential and indispensable assets, such as application and IT systems (by way of example, databases and software programmes necessary to manage them), were still owned by the transferor but simultaneously granted for use to the transferee.
The Supreme Court has also highlighted the circumstance that employees had no autonomy in the organisation of the work, given that all operating procedures were determined at central level, as well as the targets to be achieved, the authorisation of travel expenses and refunds, as well as basic behavioural rules in the relationships with customers. It is therefore evident that, even more so, employees would not have had such autonomy after being transferred even only partially (due to the distinction between Top and Non Top customers mentioned above) and in the absence of suitable material means.
Based on the results of the preliminary inquiry, the Supreme Court has deemed that the described circumstances were symptoms of the fact that the productive structure of the transaction had been created ad hoc on the occasion of the transfer and that therefore the transaction could not be considered a transfer of line business pursuant to Article 2112 of the Italian Civil Code. Indeed the transferred business structure lacked autonomy and self-sufficiency, as highlighted by the necessary use – in order to carry out the transferred activity – of the IT programmes necessary to perform the service that had remained the exclusive property of the transferor company. So the complaints of the transferred employees were founded and the Court has overturned the decision of the Appeal Court, deeming that the transaction at issue was a mere outsourcing of departments or offices, of non-autonomous structures, and that the employment relationships were not pertaining to an already established line of business.
Since the evaluation concerned legitimacy, the judgement could not intervene directly to re-establish the relationship with the transferor; therefore, the Court of Appeal – to which the Supreme Court referred – shall have to reconsider the relevant findings and, if necessary, prescribe the transferor’s obligation to re-establish the working relationships with the employees whose contracts had been transferred at the time.
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 For the purposes of Article 2112 of the Italian Civil Code, transfer of business means any transaction that, following a transfer by contract or merger, involves the change in the ownership of an organised economic activity already existing before the transfer, which when transferred maintains its identity regardless of the type of contract or of the decision based on which the transfer is implemented (including usufruct or lease of business). The provisions of Article 2112 of the Italian Civil Code applies as well to the transfer of part of the business, meant as functionally autonomous structure of an organised economic activity, identified as such by the transferor and by the transferee at the time of its transfer.
In particular, if the transaction implemented can be classified as transfer of business pursuant to Article 2112 of the Italian Civil Code, the employment relationship must go on with the transferee, with no need for the prior consent of the worker, who shall maintain all rights originated from the previous employment relationship. The transferor and the transferee are jointly liable for all receivables due to the employees at the time of their transfer.